10-Q 1 abcl-10q_20210930.htm 10-Q abcl-10q_20210930.htm
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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 September 30, 2021

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: 001-39781

 

AbCellera Biologics Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

British Columbia

Not Applicable

( State or other jurisdiction of

incorporation or organization)

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

2215 Yukon Street

Vancouver, BC

V5Y 0A1

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (604) 559-9005

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common shares, no par value per share

 

ABCL

 

The Nasdaq Stock 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 November 8, 2021, the registrant had  281,581,275 common shares, no par value per share, outstanding.

 

 

 

 


 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

2

 

Condensed Consolidated Statements of Stockholders’ Equity

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

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

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

68

Item 3.

Defaults Upon Senior Securities

68

Item 4.

Mine Safety Disclosures

68

Item 5.

Other Information

68

Item 6.

Exhibits

69

 

Signatures

70

 

 

i


 

 

Summary of the Material and Other Risks Associated with Our Business

Our business is subject to numerous material and other risks and uncertainties. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this Quarterly Report, including our financial statements and related notes hereto. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects. The risks and uncertainties described below may change over time and other risks and uncertainties, including those that we do not currently consider material, may impair our business. These risks include, but are not limited to, the following:

 

We have incurred losses in certain years since inception and we may not be able to generate sufficient revenue to maintain profitability.

 

Our quarterly and annual operating results have fluctuated significantly in the past and may fluctuate significantly in the future, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations.

 

Our commercial success depends on the quality of our antibody discovery platform and technological capabilities and their acceptance by new and existing partners in our market.

 

If we cannot maintain and expand current partnerships and enter into new partnerships that generate discovery programs for antibodies, our business could be adversely affected.

 

In recent periods, we have depended on a limited number of partners for our revenue, the loss of any of which could have an adverse impact on our business.

 

Biopharmaceutical drug development is inherently uncertain, and it is possible that none of the drug candidates discovered using our platform that are further developed will receive marketing approval or become viable commercial products, on a timely basis or at all.

 

The failure of our partners to meet their contractual obligations to us could adversely affect our business.

 

We may be unable to manage our current and future growth effectively, which could make it difficult to execute on our business strategy.

 

We have invested, and expect to continue to invest, in research and development efforts that further enhance our antibody discovery platform. Such investments in technology are inherently risky and may affect our operating results. If the return on these investments is lower or develops more slowly than we expect, our revenue and operating results may suffer.

 

Our partnership programs have significant discretion in determining when and whether to make announcements, if any, about the status of our partnerships, including about clinical developments and timelines for advancing collaborative programs, and the price of our common shares may decline as a result of announcements of unexpected results or developments.

 

Our partners may not achieve projected discovery and development milestones and other anticipated key events in the expected timelines or at all, which could have an adverse impact on our business and could cause the price of our common shares to decline.

 

The life sciences and biotech platform technology market is highly competitive, and if we cannot compete successfully with our competitors, we may be unable to increase or sustain our revenue, or sustain profitability.

 

Our success depends on our ability to protect our intellectual property.

 

Our future success depends on our ability to retain key executives and attract, retain and motivate qualified personnel.

 

In connection with the audit of our financial statements as of and for the years ended December 31, 2019, a material weakness in our internal control over financial reporting was identified and we may identify additional material weaknesses in the future.

 

Sales of a substantial number of our common shares in the public market could cause our share price to fall significantly, even if our business is doing well.

Investing in our common shares involves a high degree of risk. You should carefully consider the following risks and uncertainties, together with all other information in this Quarterly Report on Form 10-Q, including our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as our other filings with the Securities and Exchange Commission, or the SEC, before investing in our common stock. Any of the risk factors we describe below could adversely affect our business, financial condition or results of operations. The market price of our common stock could decline if one or more of these risks or uncertainties were to occur, which may cause you to lose all or part of the money you paid to buy our common shares. Additional risks that are currently unknown to us or that we currently believe to be immaterial may also impair our business. Certain statements below are forward-looking statements. See “Forward-Looking Information” in this Quarterly Report on Form 10-Q.

 

ii


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

AbCellera Biologics Inc.

