10-Q 1 abcl-20230930.htm 10-Q abcl-20230930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________________________________________________
FORM 10-Q
_________________________________________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
oTRANSITION 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 ColumbiaNot 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 classTrading
Symbol(s)		Name of each exchange on which registered
Common shares, no par value per shareABCLThe 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 x No o
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 x No o
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 filerxAccelerated filero
Non-accelerated fileroSmaller reporting companyo
Emerging growth companyo
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of October 30, 2023, the registrant had 290,170,241 common shares, no par value per share, outstanding.


Table of Contents
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.
•Unstable market and economic conditions may have serious adverse consequences on our business, financial condition, and stock price.
•Our commercial success depends on the quality of our antibody discovery and development engine and technological capabilities, the advancement of internal programs, and their acceptance by new and existing partners in our industry.
•Failure to execute our business strategy could adversely impact our growth and profitability.
•If we cannot maintain and expand current partnerships and enter 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.
•Development of a biologic is inherently uncertain, and it is possible that none of the antibody drug candidates discovered using our antibody discovery and development engine that are further developed by us or our partners 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 and development engine. 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 partners 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 with the antibodies that we have discovered, 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 biotechnology 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.
•Upgrading and integrating our business systems could result in implementation issues and business disruptions.
•If we are unable to obtain and maintain sufficient intellectual property protection for our technology, including our discovery and development engine, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technologies or a platform similar or identical to ours, and our ability to successfully sell our data packages may be impaired.
•If we fail to maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.
ii

•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 risks and uncertainties contained in Part II, Item 1A, Risk Factors, 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 under Part II, Item 1A, Risk Factors, 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.
iii

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, 2022September 30, 2023
Assets
Current assets:
Cash and cash equivalents$386,535 $172,422 
Marketable securities499,950 613,418 
Total cash, cash equivalents, and marketable securities886,485 785,840 
Accounts and accrued receivable38,593 37,446 
Restricted cash25,000 25,000 
Other current assets75,413 71,232 
Total current assets1,025,491 919,518 
Long-term assets:
Property and equipment, net217,255 277,209 
Intangible assets, net131,502 124,076 
Goodwill47,806 47,806 
Investments in and loans to equity accounted investees72,522 62,887 
Other long-term assets46,331 80,694 
Total long-term assets515,416 592,672 
Total assets$1,540,907 $1,512,190 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and other liabilities$33,150 $35,708 
Contingent consideration payable44,211 53,929 
Accrued royalties payable19,347 3,094 
Deferred revenue21,612 17,508 
Total current liabilities118,320 110,239 
Long-term liabilities:
Operating lease liability76,675 75,185 
Deferred revenue19,516 16,382 
Deferred government contributions40,801 84,072 
Contingent consideration payable16,054 5,308 
Deferred tax liability33,178 33,178 
Other long-term liabilities3,086 5,051 
Total long-term liabilities189,310 219,176 
Total liabilities307,630 329,415 
Commitments and contingencies
Shareholders' equity:
Common shares: no par value, unlimited authorized shares at December 31, 2022 and September 30, 2023: 286,851,595 and 289,777,654 shares issued and outstanding at December 31, 2022 and September 30, 2023, respectively
734,365 747,914 
Additional paid-in capital74,118 109,384 
Accumulated other comprehensive (loss)(1,391)(1,460)
Accumulated earnings426,185 326,937 
Total shareholders' equity1,233,277 1,182,775 
Total liabilities and shareholders' equity$1,540,907 $1,512,190 
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,
2022202320222023
Revenue:
Research fees$7,508 $6,413 $29,378 $26,812 
Licensing revenue154 186 531 784 
Milestone payments400 - 400 1,250 
Royalty revenue93,321 - 433,570 - 
Total revenue101,383 6,599 463,879 28,846 
Operating expenses:
Royalty fees15,035 - 64,882 - 
Research and development(1)
26,582 37,917 79,634 127,036 
Sales and marketing(1)
3,089 3,468 8,579 11,080 
General and administrative(1)
13,792 14,369 42,470 45,025 
Depreciation and amortization5,150 5,735 14,025 16,859 
Total operating expenses63,648 61,489 209,590 200,000 
Income (loss) from operations37,735 (54,890)254,289 (171,154)
Other (income) expense
Interest (income)(5,556)(10,740)(7,609)(31,278)
Grants and incentives(2,150)(2,828)(8,879)(10,779)
Other(1,146)(2,046)266 (3,670)
Total other (income)(8,852)(15,614)(16,222)(45,727)
Net earnings (loss) before income tax46,587 (39,276)270,511 (125,427)
Income tax (recovery) expense19,963 (10,666)82,099 (26,179)
Net earnings (loss)$26,624 $(28,610)$188,412 $(99,248)
Foreign currency translation adjustment(1,293)439 (997)(69)
Comprehensive income (loss)$25,331 $(28,171)$187,415 $(99,317)
Net earnings (loss) per share attributable to common shareholders
Basic$0.09 $(0.10)$0.66 $(0.34)
Diluted$0.08 $(0.10)$0.60 $(0.34)
Weighted-average common shares outstanding
Basic285,322,719289,496,841284,639,599288,750,387
Diluted315,818,163289,496,841314,183,994288,750,387
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)

