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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

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

    

Not Applicable

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

Blocks A & B, Portway Building, Granta Park
Great Abington, Cambridge, United Kingdom

CB21 6GS

(Address of principal executive offices)

(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*

n/a

The Nasdaq Stock Market LLC

American Depositary Shares, each representing one ordinary share, nominal value £0.01 per share

BCYC

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 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 (§ 232.405 of this chapter) 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, 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 

As of April 29, 2024, the registrant had 38,073,148 ordinary shares, nominal value £0.01 per share, and 4,705,882 non-voting ordinary shares, nominal value £0.01 per share, outstanding.

Table of Contents

Page

PART I - FINANCIAL INFORMATION

1

Item 1.

Financial Statements (unaudited)

1

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

Condensed Consolidated Statements of Shareholders’ Equity

3

Condensed Consolidated Statements of Cash Flows

4

Notes to Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

35

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

48

Item 4.

Controls and Procedures

49

PART II - OTHER INFORMATION

50

Item 1.

Legal Proceedings

50

Item 1A.

Risk Factors

50

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

108

Item 3.

Defaults Upon Senior Securities

109

Item 4.

Mine Safety Disclosures

109

Item 5.

Other Information

109

Item 6.

Exhibits

110

SIGNATURES

i

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or this Quarterly Report, contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements may be identified by such forward-looking terminology as “will,” “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:

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, or BTC® molecules, Bicycle Tumor-Targeted Immune Cell Agonist®, or Bicycle TICA® molecules and other pipeline programs, including our Bicycle radionuclide conjugates, or BRCTM molecules;
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;
costs associated with defending intellectual property infringement, product liability and other claims;
regulatory development in the United States, the United Kingdom and other jurisdictions and changes to 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 amount of and our ability to satisfy interest and principal payments under our debt facility with Hercules Capital, Inc., or Hercules;

ii

the potential benefits of strategic collaboration agreements and our ability to enter into additional 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;
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;
future revenue, hiring plans, expenses, capital expenditures, capital requirements and share performance;
the impact of public health crises and other adverse global economic conditions on our operations and the potential disruption in the operations and business of third-party manufacturers, contract research organizations, or CROs, other service providers, and collaborators with whom we conduct business;
recent adverse developments affecting the financial services industry;
potential business interruptions resulting from geo-political actions, such as war and terrorism, or the perception that such hostilities may be imminent;
our failure or perceived failure to comply with existing or future laws, regulations, contracts, self-regulatory schemes, standards, and other obligations related to data privacy and security (including our ability to identify and respond to potential future security incidents); 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 Quarterly Report, 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 II. Item 1A and elsewhere in this Quarterly Report. 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 Quarterly Report represents our views only as of the date of this Quarterly 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.

iii

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

Bicycle Therapeutics plc

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

March 31, 

December 31,

    

2024

    

2023

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

456,997

$

526,423

Prepaid expenses and other current assets

 

19,903

 

11,406

Research and development incentives receivable

 

39,062

 

24,039

Total current assets

 

515,962

 

561,868

Property and equipment, net

 

12,788

 

14,515

Operating lease right-of-use assets

 

12,025

 

13,169

Other assets

 

6,368

 

5,792

Total assets

$

547,143

$

595,344

Liabilities and shareholders’ equity

 

  

 

  

Current liabilities:

 

 

Accounts payable

$

7,061

$

13,050

Accrued expenses and other current liabilities

 

26,029

 

31,509

Deferred revenue, current portion

 

16,420

 

24,978

Total current liabilities

 

49,510

 

69,537

Long-term debt, net of discount

30,802

30,698

Operating lease liabilities, net of current portion

 

8,048

 

9,382

Deferred revenue, net of current portion

98,127

110,216

Other long‑term liabilities

 

4,608

 

4,579

Total liabilities

 

191,095

 

224,412

Commitments and contingencies (Note 11)

 

  

 

  

Shareholders’ equity:

 

  

 

  

Ordinary shares, including non-voting ordinary shares, £0.01 nominal value; 61,876,165 and 59,612,613 shares authorized on March 31, 2024 and December 31, 2023, respectively; 42,632,597 and 42,431,766 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

553

 

550

Additional paid-in capital

 

894,596

 

883,446

Accumulated other comprehensive loss

 

(778)

 

(1,304)

Accumulated deficit

 

(538,323)

 

(511,760)

Total shareholders’ equity

 

356,048

 

370,932

Total liabilities and shareholders’ equity

$

547,143

$

595,344

The accompanying notes are an integral part of the condensed consolidated financial statements

1

Bicycle Therapeutics plc

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)

Three Months Ended

March 31, 

    

2024

    

2023

Collaboration revenues

$

19,530

$

4,896

Operating expenses:

 

 

  

Research and development

 

34,864

 

32,211

General and administrative

 

16,382

 

14,488

Total operating expenses

 

51,246

 

46,699

Loss from operations

 

(31,716)

 

(41,803)

Other income (expense):

 

 

  

Interest income

 

5,624

 

2,929

Interest expense

(821)

(808)

Total other income (expense), net

 

4,803

 

2,121

Net loss before income tax provision

 

(26,913)

 

(39,682)

Benefit from income taxes

 

(350)

 

(618)

Net loss

$

(26,563)

$

(39,064)

Net loss per share, basic and diluted

$

(0.62)

$

(1.30)

Weighted average ordinary shares outstanding, basic and diluted

 

42,560,091

 

30,001,725

Comprehensives loss:

 

 

  

Net loss

$

(26,563)

$

(39,064)

Other comprehensive income:

 

 

  

Foreign currency translation adjustment

 

526

 

(316)

Total comprehensive loss

$

(26,037)

$

(39,380)

The accompanying notes are an integral part of the condensed consolidated financial statements

2

Bicycle Therapeutics plc

Condensed Consolidated Statements of Shareholders’ Equity

(In thousands, except share data)

(Unaudited)

Accumulated

Additional

Other

Total

Ordinary Shares

Paidin

Comprehensive

Accumulated

Shareholders’

  

Shares

  

Amount

  

Capital

  

Income (Loss)

  

Deficit

  

Equity

Balance at December 31, 2023

42,431,766

$

550

$

883,446

$

(1,304)

$

(511,760)

$

370,932

Issuance of ADSs upon exercise of share options

133,735

2

1,868

1,870

Issuance of ADSs upon settlement of restricted share units

67,096

1

1

Share-based compensation expense

9,282

9,282

Foreign currency translation adjustment

526

526

Net loss

(26,563)

(26,563)

Balance at March 31, 2024

42,632,597

$

553

$

894,596

$

(778)

$

(538,323)

$

356,048

Accumulated

Additional

Other

Total

Ordinary Shares

Paidin

Comprehensive

Accumulated

Shareholders’

    

Shares

  

Amount

  

Capital

  

Income (Loss)

  

Deficit

  

Equity

Balance at December 31, 2022

29,873,893

$

387

$

601,105

$

387

$

(331,096)

$

270,783

Issuance of ADSs upon exercise of share options

877

1

1

Issuance of ADSs, net of commissions and offering expenses of $0.1 million

100,000

1

2,715

2,716

Issuance of ADSs upon settlement of restricted share units

56,988

1

1

Share-based compensation expense

9,042

9,042

Foreign currency translation adjustment

(316)

(316)

Net loss

(39,064)

(39,064)

Balance at March 31, 2023

30,031,758

$

389

$

612,863

$

71

$

(370,160)

$

243,163

The accompanying notes are an integral part of the condensed consolidated financial statements

3

Bicycle Therapeutics plc

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended

Ended

March 31, 

    

2024

    

2023

Cash flows from operating activities:

 

  

Net loss

$

(26,563)

$

(39,064)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

 

  

Share-based compensation expense

 

9,282

 

9,042

Depreciation and amortization

 

1,658

 

