Long-term debt

3 Months Ended

Mar. 31, 2024

Long-term debt

Long-term debt

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

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