Common SharesAdditional
Paid-in
Capital		Accumulated
Earnings		Accumulated
Other
Comprehensive
Income (loss)		Total
Shareholders'
Equity
SharesAmount
Balances as of December 31, 2022286,851,595$734,365 $74,118 $426,185 $(1,391)$1,233,277 
Shares issued and restricted stock units ("RSUs") vested under stock option plan1,574,9198,451(7,962)--489
Stock-based compensation expense--15,474--15,474
Foreign currency translation adjustment----(630)(630)
Net loss---(40,110)-(40,110)
Balances as of March 31, 2023288,426,514$742,816 $81,630 $386,075 $(2,021)$1,208,500 
Shares issued and restricted stock units ("RSUs") vested under stock option plan762,9551,940(1,606)--334
Stock-based compensation expense--16,399--16,399
Foreign currency translation adjustment----122122
Net loss---(30,528)-(30,528)
Balances as of June 30, 2023289,189,469$744,756 $96,423 $355,547 $(1,899)$1,194,827 
Shares issued and restricted stock units ("RSUs") vested under stock option plan588,1853,158(2,901)--257
Stock-based compensation expense--15,862--15,862
Foreign currency translation adjustment----439439
Net loss---(28,610)-(28,610)
Balances as of September 30, 2023289,777,654$747,914 $109,384 $326,937 $(1,460)$1,182,775 
Common SharesAdditional
Paid-in
Capital		Accumulated
Earnings		Accumulated
Other
Comprehensive
Income (loss)		Total
Shareholders'
Equity
SharesAmount
Balances as of December 31, 2021283,257,104$722,430 $35,357 $267,666 $280 $1,025,733 
Shares issued and restricted stock units ("RSUs") vested under stock option plan 1,264,0773,325(2,922)--403
Share-based compensation expense--12,291--12,291
Foreign currency translation adjustment----507507
Net earnings---168,573-168,573
Balances as of March 31, 2022284,521,181$725,755 $44,726 $436,239 $787 $1,207,507 
Shares issued and restricted stock units ("RSUs") vested under stock option plan531,1211,070(838)--232
Share-based compensation expense--12,113--12,113
Foreign currency translation adjustment----(211)(211)
Net loss---(6,785)-(6,785)
Balances as of June 30, 2022285,052,302$726,825 $56,001 $429,454 $576 $1,212,856 
Shares issued and restricted stock units ("RSUs") vested under stock option plan709,1903,602(3,371)--231
Share-based compensation expense--11,754--11,754
Foreign currency translation adjustment----(1,293)(1,293)
Net loss---26,624-26,624
Balances as of September 30, 2022285,761,492$730,427 $64,384 $456,078 $(717)$1,250,172 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