1,557

Non-cash interest

104

102

Deferred income tax benefit

 

(767)

(2,106)

Changes in operating assets and liabilities:

 

Accounts receivable

 

 

2,519

Research and development incentives receivable

 

(15,268)

 

(6,830)

Prepaid expenses and other assets

 

(8,390)

 

(1,735)

Operating lease right‑of‑use assets

 

1,085

 

1,009

Accounts payable

 

(5,923)

 

(2,001)

Accrued expenses and other current liabilities

 

(5,412)

 

(3,130)

Operating lease liabilities

 

(1,179)

 

(1,034)

Deferred revenue

 

(19,555)

 

(4,900)

Other long-term liabilities

 

59

 

160

Net cash used in operating activities

 

(70,869)

 

(46,411)

Cash flows from investing activities:

 

  

 

  

Purchases of property and equipment

 

(12)

 

(2,099)

Net cash used in investing activities

 

(12)

 

(2,099)

Cash flows from financing activities:

 

  

 

  

Proceeds from the issuance of ADSs, net of issuance costs

2,716

Proceeds from the exercise of share options and sale of ordinary shares

1,871

2

Net cash provided by financing activities

 

1,871

 

2,718

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(416)

 

453

Net decrease in cash, cash equivalents and restricted cash

 

(69,426)

 

(45,339)

Cash, cash equivalents and restricted cash at beginning of period

 

526,970

 

339,154

Cash, cash equivalents and restricted cash at end of period

$

457,544

$

293,815

Reconciliation of cash, cash equivalents and restricted cash

Cash and cash equivalents

$

456,997

$

293,815

Restricted cash included in other assets

547

Total cash, cash equivalents and restricted cash

$

457,544

$

293,815

Supplemental disclosure of cash flow information

 

  

 

  

Cash paid for interest

$

686

$

679

Cash paid for amounts included in the measurement of operating lease liabilities

$

1,435

$

1,351

Changes in purchases of property and equipment in accounts payable and accrued expenses

$

26

$

(1,737)

Advance billings on deferred revenue included in accounts receivable

$

$

50,000

Non-cash impact to right-of-use assets and operating lease liabilities

$

$

5,849

The accompanying notes are an integral part of the condensed consolidated financial statements

4

Bicycle Therapeutics plc

Notes to Condensed Consolidated Financial Statements
(Unaudited)

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 class of medicines, which the Company refers to as Bicycle ® molecules, for diseases that are underserved by existing therapeutics. Bicycle molecules 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 is evaluating BT8009, a Bicycle Toxin Conjugate (a “BTC® molecule) targeting Nectin-4, in both an ongoing Company-sponsored Phase I/II clinical trial and an ongoing Phase II/III registrational trial, called Duravelo-2, BT5528, a BTC molecule targeting Ephrin type-A receptor 2 (“EphA2”), in a Company-sponsored Phase I/II clinical trial, and BT7480, a Bicycle Tumor-Targeted Immune Cell Agonist® (a “Bicycle TICA®” molecule) targeting Nectin-4 and agonizing CD137, in a Company-sponsored Phase I/II clinical trial. In addition, BT1718, a BTC molecule that is being developed to target tumors that express Membrane Type 1 matrix metalloproteinase, is being investigated for safety, tolerability and efficacy in a Phase I/IIa clinical trial sponsored and fully funded by the Centre for Drug Development of Cancer Research UK. The Company’s discovery pipeline in oncology includes next-generation BTC molecules, Bicycle radionuclide conjugates (“BRCTM molecules), Bicycle based systemic immune cell agonists and Bicycle TICA molecules. Beyond the Company’s wholly owned oncology portfolio, the Company is collaborating with biopharmaceutical companies and organizations in therapeutic areas in which the Company believes its proprietary Bicycle screening platform can identify therapies to treat diseases with significant unmet medical need.

The accompanying condensed 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 condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Liquidity

As of March 31, 2024, the Company had cash and cash equivalents of $457.0 million.

The accompanying condensed 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 primarily with proceeds from the sale of its ordinary shares, American Depositary Shares representing ordinary shares (“ADSs”), including in offerings pursuant to its at-the-market offering (“ATM”) program, and non-voting ordinary shares, proceeds received from its collaboration arrangements (Note 9) and borrowings from a loan agreement with Hercules Capital, Inc. (“Hercules”) (Note 6).

On June 5, 2020, the Company entered into a Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. and Oppenheimer & Co. Inc. (the “Sales Agents”) with respect to its ATM program pursuant to which the Company may offer and sell through the Sales Agents, from time to time at the Company’s sole discretion, ADSs. No ADSs were issued or sold pursuant to the Sales Agreement during the three months ended March 31, 2024. During the three months ended March 31, 2023, the Company issued and sold 100,000 ADSs under the Sales Agreement for gross proceeds of $2.8 million, resulting in net proceeds of $2.7 million, after deducting sales commissions and offering expenses of $0.1 million.

The Company has incurred recurring losses since inception, including net losses of $26.6 million and $39.1 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, the Company had an

5

accumulated deficit of $538.3 million. The Company expects to continue to generate operating losses in the foreseeable future. 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 these interim condensed consolidated financial statements.

The Company expects its expenses to increase substantially in connection with ongoing activities, particularly as the Company advances its clinical trials for its product candidates in development and preclinical activities. Accordingly, the Company will need to obtain additional funding in connection with continuing operations. If the Company is unable to raise funding 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. 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.

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of delays in initiating or continuing research programs and clinical trials, 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, if approved, 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.

2. Summary of significant accounting policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission (the “SEC”), on February 20, 2024 (the “2023 Annual Report”). Since the date of such consolidated financial statements, there have been no changes to the Company’s significant accounting policies, other than those disclosed below.

Use of estimates

The preparation of condensed 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 condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition, the accrual for research and development expenses, share-based compensation expense, valuation of right-of-use assets and liabilities and income taxes, including the valuation allowance for deferred tax assets. 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.

Significant risks and uncertainties

The Company currently operates in a period of economic uncertainty which has been significantly impacted by domestic and global monetary and fiscal policy, geopolitical conflicts such as the ongoing wars involving Ukraine and Israel, inflation and interest rates, and fluctuations in monetary exchange rates. While the Company has experienced limited financial impacts at this time, the Company continues to monitor these factors and events and the potential effects each may have on the Company’s business, financial condition, results of operations and growth prospects.

6

Unaudited interim financial information

Certain information in the footnote disclosures of these financial statements has been condensed or omitted pursuant to the rules and regulations of the SEC. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2023 included in the Company’s 2023 Annual Report.

The accompanying condensed consolidated balance sheet as of March 31, 2024, the condensed consolidated statements of operations and comprehensive loss, condensed consolidated statements of shareholders’ equity and condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023, and the related financial information disclosed in these notes are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements for the year ended December 31, 2023, and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2024, the results of its operations and its cash flows for the three months ended March 31, 2024 and 2023. The results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period.

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 Small and Medium-sized Enterprises (“SME”) R&D Tax Relief 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 cash rebate of up to 33.35% of qualifying expenditure incurred prior to April 1, 2023, and up to 18.6% of qualifying expenditure incurred thereafter. Amendments to the U.K. R&D tax credit regime included in Finance Act 2024, which was enacted in February 2024, increased the cash rebate that may be claimed to 26.97% of qualifying expenditure, retroactively applied to qualifying expenditures incurred after April 1, 2023, if we qualify as “R&D intensive” for an accounting period (broadly, a loss making SME whose relevant R&D expenditure represents, for accounting periods beginning on or after April 1, 2023, 40%, or, for accounting periods beginning on or after April 1, 2024, 30%, of its total expenditure for that accounting period).

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 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 $15.3 million during the three months ended March 31, 2024, inclusive of $9.7 million associated with the increase to U.K. R&D tax credit reimbursement rates enacted with Finance Act 2024. The Company recorded a reduction to research and development expense of $6.8 million during the three months ended March 31, 2023.