Condensed Consolidated Balance Sheets

(All figures in U.S. dollars. Amounts are expressed in thousands except share data)

(Unaudited)

 

 

 

December 31, 2020

 

 

September 30, 2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

594,116

 

 

$

517,694

 

Marketable securities

 

 

-

 

 

 

235,785

 

                   Total cash, cash equivalents, and marketable securities

 

 

594,116

 

 

 

753,479

 

Accounts and accrued receivable

 

 

213,239

 

 

 

43,633

 

Other current assets

 

 

5,970

 

 

 

6,635

 

Total current assets

 

 

813,325

 

 

 

803,747

 

Long term assets:

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

17,923

 

 

 

91,584

 

Intangible assets

 

 

115,153

 

 

 

148,821

 

Goodwill

 

 

31,500

 

 

 

49,457

 

Investments in and loans to equity accounted investees

 

 

19,247

 

 

 

47,507

 

Other long-term assets

 

 

8,388

 

 

 

31,616

 

Total long-term assets

 

 

192,211

 

 

 

368,985

 

Total assets

 

$

1,005,536

 

 

$

1,172,732

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and other liabilities

 

$

20,195

 

 

$

24,072

 

Current portion of contingent consideration payable

 

 

13,411

 

 

 

12,122

 

Income taxes payable

 

 

36,152

 

 

 

6,590

 

Accrued royalties payable

 

 

27,143

 

 

 

595

 

Deferred revenue

 

 

6,589

 

 

 

6,170

 

Total current liabilities

 

 

103,490

 

 

 

49,549

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Operating lease liability

 

 

3,715

 

 

 

27,264

 

Deferred revenue and grant funding

 

 

25,894

 

 

 

59,682

 

Contingent consideration payable

 

 

9,148

 

 

 

44,948

 

Deferred tax liability

 

 

26,161

 

 

 

36,197

 

Other long-term liabilities

 

 

6,620

 

 

 

1,695

 

Total long-term liabilities

 

 

71,538

 

 

 

169,786

 

Total liabilities

 

 

175,028

 

 

 

219,335

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common shares: no par value, unlimited authorized shares at December 31,

   2020 and September 30, 2021:  269,497,768 and 281,151,877 shares issued

   and outstanding at December 31, 2020 and September 30, 2021 respectively

 

 

710,387

 

 

 

718,088

 

Additional paid-in capital

 

 

5,919

 

 

 

26,945

 

Accumulated other comprehensive income

 

 

-

 

 

 

644

 

Accumulated earnings

 

 

114,202

 

 

 

207,720

 

Total shareholders' equity

 

 

830,508

 

 

 

953,397

 

Total liabilities and shareholders' equity

 

$

1,005,536

 

 

$

1,172,732

 

 

 

 

 

 

 

 

 

 

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

1


 

AbCellera Biologics Inc.

Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(All figures in U.S. dollars. Amounts are expressed in thousands except share and per share data)

(Unaudited)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research fees

 

$

4,362

 

 

$

5,128

 

 

$

17,247

 

 

$

14,330

 

Licensing revenue

 

 

-

 

 

 

190

 

 

 

-

 

 

 

20,692

 

Milestone payments

 

 

5,000

 

 

 

-

 

 

 

8,000

 

 

 

8,000

 

Royalty revenue

 

 

-

 

 

 

190

 

 

 

-

 

 

 

192,850

 

Total revenue

 

 

9,362

 

 

 

5,508

 

 

 

25,247

 

 

 

235,872

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalty fees

 

 

-

 

 

 

-

 

 

 

-

 

 

 

23,622

 

Research and development(1)

 

 

7,495

 

 

 

17,450

 

 

 

20,757

 

 

 

44,853

 

Sales and marketing(1)

 

 

626

 

 

 

1,217

 

 

 

1,610

 

 

 

5,086

 

General and administrative(1)

 

 

2,968

 

 

 

11,271

 

 

 

6,116

 

 

 

28,958

 

Depreciation and amortization

 

 

41

 

 

 

3,666

 

 

 

1,508

 

 

 

10,493

 

Total operating expenses

 

 

11,130

 

 

 

33,604

 

 

 

29,991

 

 

 

113,012

 

Income (loss) from operations

 

 

(1,768

)

 

 

(28,096

)

 

 

(4,744

)

 

 

122,860

 

Other (income) expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (income) expense

 

 

2,262

 

 

 

1,256

 

 

 

3,556

 

 

 

595

 

Grants and incentives

 

 

(1,337

)

 

 

(4,380

)

 

 

(10,217

)

 

 

(12,174

)

Total other (income) expense

 

 

925

 

 

 

(3,124

)

 

 

(6,661

)

 

 

(11,579

)

Net earnings (loss) before income tax

 

 

(2,693

)

 

 

(24,972

)

 

 

1,917

 

 

 

134,439

 

Income tax (recovery)

 

 

-

 

 

 

(3,592

)

 

 

-

 

 

 

40,923

 

Net earnings (loss)

 

$

(2,693

)

 

$

(21,380

)

 

$

1,917

 

 

$

93,516

 

Foreign currency translation adjustment

 

 

-

 

 

 

(1,508

)

 

 

-

 

 

 

644

 