AbCellera Biologics Inc.
Condensed Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. dollars.)
(Unaudited)
Nine months ended September 30,
20222023
Cash flows from operating activities:
Net earnings (loss)$188,412 $(99,248)
Cash flows from operating activities:
Depreciation of property and equipment6,212 8,874 
Amortization of intangible assets7,844 7,985 
Amortization of operating lease right-of-use assets3,686 4,926 
Stock-based compensation36,158 47,735 
Other3,304 (6,354)
Changes in operating assets and liabilities:
Research fee and grant receivable(3,675)(35,495)
Accrued royalties receivable43,966 9,273 
Income taxes payable(34,934)28,685 
Accounts payable and accrued liabilities(1,151)(1,852)
Deferred revenue(4,094)(7,238)
Accrued royalties payable(4,684)(16,253)
Deferred grant income6,630 30,377 
Other assets(1,226)4,319 
Net cash provided by (used in) operating activities246,448 (24,266)
Cash flows from investing activities:
Purchases of property and equipment(58,330)(62,516)
Purchase of intangible assets(2,000)(560)
Purchase of marketable securities(670,430)(744,674)
Proceeds from marketable securities418,238 642,913 
Receipt of grant funding14,100 15,023 
Long-term investments and other assets(17,370)(36,757)
Investment in and loans to equity accounted investees(19,770)(10,214)
Net cash used in investing activities(335,562)(196,785)
Cash flows from financing activities:
Payment of liability for in-licensing agreement, contingent consideration, and other(4,383)(1,049)
Proceeds from long-term debt and exercise of stock options2,406 7,640 
Net cash provided by (used in) financing activities(1,977)6,591 
Effect of exchange rate changes on cash and cash equivalents(9,963)(479)
Decrease in cash and cash equivalents(101,054)(214,939)
Cash and cash equivalents and restricted cash, beginning of period501,142 414,651 
Cash and cash equivalents and restricted cash, end of period$400,088 $199,712 
Restricted cash included in other assets3,115 2,290 
Total cash, cash equivalents, and restricted cash shown on the balance sheet$396,973 $197,422 
Supplemental disclosure of non-cash investing and financing activities
Property and equipment in accounts payable2,213 12,948 
Right-of-use assets obtained in exchange for operating lease obligation46,239 3,586 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

AbCellera Biologics Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(All figures in U.S. dollars. Amounts are expressed in thousands except share data.)
(Unaudited)
1. Nature of operations
AbCellera Biologics Inc.’s (the “Company”) mission is to bring better antibody drugs to patients faster, solve long-standing problems, and transform how antibody drugs are discovered. The Company aims to bring antibody therapeutics from target to clinic by combining expertise, technologies, and infrastructure to build an engine for antibody drug discovery and development. The Company uses the engine to both work with partners to build a large and diversified portfolio of royalty (and equivalent) stakes in future antibody drugs and to develop its own pipeline of future antibody drugs. The Company partners with companies of all sizes - from innovative biotechnology companies to leading pharmaceutical companies - propelling programs to the clinic, together.
2. Basis of presentation
The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, the year-end condensed consolidated financial statement data was derived from audited financial statements and these financial statements do not include all the information and footnotes required for complete financial statements. These statements should be read in conjunction with the audited consolidated financial statements of the Company and the accompanying notes thereto for the year ended December 31, 2022.
These unaudited interim condensed consolidated financial statements reflect all adjustments, consisting solely of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods presented. The results of operations for the three and nine months ended September 30, 2022 and 2023 are not necessarily indicative of results that can be expected for a full year. These unaudited interim condensed consolidated financial statements follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company for the year ended December 31, 2022, except for the new accounting guidance adopted during the period (Note 13).
All amounts expressed in these condensed consolidated financial statements of the Company and the accompanying notes thereto are expressed in thousands of U.S. dollars, except for share data and where otherwise indicated. References to “$” are to U.S. dollars and references to “C$” and “CAD” are to Canadian dollars.
3. Significant accounting policies
Use of estimates
The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas of significant estimates include, but are not limited to, revenue recognition including evaluating whether contractual obligations represent distinct performance obligations, determining whether an option for additional goods or services represents a material right, allocating the transaction price to performance obligations within a contract, and assessing the recognition and possible future reversal of variable consideration, the fair value of acquired intangible assets, contingent consideration payable, and the estimates of stock-based compensation awards. 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. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could significantly differ from those estimates.
Recent accounting pronouncements not yet adopted
The Company has reviewed recent accounting pronouncements and concluded that they are either not applicable to the Company or no material impact is expected in the condensed consolidated financial statements as a result of future adoption.
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4. Net earnings (loss) per share
Basic and diluted net earnings (loss) per share attributable to common shareholders was calculated as follows:
Three months ended September 30,Nine months ended September 30,
2022202320222023
Basic earnings (loss) per share
Net earnings (loss) attributable to common shareholders - basic$26,624 $(28,610)$188,412 $(99,248)
Weighted-average common shares outstanding - basic285,322,719289,496,841284,639,599288,750,387
Net earnings (loss) per share attributable to common shareholders - basic$0.09 $(0.10)$0.66 $(0.34)
Diluted earnings (loss) per share
Net earnings (loss) attributable to common shareholders - diluted$26,624 $(28,610)$188,412 $(99,248)
Weighted-average common shares outstanding - basic285,322,719289,496,841284,639,599288,750,387
Stock options and RSUs30,495,444-29,544,395-
Weighted-average common shares outstanding - diluted315,818,163289,496,841314,183,994288,750,387
Net earnings (loss) per share attributable to common shareholders - diluted$0.08 $(0.10)$0.60 $(0.34)
The Company’s potentially dilutive securities, which include stock options and restricted share units (“RSUs”), have been excluded from the computation of diluted net loss per share for the three and nine months ended September 30, 2023 as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding for the three and nine months ended September 30, 2023 used to calculate both basic and diluted net loss per share attributable to common shareholders is the same.
The Company excluded 11,410,471 and 10,913,595 potential common shares for the three and nine months ended September 30, 2022, and 50,081,069 and 50,544,294 potential common shares for the three and nine months ended September 30, 2023, from the computation of diluted net earnings (loss) per share attributable to common shareholders because including them would have had an anti-dilutive effect.
5. Property and equipment, net
Property and equipment, net consisted of the following:
December 31, 2022September 30, 2023
Computers$8,303 $3,484 
Land53,405 53,405 
Building11,361 34,062 
Laboratory equipment41,256 68,198 
Leasehold improvements40,567 65,591 
Operating lease right-of-use assets80,838 79,499 
Property and equipment235,730 304,239 
Less accumulated depreciation(18,475)(27,030)
Property and equipment, net$217,255 $277,209 
6