Recently adopted accounting pronouncements

There have been no recently adopted accounting pronouncements during the three months ended March 31, 2024 that are of significance or potential significance to the Company.

7

Recently issued accounting pronouncements not yet adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures (“ASU No. 2023-09”), which prescribes standard categories for the components of the effective tax rate reconciliation and requires disclosure of additional information for reconciling items meeting certain quantitative thresholds, requires disclosure of disaggregated income taxes paid, and modifies certain other income tax-related disclosures. ASU No. 2023-09 is effective for annual periods beginning after December 15, 2024 and allows for adoption on a prospective basis, with a retrospective option. The Company is currently evaluating the potential impact of the adoption of ASU No. 2023-09 on its consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures (“ASU No. 2023-07”), which requires disclosure of incremental segment information on an interim and annual basis. ASU No. 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024, and requires retrospective adoption to all prior periods presented in the consolidated financial statements. The Company is currently evaluating the potential impact of the adoption of ASU No. 2023-07 on its consolidated financial statements and related disclosures.

3. Fair value of financial assets and liabilities

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.

The carrying values of cash, cash equivalents and restricted cash, accounts receivable, research and development incentives receivable, prepaid expenses and 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. As of March 31, 2024, and December 31, 2023, the carrying value of the long-term debt approximates its fair value, which was determined using unobservable Level 3 inputs, including quoted interest rates from a lender for borrowings with similar terms.

Cash, cash equivalents and restricted cash

The Company considers all highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less at the date of purchase to be cash equivalents. As of March 31, 2024, the Company had cash equivalents of $22.4 million, consisting of interest-bearing money market funds which are considered Level 1 assets. As of December 31, 2023, the Company had cash equivalents of $72.3 million, consisting of $22.1 million of interest-bearing money market funds and $50.2 million of 30-day term deposits which are considered Level 1 assets. As of March 31, 2024, and December 31, 2023, there were no other assets or liabilities measured at fair value on a recurring basis.

As of March 31, 2024, the Company had $0.5 million of restricted cash related to a collateralized letter of credit in connection with the Company’s lease for office and laboratory space in Cambridge, Massachusetts, which is included within other assets in the Company’s condensed consolidated balance sheet.

8

4. Property and equipment, net

Property and equipment, net consisted of the following (in thousands):

March 31, 

December 31,

    

2024

    

2023

Laboratory equipment

$

15,478

$

15,554

Leasehold improvements

 

10,908

 

11,000

Computer equipment and software

 

529

 

532

Furniture and office equipment

 

814

 

822

 

27,729

 

27,908

Less: Accumulated depreciation and amortization

 

(14,941)

 

(13,393)

$

12,788

$

14,515

Depreciation expense was $1.7 million and $1.6 million for the three months ended March 31, 2024 and 2023, respectively.

5. Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

March 31, 

December 31,

    

2024

    

2023

Accrued employee compensation and benefits

$

5,545

$

13,394

Accrued external research and development expenses

 

13,845

 

11,839

Accrued professional fees

 

1,493

 

1,143

Current portion of operating lease liabilities

 

4,974

 

4,876

Other

 

172

 

257

$

26,029

$

31,509

6. Long-term debt

On September 30, 2020, Bicycle Therapeutics plc and its subsidiaries (the “Borrowers”) entered into a loan and security agreement (the “Loan Agreement”) with Hercules, as amended from time to time, which provides for aggregate maximum borrowings of up to $75.0 million. As of March 31, 2024, the Company had borrowings under the Loan Agreement of $30.0 million. The Loan Agreement includes, at the Borrowers’ request, potential for additional term loans, subject to satisfaction of customary conditions, in an aggregate principal amount of up to $45.0 million. Payments on borrowings under the Loan Agreement are interest-only until April 1, 2025 and interest is paid at an annual rate of the Wall Street Journal prime rate plus 4.55%, with a minimum annual rate of at least 8.05%, capped at a rate no greater than 9.05%. The scheduled maturity date is July 1, 2025 (the “Maturity Date”).

At the Borrowers’ option, the Borrowers may prepay all or any portion greater than $5.0 million of the outstanding borrowings, subject to a prepayment premium equal to 1.0% of the principal amount outstanding. The Loan Agreement also provides for an end of term charge (the “End of Term Charge”), payable upon maturity or the repayment of obligations under the Loan Agreement, equal to 5.0% of the principal amount repaid. Borrowings under the Loan Agreement are collateralized by substantially all of the Borrower’s personal property and other assets, other than their intellectual property. Hercules has a perfected first-priority security interest in certain cash accounts. The Loan Agreement contains customary affirmative and restrictive covenants and representations and warranties, including a covenant against the occurrence of a change in control, as defined in the agreement. There are no financial covenants. The Loan Agreement also includes customary events of default, including payment defaults, breaches of covenants following any applicable cure period, cross acceleration to third-party indebtedness, certain events relating to bankruptcy or insolvency, and the occurrence of certain events that could reasonably be expected to have a material adverse effect. Upon the occurrence of an event of default, a default interest rate of an additional 5.0% may be applied to the outstanding principal and interest payments due, and Hercules may declare all outstanding obligations immediately due

9

and payable and take such other actions as set forth in the Loan Agreement. The Company has determined that the risk of subjective acceleration under the material adverse events clause is not probable and therefore has classified the outstanding principal in long-term liabilities based on scheduled principal payments.

The Company incurred fees and transaction costs totaling $0.6 million associated with the initial term loan, which are recorded as a reduction to the carrying value of the long-term debt in the condensed consolidated balance sheets. The fees, transaction costs, and the End of Term Charge are amortized to interest expense through the Maturity Date using the effective interest method. The Company concluded that the amendments to the agreement to date represent modifications to the Loan Agreement, and as such, the fees and transaction costs associated with the term loan will continue to be amortized to interest expense through the Maturity Date. The effective interest rate of the Hercules borrowings was 10.8% at March 31, 2024.

The Company assessed all terms and features of the Loan Agreement in order to identify any potential embedded features that would require bifurcation. As part of this analysis, the Company assessed the economic characteristics and risks of the debt. The Company determined that all features of the Loan Agreement are clearly and closely associated with a debt host and, as such, do not require separate accounting as a derivative liability. Interest expense associated with the Loan Agreement for the three months ended March 31, 2024 and 2023 was $0.8 million and $0.8 million, respectively.

Long-term debt consisted of the following (in thousands):

March 31, 

December 31,

    

2024

    

2023

Term loan payable

$

30,000

$

30,000

End of term charge

1,018

946

Unamortized debt issuance costs

(216)

(248)

Carrying value of term loan

$

30,802

$

30,698

Future principal payments, including the End of Term Charge, are as follows (in thousands):

Year Ending December 31, 

2024

2025

31,500

Total

$

31,500


7. Ordinary shares

The Company’s ordinary shares are divided into two classes: (i) ordinary shares and (ii) non-voting 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. Holders of ADSs are not treated as holders of the Company’s ordinary shares, unless they withdraw the ordinary shares underlying their ADSs in accordance with the deposit agreement and applicable laws and regulations. The depositary is the holder of the ordinary shares underlying the ADSs. Holders of ADSs therefore do not have any rights as holders of the Company’s ordinary shares, other than the rights that they have pursuant to the deposit agreement with the depositary.