Comprehensive income (loss)

 

$

(2,693

)

 

$

(22,888

)

 

$

1,917

 

 

$

94,160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss) per share attributable to common shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.02

)

 

$

(0.08

)

 

$

0.01

 

 

$

0.34

 

Diluted

 

$

(0.02

)

 

$

(0.08

)

 

$

0.01

 

 

$

0.29

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

153,049,739

 

 

 

278,933,760

 

 

 

152,413,300

 

 

 

273,642,542

 

Diluted

 

 

153,049,739

 

 

 

278,933,760

 

 

 

237,723,530

 

 

 

323,323,053

 

 

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

 

1Exclusive of depreciation and amortization

2


 

 

AbCellera Biologics Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(All figures in U.S. dollars. Amounts are expressed in thousands except share data)

(Unaudited)

 

 

 

Series A1

Preferred Shares

 

 

Series A2

Preferred Shares

 

 

Common Shares

 

 

Additional

Paid-in

 

 

Accumulated

Earnings

 

 

Accumulated

Other

Comprehensive

 

 

Total

Shareholders'

 

(in thousands, except share data)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Deficit)

 

 

Income

 

 

Equity

 

Balances as of December 31, 2020

 

 

-

 

 

$

-

 

 

 

-

 

 

$

-

 

 

 

269,497,768

 

 

$

710,387

 

 

$

5,919

 

 

$

114,202

 

 

$

-

 

 

$

830,508

 

Shares issued under stock option plan

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,428,162

 

 

 

752

 

 

 

(579

)

 

 

-

 

 

 

-

 

 

 

173

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,021

 

 

 

-

 

 

 

-

 

 

 

4,021

 

Reclassification of liability classified

   options

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,201

 

 

 

-

 

 

 

-

 

 

 

5,201

 

Net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

117,221

 

 

 

-

 

 

 

117,221

 

Balances as of March 31, 2021

 

 

-

 

 

$

-

 

 

 

-

 

 

$

-

 

 

 

270,925,930

 

 

$

711,139

 

 

$

14,562

 

 

$

231,423

 

 

$

-

 

 

$

957,124

 

Shares issued under stock option plan

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,056,748

 

 

 

3,619

 

 

 

(1,840

)

 

 

-

 

 

 

-

 

 

 

1,779

 

Share-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,473

 

 

 

-

 

 

 

-

 

 

 

8,473

 

Reclassification of liability classified

   options

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

474

 

 

 

-

 

 

 

-

 

 

 

474

 

Foreign currency translation

   adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,152

 

 

 

2,152

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,323

)

 

 

-

 

 

 

(2,323

)

Balances as of June 30, 2021

 

 

-

 

 

$

-

 

 

 

-

 

 

$

-

 

 

 

276,982,678

 

 

$

714,758

 

 

$

21,669

 

 

$

229,100

 

 

$

2,152

 

 

$

967,679

 

Shares issued under stock option plan

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,169,199

 

 

 

3,330

 

 

 

(2,431

)

 

 

-

 

 

 

-

 

 

 

899

 

Share-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,707

 

 

 

-

 

 

 

-

 

 

 

7,707

 

Foreign currency translation

   adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,508

)

 

 

(1,508

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(21,380

)

 

 

-

 

 

 

(21,380

)

Balances as of September 30, 2021

 

 

-

 

 

$

-

 

 

 

-

 

 

$

-

 

 

 

281,151,877

 

 

$

718,088

 

 

$

26,945

 

 

$

207,720

 

 

$

644

 

 

$

953,397

 

 

 

 

Series A1

Preferred Shares

 

 

Series A2

Preferred Shares

 

 

Common Shares

 

 

Additional

Paid-in

 

 

Accumulated

Earnings

 

 

Accumulated

Other

Comprehensive

 

 

Total

Shareholders'

 

(in thousands, except share data)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Deficit)

 

 

Income

 

 

Equity

 

Balances as of December 31, 2019

 

 

2,105,264

 

 

$

7,546

 

 

 

-

 

 

$

-

 

 

 

151,681,382

 

 

$

5,122

 

 

$

2,300

 

 

$

(4,716

)

 

$

-

 

 

$

10,252

 

Issuance of Series A2 preferred shares

 

 

-

 

 

 

-

 

 

 

6,017,784

 

 

 

74,662

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

74,662

 

Shares issued under stock option plan

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

535,000

 

 

 

235

 

 

 

(111

)

 

 

-

 

 

 

-

 

 

 

124

 

Share-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

744

 

 

 

-

 

 

 

-

 

 

 

744

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,093

)

 

 

-

 

 

 

(2,093

)

Balances as of March 31, 2020

 

 

2,105,264