As of December 31, 2022 and September 30, 2023, property and equipment includes leasehold improvements and construction in progress in the amount of $25.6 million and $72.5 million, respectively, and construction deposits of nil and $13.2 million, respectively, that have not commenced depreciation. Depreciation expense on property and equipment for the three and nine months ended September 30, 2022 was $2.5 million and $6.2 million, respectively, and $3.1 million and $8.9 million for the three and nine months ended September 30, 2023, respectively.
6. Intangible assets
Intangible assets consisted of the following:
September 30, 2023
Gross
carrying
amount		Accumulated
amortization		Net book
value
License$38,433 $23,868 $14,565 
Technology52,700 7,199 45,501 
IPR&D64,010 - 64,010 
$155,143 $31,067 $124,076 
Amortization expense on intangible assets subject to amortization is estimated to be as follows for each of the next five years ended September 30:
Amortization
Expense
2024$7,463 
20254,297 
20264,297 
20274,297 
20284,297 
$24,651 
7. Investments in and loans to equity accounted investees, and other long-term assets
The Company has entered into two separate 50% joint ventures, Dayhu JV and Beedie JV, as part of the construction of future office and laboratory headquarters. To date, the Company has recorded immaterial amounts of proportionate income or loss with respect to either venture.

Dayhu JV

During 2020, the Company entered into a joint venture with Dayhu ("Dayhu JV"). As of September 30, 2023, the equity investment balance was $42.2 million.

In March, 2021, the Company made a commitment of up to CAD $82.7 million ($60.9 million at September 30, 2023) to the Dayhu JV (Dayhu JV Loan) to fund the construction at a rate referenced to a Canadian bank prime rate adjusted for applicable margins as defined in the agreement, and repayment on the earlier of thirty months from the date of initial advancement and September 1, 2023, or upon the trigger of certain liquidity events as defined in the agreement.
The loan is secured by the underlying land and future assets of the Dayhu JV. At December 31, 2022, and September 30, 2023, the outstanding related party loan balance was $38.1 million and nil, respectively, to the Dayhu JV and is included in investment in and loans to equity accounted investees.