The non-voting ordinary shares have the same rights and restrictions as the ordinary shares and otherwise rank pari passu in all respects with the ordinary shares except for the following:

a holder of non-voting ordinary shares shall, in relation to the non-voting ordinary shares held, have no right to receive notice of, or to attend or vote at, any general meeting of shareholders save in relation to a variation of class rights of the non-voting ordinary shares;
the non-voting ordinary shares shall be re-designated as ordinary shares by the Company’s board of directors, or a duly authorized committee or representative thereof, upon receipt of a re-designation notice

10

and otherwise subject to the terms and conditions set out in the terms of issue. A holder of non-voting ordinary shares shall not be entitled to have any non-voting ordinary shares re-designated as ordinary shares where such re-designation would result in such holder thereof beneficially owning (for purposes of section 13(d) of the Exchange Act), when aggregated with “affiliates” and “group” members with whom such holder is required to aggregate beneficial ownership for the purposes of section 13(d) of the Exchange Act, in excess of 9.99% of any class of the Company’s securities registered under the Exchange Act (which percentage may be increased or decreased on a holder-by-holder basis subject to the provisions set out in the terms of issue); and
the non-voting ordinary shares shall be re-designated as ordinary shares automatically upon transfer of a non-voting ordinary share by its holder to any person that is not an “affiliate” or “group” member with whom such holder is required to aggregate beneficial ownership for purposes of section 13(d) of the Exchange Act. This automatic re-designation shall only be in respect of the non-voting ordinary shares that are subject to such transfer.

As of March 31, 2024, and December 31, 2023, the Company had not declared any dividends.

As of March 31, 2024, and December 31, 2023, the Company’s authorized share capital consisted of 61,876,165 and 59,612,613 ordinary shares, respectively, including ordinary shares and non-voting ordinary shares, with a nominal value of £0.01 per share. Authorized share capital, or shares authorized, comprises (i) the currently issued and outstanding ordinary shares and non-voting ordinary shares, (ii) the remaining ordinary shares available for allotment under the existing authority granted to the Board at the annual general meeting held on June 28, 2021, (iii) ordinary shares issuable on the exercise of outstanding options and (iv) ordinary shares reserved for issuance under the Bicycle Therapeutics plc 2020 Equity Incentive Plan and/or the Bicycle Therapeutics plc 2019 Employee Share Purchase Plan.

As of March 31, 2024, there were 37,926,715 ordinary shares issued and outstanding and 4,705,882 non-voting ordinary shares issued and outstanding.

8. Share-based compensation

Employee incentive pool

2020 Equity Incentive Plan

In June 2020, the Company’s shareholders first approved the Bicycle Therapeutics plc 2020 Equity Incentive Plan with Non-Employee Sub-Plan (as amended from time to time, the “2020 Plan”), under which the Company may grant market value options, market value stock appreciation rights or restricted shares, restricted share units (“RSUs”), performance RSUs and other share-based awards to the Company’s employees. The Company’s non-employee directors and consultants are eligible to receive awards under the 2020 Non-Employee Sub-Plan to the 2020 Plan. All awards under the 2020 Plan, including the 2020 Non-Employee Sub-Plan, will be set forth in award agreements, which will detail the terms and conditions of awards, including any applicable vesting and payment terms, change of control provisions and post-termination exercise limitations. In the event of a change of control of the Company, as defined in the 2020 Plan, any outstanding awards under the 2020 Plan will vest in full immediately prior to such change of control.

The Company initially reserved up to 4,773,557 ordinary shares for future issuance under the 2020 Plan, including shares subject to options that were granted under the Company’s 2019 Share Option Plan (the “2019 Plan”) and that were granted pursuant to option contracts granted prior to the Company’s IPO, in each case that expire, terminate, are forfeited or otherwise not issued from time to time, if any. On June 27, 2022, the Company’s shareholders approved an amendment to the 2020 Plan (the “Amendment”) which increased the number of ordinary shares reserved for future issuance by 750,000 shares. Additionally, the number of ordinary shares reserved for issuance pursuant to the 2020 Plan will automatically increase on the first day of January of each year, initially commencing on January 1, 2021 and continuing up to and including January 1, 2032, in an amount equal to 5% of the total number of the Company’s 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. Pursuant to this “evergreen” provision, on January 1, 2024, the number of shares reserved

11

for issuance under the 2020 Plan was increased by 1,886,294 shares. As of March 31, 2024, there were 149,873 shares available for issuance.

Share options issued under the 2020 Plan have a 10-year contractual life and generally vest over either a three-year service period for non-employee directors, or a four-year service period with 25% of the award vesting on the first anniversary of the vesting commencement date and the balance thereafter in 36 equal monthly installments for employees and consultants. Certain options granted to the Company’s non-employee directors vest over a three-year service period in three equal annual installments or over a one-year service period in four equal quarterly installments.

The Company grants RSUs to non-employee directors and certain employees under the 2020 Plan. Each RSU represents the right to receive one of the Company’s ordinary shares upon vesting. RSUs granted to employees vest over a four-year service period with 25% of the award vesting on the first anniversary of the vesting commencement date and the remaining RSUs vest in 12 equal quarterly installments. Certain RSUs granted to the Company’s non-employee directors either vest over a three-year service period in three equal annual installments or over a one-year service period in four equal quarterly installments. The Company may also, in its sole discretion, provide for deferred settlement of RSUs awarded to the Company’s non-employee directors.

As of March 31, 2024, there were options to purchase 6,629,815 shares and RSUs for 856,748 shares outstanding under the 2020 Plan.

2019 Share Option Plan

In May 2019, the Company adopted the 2019 Plan, which became effective in conjunction with the IPO. As of March 31, 2024, there were 1,950,108 options to purchase ordinary shares outstanding under the 2019 Plan. In conjunction with the adoption of the 2020 Plan, all shares available for future issuance under the 2019 Plan as of June 29, 2020 became available for issuance under the 2020 Plan and the Company ceased making awards under the 2019 Plan. The 2020 Plan is the successor of the 2019 Plan.

Share options previously issued under the 2019 Plan have a 10-year contractual life, and generally 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 vesting commencement date and the balance thereafter in 36 equal monthly installments. Certain awards granted to the Company’s non-employee directors were fully vested on the date of grant. The exercise price of share options issued under the 2019 Plan is not less than the fair value of ordinary shares as of the date of grant.

Employee Share Purchase Plan

In May 2019, the Company adopted the 2019 Employee Stock Purchase Plan (the “ESPP”), which became effective in conjunction with the IPO. The Company initially reserved 215,000 ordinary shares for future issuance under this plan. The ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2020 and each January 1 thereafter through January 1, 2029, by the lower of: (i) 1% of the outstanding number of ordinary shares on the immediately preceding December 31; (ii) 430,000 ordinary shares or (iii) such lesser number of shares as determined by the Compensation Committee. The number of shares reserved under the ESPP is subject to adjustment in the event of a split-up, share dividend or other change in the Company’s capitalization. The number of shares reserved for issuance under the ESPP was increased by 377,258 shares effective January 1, 2024. As of March 31, 2024, the total number of shares available for issuance under the ESPP was 1,577,671 ordinary shares. As of March 31, 2024, there have been no offering periods to employees under ESPP.

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Share-based compensation

The Company recorded share-based compensation expense in the following expense categories of its condensed consolidated statements of operations and comprehensive loss (in thousands):

Three Months Ended

March 31, 

    

2024

    

2023

Research and development expenses

$

4,531

$

4,596

General and administrative expenses

 

4,751

 

4,446

$

9,282

$

9,042

Share options

The following table summarizes the Company’s option activity since December 31, 2023:

Number of

Weighted

Shares

Weighted

Average

Aggregate

Underlying

Average

Contractual

Intrinsic

    

Share Options

    

Exercise Price

    

Term

    

Value

(in years)

(in thousands)

Outstanding as of December 31, 2023

 

7,469,527

$

23.13

 

6.83

$

21,920

Granted

 

1,862,815

 

18.44

 

 

Exercised

 

(133,735)

 

13.98

 

 

Forfeited

 

(30,351)

 

27.43

 

 

Outstanding as of March 31, 2024

 

9,168,256

$

22.30

 

7.31

$

61,558

Vested and expected to vest as of March 31, 2024

 

9,168,256

$

22.30

7.31

$

61,558

Options exercisable as of March 31, 2024

 

4,959,686

$

20.12

 

5.81

$

45,394

The weighted average grant-date fair value of share options granted during the three months ended March 31, 2024 and 2023 was $12.93 per share and $20.95 per share, respectively.

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 was $1.0 million and $20,000 for the three months ended March 31, 2024 and 2023, respectively.

Total share-based compensation expense for share options granted was $7.5 million and $7.4 million for the three months ended March 31, 2024 and 2023, respectively. Expense for non-employee consultants for the three months ended March 31, 2024 and 2023 was immaterial.

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:

Three Months Ended

March 31, 

    

2024

    

2023

    

Risk-free interest rate

 

4.0

%  

3.9

%  

Expected volatility

 

77.8

%  

83.6

%  

Expected dividend yield

 

 

 

Expected term (in years)

 

6.1

 

6.1

 

As of March 31, 2024, total unrecognized compensation expense related to the unvested employee and director share options was $70.1 million, which is expected to be recognized over a weighted average period of 2.8 years.

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Restricted share units

The following table summarizes the Company’s RSU activity under the 2020 Plan since December 31, 2023:

Number of Shares

Weighted-Average

Underlying RSUs

Grant Date Fair Value

Unvested at December 31, 2023

326,848

$

37.40

Granted

596,996

18.12

Vested and settled

(67,096)

33.99

Vested and deferred(1)

(10,500)

18.07

Unvested outstanding at March 31, 2024

846,248

24.31

Vested but subject to deferred settlement at March 31, 2024(1)

10,500

18.07

Outstanding at March 31, 2024

856,748

$

24.23

(1)During the three months ended March 31, 2024, the Company granted certain RSUs to the Company’s non-employee directors which provided for deferred settlement of the RSUs to a specified date following the first to occur of (i) the date of the director’s separation from service, (ii) the date of the director’s disability, (iii) the date of the director’s death or (iv) the date of a change in control event.

The fair value of RSUs that vested during the three months ended March 31, 2024 and 2023 was $1.5 million and $1.6 million, respectively.

Total share-based compensation expense for RSUs granted was $1.8 million and $1.6 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, the total unrecognized compensation expense related to unvested RSUs was $18.9 million, which is expected to be recognized over a weighted-average period of 3.0 years.

9. Significant agreements

For the three months ended March 31, 2024 and 2023, the Company recognized revenue for its collaborations with Bayer Consumer Care AG (“Bayer”), Novartis Pharma AG (“Novartis”), Ionis Pharmaceuticals, Inc. (“Ionis”) and Genentech, Inc. (“Genentech”). The following table summarizes the revenue recognized in the Company’s condensed consolidated statements of operations and comprehensive loss from these arrangements (in thousands):

Three Months 

Ended 

March 31, 

    

2024

    

2023

Collaboration revenues

    

  

    

  

Bayer

$

818

$

Novartis

1,247

Ionis

5,854

2,784

Genentech

11,611

2,112

Total collaboration revenues

$

19,530

$

4,896

Bayer Collaboration Agreement

On May 4, 2023, the Company and Bayer entered into a collaboration and license agreement (the “Bayer Collaboration Agreement”), pursuant to which the parties will perform research and discovery activities under a mutually agreed upon research plan during a research term up to a specified number of years per target program to generate radiopharmaceutical compounds incorporating optimized Bicycle constructs directed to two specified targets, under the oversight of a joint research committee. In addition, Bayer has a one-time right to expand the collaboration to include a third target program, and with respect to each of the up to three target programs, Bayer has an option, exercisable within a specified period of time following the effective date of the Bayer Collaboration Agreement, to generate, develop and commercialize non-radiopharmaceutical compounds directed to the applicable target, either itself

14

or in collaboration with the Company. Bayer also has certain limited target substitution rights, in certain cases subject to specified additional payments.

For each collaboration program, Bayer may elect, at its sole discretion, to progress compounds arising from activities under the research programs into further preclinical development of potential products directed to the target of such collaboration program. On a target-by-target basis, if Bayer elects to progress development candidates directed to such target into further clinical development, Bayer will be required to use commercially reasonable efforts to develop and seek regulatory approval in certain major markets for products directed to the applicable target.

Bayer paid an upfront payment to the Company of $45.0 million in July 2023. All other payments under the Bayer Collaboration Agreement will be made in British Pound Sterling. If Bayer elects to expand the collaboration to include an additional target program, it will be required to make a one-time payment to the Company in connection with the selection of such target in the high-single digit millions. In addition, on a target-by-target basis, if Bayer elects to exercise its option to expand its rights with respect to such target to develop and commercialize non-radiopharmaceutical compounds directed to such target, Bayer will be required to pay to the Company, for each such target program for which it exercises such option, either a one-time option fee payment or quarterly payments of specified installment amounts for a specified maximum time period during which the Company is performing research activities, with the aggregate amounts receivable by the Company ranging from the high-single digit millions in the case of the one-time option fee payment, to the low single-digit millions in the case of the quarterly installments, in each case where the Company is performing specified research activities following the exercise of the option. Additionally, for each collaboration program, Bayer will reimburse the Company for certain expenses incurred in connection with specified research and discovery activities performed by a contract research organization (“CRO”).

On a target-by-target basis for the up to three targets, if Bayer elects to progress one or more candidate compounds into further development, Bayer will be required to pay a candidate selection fee for the first such compound progressed by Bayer directed to such target that incorporates a radionuclide, and for the first such compound directed to such target that does not incorporate a radionuclide (and for which Bayer has not paid the one-time option fee payment for non-radiopharmaceutical compounds), ranging from high single-digit millions to the mid single-digit millions. Upon declaring a candidate, Bayer will be responsible for all future development, manufacturing, and commercialization activities. On a target-by-target basis, if Bayer successfully conducts clinical development and achieves regulatory approval for compounds arising from the collaboration directed to such target in two indications, Bayer will be required to pay to the Company development and regulatory/first commercial sale milestones of up to £178.3 million for the first product directed to the applicable target to achieve such milestones (whether radiopharmaceutical or non-radiopharmaceutical), or £534.9 million across all three potential target programs. In addition, if Bayer successfully commercializes products arising from the collaboration, Bayer will be required to pay to the Company, on a product-by-product basis, tiered royalties on net sales of products by Bayer, its affiliates or sublicensees at percentages ranging from the mid-single digits to the very low double digits, subject to standard reductions and offsets in certain circumstances, and a royalty floor. If Bayer commercializes diagnostic products directed to a target, royalties will be payable on such diagnostic products at a specified reduced percentage of the rates for therapeutic products. Royalties will be payable under the Bayer Collaboration Agreement on a product-by-product and country-by-country basis, commencing on the first commercial sale of each product, until the latest of (a) the expiration of the last valid claim of certain patents licensed by the Company to Bayer, (b) a specified number of years following first commercial sale of such product, and (c) expiration of all data and regulatory exclusivity for such product in the applicable country. On a target-by-target basis, Bayer will also owe the Company tiered sales milestones based on the achievement of specified levels of net sales of therapeutic products directed to such target totaling up to £194.5 million in the aggregate per target, or £583.5 million across all three potential target programs, and on diagnostic products directed to such target at a low double digit percentage of the therapeutic product milestones.

The Bayer Collaboration Agreement will remain in force on a product-by-product and country-by-country basis, unless earlier terminated by either party, until the expiration of the obligation for Bayer to make royalty payments to the Company for such product in such country, and will terminate in its entirety on the expiration of all such royalty terms in all countries. Either party may terminate the agreement upon 90 days’ written notice for the other party’s uncured material breach (or 20 business days in the case of non-payment by Bayer), subject to extension of such cure period in certain circumstances, or upon the other party’s insolvency. In addition, the Company has the right to terminate

15

in the case of a patent challenge by or on behalf of Bayer (or any of its affiliates or sublicensees). In addition, Bayer may terminate the Bayer Collaboration Agreement (i) in its entirety or with respect to any product, collaboration program or target for any reason upon 60 or 90 days’ written notice to the Company (depending on whether such termination is prior to or following first commercial sale of a licensed product). The closing of the Bayer Collaboration Agreement was subject to the clearance of the transaction under the U.K. National Security and Investment Act 2021, which occurred on June 22, 2023 (the “Effective Date”).

Accounting Analysis

At inception of the Bayer Collaboration Agreement, the Company identified the following performance obligations:

(i)Two combined performance obligations comprised of the license and the related research and development services during the research term associated with radiopharmaceutical compounds for the first and second targets;
(ii)A material right associated with certain limited substitution rights with respect to either the first or second target;
(iii)Two material rights associated with the option to progress radiopharmaceutical candidates directed to the first and second targets into further development;
(iv)Two material rights associated with the options to generate, develop, and commercialize non-radiopharmaceutical compounds for each of the first and second targets, for which each option includes an underlying option for research and development services and an option to progress non-radiopharmaceutical candidates directed to the first and second targets into further development; and
(v)A material right related to the option to expand the collaboration to include a third target, which upon exercise includes research and development services during the research term associated with radiopharmaceutical compounds directed to the third target, as well as underlying options for: certain limited substitution rights; an option to progress a radiopharmaceutical candidate directed to the third target into further development; and an option to generate, develop, and commercialize non-radiopharmaceutical compounds directed to the third target, inclusive of an underlying option for research and development services and an option to progress a non-radiopharmaceutical candidate into further development.

The Company’s participation in the joint research committee was assessed as immaterial in the context of the contract.

The Company concluded that the license granted at contract inception is not distinct from the research and development services as Bayer cannot obtain the benefit of the license without the Company performing the research and development services. The services incorporate proprietary technology and unique skills and specialized expertise, particularly as they relate to constrained peptide technology that is not available in the marketplace. As a result, for each target, the license has been combined with the research and development services into a single performance obligation which is the combined performance obligation comprised of the license and related research and development services.

In assessing whether the various options under the Bayer Collaboration Agreement represent material rights, the Company considered the additional consideration the Company would be entitled to upon option exercise and the standalone selling price of the underlying goods and services. For the material rights identified above, the Company concluded that each of the options provided Bayer with a discount that it otherwise would not have received. The Company exercised judgment in concluding that certain development and commercialization rights associated with progressing product candidates into further development and commercialization represent options that are material rights, as Bayer cannot benefit from the development and commercialization rights until Bayer, in its sole discretion, elects to progress candidates into further development and pays the associated candidate selection fees.

16

The transaction price was initially determined to be $47.5 million, consisting of the $45.0 million upfront fee and an estimated $2.5 million for the reimbursement of certain external CRO costs. The Company utilized the expected value method to determine the amount of variable consideration to be received. Additional payments to the Company upon Bayer’s exercise of options are excluded from the transaction price as they relate to option fees and milestones that can only be achieved subsequent to the exercise of an option. The estimated $2.5 million in variable consideration was first allocated entirely to the first and second target combined performance obligations as the terms of the variable consideration relate specifically to the Company’s efforts in satisfying the performance obligations and allocating the variable consideration entirely to those performance obligations is consistent with the allocation objective in ASC 606. The remaining 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 combined performance obligations for the first and second targets were 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 for what would be expected to be realized under similar contracts. The estimated standalone selling prices for the material rights were determined based on the fees that Bayer would pay to exercise the options, the estimated value of the underlying goods and services, and the probability that Bayer would exercise the options, inclusive of the probability of technical success. Based on the relative standalone selling prices, the allocation of the transaction price to the separate performance obligations is as follows (in thousands):

Allocation of

Performance Obligations

Transaction Price

Two combined performance obligations related to the licenses and research and development services associated with radiopharmaceutical compounds directed to the first and second targets

$

14,976

Material right associated with limited substitution rights for either the first or second target

1,527

Two material rights associated with the option to progress radiopharmaceutical candidates directed to the first and second targets into further development

14,691

Two material rights associated with the option to progress a non-radiopharmaceutical compound directed to the first and second targets

8,703

Material right for the option to expand the collaboration to include a third target and the underlying additional option rights

7,603

$

47,500

The Company is recognizing revenue related to amounts allocated to the first and second target combined performance obligations as the underlying services are performed using a proportional performance model over the period of service using input-based measurements of full-time equivalent efforts and external costs incurred to date as a percentage of total expected full-time equivalent efforts and external costs, which best reflects the progress towards satisfaction of the performance obligations. The amounts allocated to the material rights are recorded as deferred revenue and the Company will commence revenue recognition upon exercise of or upon expiry of the respective option. The first and second target combined performance obligations are expected to be satisfied over a period of approximately four years and the remaining material rights are expected to be exercised or expire within approximately seven years from contract inception.

During the three months ended March 31, 2024 the Company recognized revenue of $0.8 million in connection with the Bayer Collaboration Agreement. The Company did not recognize revenue during the three months ended March 31, 2023 in connection with the Bayer Collaboration Agreement. As of March 31, 2024 and December 31, 2023, the Company recorded deferred revenue of $42.4 million and $43.6 million, respectively, in connection with the Bayer Collaboration Agreement.

Novartis Collaboration Agreement

On March 27, 2023, the Company and Novartis entered into a collaboration and license agreement (the “Novartis Collaboration Agreement”), pursuant to which the parties will perform research and discovery activities under a mutually agreed upon research plan during a research term of up to a specified number of years per target program to generate compounds incorporating optimized Bicycle constructs directed to two specified targets, under the oversight of a joint steering committee. The Company granted Novartis a non-exclusive, worldwide, royalty-free, sublicensable

17

(subject to certain restrictions) license under the Company’s intellectual property solely for Novartis to perform its research activities under each collaboration program during the research term (the “Novartis Research License”). For each collaboration program, Novartis may elect to progress compounds arising from activities under the research programs (“Licensed Compounds”) into further preclinical development of potential products directed to the target of such collaboration program. At a specified point, the Company will grant Novartis an exclusive, royalty-bearing, sublicensable, license under certain of the Company’s intellectual property to develop, manufacture, and commercialize such Licensed Compound, subject to certain limitations. Novartis also has certain limited substitution rights for each target, and Novartis may extend the initial research term by one year by electing to make an additional payment. On a target-by-target basis, if Novartis elects to progress development candidates directed to such target into further clinical development, Novartis will be required to use commercially reasonable efforts to develop and seek regulatory approval in certain major markets for products containing Licensed Compounds directed to the applicable target.

 

Novartis paid a nonrefundable upfront payment to the Company of $50.0 million in April 2023. During the research term, upon achievement of a specified discovery milestone for the first target program, Novartis will make a one-time payment to the Company in the low single digit millions. On a target-by-target basis, if Novartis elects to progress one or more candidate compounds into further development and obtain an exclusive license for commercialization, Novartis will be required to pay a candidate selection fee for the first such Licensed Compound progressed by Novartis that incorporates a radionuclide, and for the first such Licensed Compound that does not incorporate a radionuclide, in each case in the mid-teen millions. Upon declaring a candidate, Novartis will be responsible for all future development, manufacturing, and commercialization activities. On a target-by-target basis, Novartis will be required to pay to the Company additional development and regulatory/first commercial sale milestones of up to $210.0 million for each of the first radionuclide product and non-radionuclide product directed to the applicable target upon the achievement of specified milestones, or $840.0 million in the aggregate if Novartis successfully achieves all such milestone events for both a radionuclide and a non-radionuclide product in each of the targets. In addition, the Company is eligible to receive tiered sales milestones based on the achievement of specified levels of net sales of such products totaling up to $200.0 million in the aggregate per product, or $800.0 million in the aggregate if Novartis successfully commercializes both a radionuclide and a non-radionuclide product in each of the target programs. In addition, (i) the Company is eligible to receive, on a therapeutic product-by-therapeutic product basis, tiered royalties on net sales of products by Novartis, its affiliates or sublicensees at percentages ranging from the high single digits to the very low double digits, subject to standard reductions and offsets in certain circumstances, and a royalty floor, and (ii) the Company is eligible to receive low single digit royalties on net sales of diagnostic products on a diagnostic product-by-diagnostic product basis and a low single digit percentage of sublicensing income on diagnostic products. Royalties will be payable under the Novartis Collaboration Agreement on a product-by-product and country-by-country basis, commencing on the first commercial sale of each product in a country, until the latest of (a) the expiration of the last valid claim of certain patents licensed by Company to Novartis, (b) a specified number of years following first commercial sale of such product, and (c) expiration of all data and regulatory exclusivity for such product in the applicable country.

 

The Novartis Collaboration Agreement will remain in force on a product-by-product and country-by-country basis, unless earlier terminated by either party, until the expiration of the obligation for Novartis to make royalty payments to Company for such product in such country, and will terminate in its entirety on the expiration of all such royalty payment obligations in all countries. Either party may terminate the agreement upon 60 days’ written notice for the other party’s uncured material breach, or upon the other party’s insolvency. In addition, Novartis may terminate the Collaboration Agreement (i) in its entirety or on a product-by-product or target-by-target basis for any reason upon 90 days’ written notice to Company, and (ii) on a target-by-target basis on 30 days’ written notice if Novartis determines that a safety or regulatory issue exists which would have a material adverse effect on the development, manufacture, or commercialization of any product with respect to a given target. The Company may terminate the Novartis Collaboration Agreement, (a) on a target-by-target basis upon 30 days’ prior written notice if Novartis has not yet declared a development candidate for such target by the sixth anniversary of the commencement of research activities for such target and (b) if Novartis or any of its affiliates or sublicensees challenges the validity or enforceability of any of the patents in the Company’s licensed intellectual property.

18

Accounting Analysis

Upon the execution of the Novartis Collaboration Agreement, the Company identified the following performance obligations:

(i)Two combined performance obligations comprised of the Novartis Research License and the related research and development services during the research term for the first and second targets;

(ii)Two material rights associated with certain limited substitution rights with respect to the first and second targets;

(iii)Two material rights associated with the option to progress development candidates that incorporate a radionuclide with respect to the first and second target; and

(iv)Two material rights associated with the option to progress development candidates that do not incorporate a radionuclide with respect to the first and second target.

The Company concluded that certain rights that require the payment of additional consideration, which approximates the standalone selling price of the underlying services to be provided, do not provide the customer with a material right and therefore, are not considered as performance obligations at the inception of the arrangement. 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 Novartis Research License is not distinct from the research and development services as Novartis 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 they relate to constrained peptide technology that is not available in the marketplace. As a result, for each target, the research license has been combined with the research and development services into a single performance obligation. The Company exercised judgment in concluding that Novartis’ rights to obtain certain research and development services associated with compounds that do not incorporate a radionuclide during the research term are not options that are material rights as they do not represent either options for additional goods or services or options for additional services that are at a discount that it would not have otherwise received.

In assessing whether the various options under the Novartis Collaboration Agreement represent material rights, the Company considered the additional consideration the Company would be entitled to upon option exercise and the standalone selling price of the underlying goods and services. For the material rights identified above the Company concluded that each of the options provided Novartis with a discount that it otherwise would not have received.

The total transaction price was initially determined to be $50.0 million, consisting of the $50.0 million upfront fee. The Company utilizes the most likely amount method to determine the amount of variable consideration to be received. Variable consideration for development milestones not subject to option exercises was fully constrained as a result of the uncertainty regarding whether any of the milestones will be achieved. Additional consideration to be paid to the Company upon the exercise of options by Novartis is excluded from the transaction price as they relate to option fees and milestones that can only be achieved subsequent to the exercise of an option.

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 combined performance obligations for each of the targets were 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 for what would be expected to be realized under similar contracts. The estimated standalone selling prices for the material rights were determined based on the fees Novartis would pay to exercise the options, the estimated value of the underlying goods and services, and the probability that Novartis would exercise the options, inclusive of the probability of technical success. Based on the relative standalone selling prices, the allocation of the transaction price to the separate performance obligations is as follows (in thousands):

19

Allocation of 

Performance Obligations

    

Transaction Price

Two combined performance obligations for the first and second targets comprised of the Novartis Research License and the related research and development services during the research term for the first and second targets

$

18,008

Two material rights associated with limited substitution rights

 

2,466

Two material rights associated with options to progress development candidates incorporating radionuclides

 

19,684

Two material rights associated with options to progress development candidates not incorporating radionuclides

9,842

$

50,000

The Company is recognizing revenue related to amounts allocated to the first and second target combined performance obligations 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 efforts and external costs incurred to date as a percentage of total full-time equivalent efforts and expected external costs, which best reflects the progress towards satisfaction of the performance obligations. The amounts allocated to the material rights are recorded as deferred revenue and the Company will commence revenue recognition upon exercise of or upon expiry of the respective option. The first and second target combined performance obligations are expected to be satisfied over a period of approximately three years and the remaining material rights are expected to be exercised or expire within approximately six years from contract execution.

During the three months ended March 31, 2024, the Company recognized revenue of $1.2 million in connection with the Novartis Collaboration Agreement. The Company did not recognize revenue during the three months ended March 31, 2023 in connection with the Novartis Collaboration Agreement. As of March 31, 2024 and December 31, 2023, the Company recorded deferred revenue of $48.3 million and $50.0 million, respectively, in connection with the Novartis Collaboration Agreement.

Ionis Agreements

Ionis Evaluation and Option Agreement

On December 31, 2020, the Company entered into an Evaluation and Option Agreement (the “Evaluation and Option Agreement”) with Ionis. Under the terms of the Evaluation and Option Agreement, Ionis had the option (the “Ionis Option”) to obtain an exclusive license to the Company’s intellectual property for the purpose of continued research, development, manufacture and commercialization of products within a particular application of the Company’s platform technology. Ionis paid the Company a nonrefundable option fee of $3.0 million in January 2021 that was fully creditable against the upfront payment to be paid upon the execution of a license agreement. On July 9, 2021, the Ionis Option was exercised upon the parties’ entry into a collaboration and license agreement as contemplated by the Evaluation and Option Agreement. The Company determined that the Ionis Option exercise constituted a continuation of an existing arrangement. Therefore, the $3.0 million paid under the Evaluation and Option Agreement was included in the transaction price of the collaboration and license agreement.

Ionis Collaboration Agreement

Following the exercise by Ionis of the Ionis Option granted pursuant to the Evaluation and Option Agreement, on July 9, 2021, the Company and Ionis entered into a collaboration and license agreement (the “Ionis Collaboration Agreement”). Pursuant to the Ionis Collaboration Agreement, the Company granted to Ionis a worldwide exclusive license under the Company’s relevant technology to research, develop, manufacture and commercialize products incorporating Bicycle peptides directed to the protein coded by the gene TFRC1 (transferrin receptor) (“TfR1 Bicycle” molecules) intended for the delivery of oligonucleotide compounds directed to targets selected by Ionis for diagnostic, therapeutic, prophylactic and preventative uses in humans. Ionis will maintain exclusivity to all available targets unless it fails to achieve specified development diligence milestone deadlines. If Ionis fails to achieve one or more development diligence milestone deadlines, the Company has the right to limit exclusivity to certain specific collaboration targets,

20

subject to the payment by Ionis of a low-single-digit million dollar amount per target as specified in the Ionis Collaboration Agreement. Each party will be responsible for optimization of such TfR1 Bicycle molecules and other research and discovery activities related to TfR1 Bicycle molecules, as specified by a research plan, and thereafter Ionis will be responsible for all future research, development, manufacture and commercialization activities. The Company will perform research and discovery activities including a baseline level of effort for a period of three years for no additional consideration. The parties will negotiate a commercially reasonable rate if additional research activities are agreed to be performed. For certain research and discovery activities that the Company is responsible for performing, the Company may use the assistance of a contract research organization (“CRO”). The Company has retained certain rights, including the right to use TfR1 Bicycle molecules for all non-oligonucleotide therapeutic purposes.

The activities under the Ionis Collaboration Agreement are governed by a joint steering committee (“JSC”) with an equal number of representatives from the Company and Ionis. The JSC will oversee the performance of the research and development activities. Upon first commercial sales of a licensed product, the JSC will have no further responsibilities or authority under the Ionis Collaboration Agreement.

Under the Ionis Collaboration Agreement, Ionis made a non-refundable upfront payment of $31.0 million in addition to the $3.0 million already paid under the Option and Evaluation Agreement. Additionally, Ionis is obligated to reimburse the Company on a pass-through basis for expenses incurred in connection with research and discovery activities performed by a CRO. If Ionis is at risk of failing to achieve a specified development diligence milestone deadline, it can make up to three separate payments of a mid-single-digit million dollar amount to extend the development diligence milestone deadlines. On a collaboration target-by-collaboration target basis, Ionis will be required to make a low-single-digit million dollar payment upon acceptance of an investigational new drug application (“IND”) for the first product directed to such collaboration target (provided that Ionis will have a high single-digit million dollar credit to be applied towards the IND acceptance fee for four collaboration targets, or for exclusivity payments for certain targets if specified development diligence milestones deadlines are not achieved), and Ionis will be required to make milestone payments upon the achievement of specified development and regulatory milestones of up to a low double-digit million dollar amount per collaboration target. In addition, the Company is eligible to receive up to a low double-digit million dollar amount in cumulative sales milestone payments. The Company is also entitled to receive tiered royalty payments on net sales at percentages in the low single digits, subject to certain standard reductions and offsets. Royalties will be payable, on a product-by-product and country-by-country basis, until the latest of the expiration of specified licensed patents covering such product in such country, ten years from first commercial sale of such product in such country, or expiration of marketing exclusivity for such product in such country.

In December 2021, the Company and Ionis entered into an amendment to the Ionis Collaboration Agreement (the “Ionis Amendment”). Ionis paid the Company $1.6 million and the Company agreed to perform additional research services utilizing its proprietary phage screening technology to identify and optimize new product candidates that target the TfR1 receptor. The Company performed the additional research services for an initial six-month period, which was extended in August 2022 for an additional three months, in exchange for consideration of $0.8 million. In October 2022, Ionis exercised an option it had for the Company to perform additional research services for an additional six months in exchange for the remaining consideration of $0.8 million. In April 2023, the Company and Ionis entered into the third amendment to the Ionis Collaboration Agreement (the “Third Ionis Amendment”). Ionis paid the Company $0.8 million and the Company agreed to perform additional research services to continue to evaluate and optimize the new product candidates that target the TfR1 receptor. The Company will perform the additional research services for a period of one year in exchange for consideration of $0.8 million.

Either party may terminate the Ionis Collaboration Agreement for the uncured material breach of the other party or in the case of insolvency. Ionis may terminate the Ionis Collaboration Agreement for convenience on specified notice periods depending on the development stage of the applicable target, either in its entirety or on a target-by-target basis.

Ionis Share Purchase Agreement

Concurrently with the execution of the Ionis Collaboration Agreement on July 9, 2021, the Company entered into a share purchase agreement (the “Ionis Share Purchase Agreement”) with Ionis, pursuant to which Ionis purchased 282,485 of the Company’s ordinary shares (the “Ionis Shares”) at a price per share of $38.94, for an aggregate purchase

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price of approximately $11.0 million. The Share Purchase Agreement also provided that, subject to limited exceptions, Ionis could not sell any of the Ionis Shares until July 2022.

The Company determined the fair value of the Ionis Shares to be $7.6 million, based on the closing price of the Company’s ADSs of $31.11 per ADS on the date of the Ionis Share Purchase Agreement, less a discount for lack of marketability associated with resale restrictions applicable to the Ionis Shares. The Company concluded that the premium paid by Ionis under the Ionis Share Purchase Agreement represents additional consideration for the goods and services to be provided under the Ionis Collaboration Agreement. As such, the total premium of $3.4 million was included in the transaction price under the Ionis Collaboration Agreement.

Accounting Analysis

Upon execution of the Ionis Collaboration Agreement, the Company identified the following promises in the arrangement: i) a worldwide exclusive license to research, develop, manufacture and commercialize products incorporating TfR1 Bicycle molecules intended for the delivery of oligonucleotide compounds directed to targets selected by Ionis for diagnostic, therapeutic, prophylactic and preventative uses in humans; ii) research and discovery activities to customize and optimize such TfR1 Bicycle molecules; iii) four material rights associated with options to obtain credits to be applied towards the IND acceptance fee for four collaboration targets.

The Company’s participation in the JSC was deemed immaterial in the context of the contract. The Company has concluded that the exclusive license to research, develop, manufacture and commercialize products is not distinct from the research and discovery services as Ionis cannot obtain the intended benefit of the license without the Company performing the agreed upon research and discovery services, including the optimization of such TfR1 Bicycle molecules. The services incorporate proprietary technology, unique skills and specialized expertise to optimize Bicycle molecules that are not available in the marketplace. As a result, the exclusive license to research, develop, manufacture and commercialize products has been combined with the research and discovery activities into a single performance obligation. The Company concluded that the low-single-digit million dollar payments upon acceptance of an IND (and payment to extend the exclusive license to research, develop, manufacture and commercialize a product candidate for certain specific collaboration targets if Ionis fails to achieve specified development diligence milestone deadlines) is a customer option, as Ionis has the contractual right to choose to make the payment in exchange for the continued exclusive right to research, develop, manufacture and commercialize the product candidate, and the Company is not presently obligated to provide, and does not have a right to consideration, for the additional goods or services prior to Ionis’s exercise of the option. In assessing whether the options under the Ionis Collaboration Agreement represent material rights, the Company considered the additional consideration the Company would be entitled to upon the option exercise and the standalone selling price of the underlying goods and services. For the material rights identified as performance obligations above, the Company concluded that each of the options to obtain credits provided Ionis with a discount that it otherwise would not have received without entering into the Ionis Collaboration Agreement.

The total transaction price was initially determined to be $38.0 million, consisting of the $31.0 million up front payment, the $3.0 million payment under the Option and Evaluation Agreement that was credited against the total upfront payment payable pursuant to the Ionis Collaboration Agreement, the $3.4 million premium paid under the Ionis Share Purchase Agreement, and an estimated $0.6 million for the reimbursement of CRO costs. Additional variable consideration including development diligence milestone deadline extension payments, development and regulatory milestone payments, sales milestone payments and royalty payments, was fully constrained as a result of the uncertainty regarding whether any of the milestones will be achieved.

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 price of the Ionis combined licenses and research and discovery performance obligation was based on the nature of the licenses to be delivered, as well as the services to be performed and estimates of the associated effort and costs of the services, adjusted for a reasonable profit margin for what would be expected to be realized under similar contracts. The estimated standalone selling price for the material rights was determined based on the estimated value of the underlying goods and services, and the probability

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that Ionis would exercise the option. Based on the relative standalone selling price, the initial allocation of the transaction price to the separate performance obligations is as follows (in thousands):

Allocation of 

Performance Obligations

    

Transaction Price

Combined licenses and research and discovery performance obligation

$

34,100

Four material rights associated with credits for IND Acceptance fees

 

3,900