In July 2022, the Company entered into an agreement of up to CAD $46.0 million ($33.9 million at September 30, 2023) with Dayhu (New Dayhu Loan) to replace Dayhu’s portion of the outstanding Dayhu JV Loan balance as at January 1, 2023, at a rate referenced to a Canadian bank prime rate adjusted for applicable margins as defined in the agreement. The agreement has a maturity of December 31, 2025, with a call provision, callable by the Company after September 30, 2023, including customary make whole provisions. The loan is secured by the underlying land and existing and future assets of the Dayhu JV. In January 2023, the Company issued CAD $46.0 million ($33.9 million at September 30, 2023) to Dayhu
7

from the New Dayhu loan, which was used to repay, in part, Dayhu’s 50% portion of the Dayhu JV Loan. At September 30, 2023, the loan balance was $33.9 million and is included in other long-term assets.
Beedie JV
In March, 2021, the Company entered into the Beedie joint venture ("Beedie JV"). As of September 30, 2023, the equity investment balance was $20.7 million.

In June 2022, the Company made a commitment to our partner Beedie for a land loan of up to CAD $7.5 million ($5.5 million at September 30, 2023) plus a construction loan for up to 80% of Beedie’s share of construction costs. The commitment is at a rate referenced to a Canadian bank prime rate adjusted for applicable margins as defined in the agreement, and repayment on the earlier of thirty months from the date of initial advancement of the construction loan and
five years from the initial advancement of the land loan, or upon the triggering of certain repayment events as defined in the agreement. The loan is secured by the underlying land and existing and future assets of the Beedie JV. The loan receivable balance, which was solely related to the land loan to date, was CAD $7.5 million ($5.5 million as at September 30, 2023) and is included in other long-term assets.
8. Other current assets and liabilities
Other current assets
December 31, 2022September 30, 2023
Tax deposits and receivables $64,817 $38,037 
Prepaid expenses and other9,064 32,001 
Materials and supplies1,532 1,194 
Total other current assets$75,413 $71,232 

Current accounts payable and other liabilities
December 31, 2022September 30, 2023
Accounts payable and accrued liabilities$14,828 $17,432 
Current portion of operating lease liability5,583 5,572 
Payroll liabilities6,454 6,351 
Current portion of deferred government contributions6,285 6,353 
Total current accounts payable and other liabilities$33,150 $35,708 
9. Shareholders’ equity
The following table summarizes the Company’s stock option activity under the Pre-IPO Plan since December 31, 2022:
Number of
Shares		Weighted-
Average Exercise
Price 
Outstanding as of December 31, 202233,694,150$0.90 
Granted-- 
Exercised(2,173,877)0.49 
Forfeited(27,000)0.39 
Outstanding as of September 30, 202331,493,273$0.93 
Options exercisable as of September 30, 202326,428,832$0.78 
8

The following table summarizes the Company’s stock option activity under the 2020 Plan since December 31, 2022:
Number of
Shares		Weighted-
Average Exercise
Price
Outstanding as of December 31, 202212,322,933$14.81 
Granted2,401,5469.34 
Exercised-- 
Forfeited(555,212)12.04 
Outstanding as of September 30, 202314,169,267$13.99 
Options exercisable as of September 30, 20234,018,741$16.79 
The following table summarizes the Company’s RSU activity under the 2020 Plan since December 31, 2022:
Number of
Shares		Weighted-
Average Grant
Date Fair Value
Outstanding as of December 31, 20223,946,985$13.71 
Granted1,585,7509.34 
Vested and settled(752,182)14.41 
Forfeited(362,583)11.89 
Outstanding as of September 30, 20234,417,970$12.18 
As of September 30, 2023, the number of shares available for issuance under the 2020 Plan was 32,629,848, which includes awards granted and outstanding under the Pre-IPO Plan that are forfeited after December 10, 2020.
Stock-based compensation:
Stock-based compensation expense was classified in the condensed consolidated statements of income (loss) and comprehensive income (loss) as follows:
Three months ended September 30,Nine months ended September 30,
2022202320222023
Research and development$5,554 $7,796 $17,755 $23,370 
Sales and marketing763 1,264 2,232 3,864 
General and administrative5,437 6,802 16,171 20,501 
$11,754 $15,862 $36,158 $47,735 
10. Revenue
The disaggregated revenue categories are presented on the face of the condensed consolidated statements of income (loss) and comprehensive income (loss). Deferred revenue outstanding in each respective period is as follows:
December 31, 2021September 30, 2022December 31, 2022September 30, 2023
Deferred revenue$34,954 $30,924 $41,128 $33,890 
During the three and nine months ended September 30, 2022 and 2023, the Company recognized $2.0 million and $9.1 million, respectively, and $4.1 million and $11.0 million respectively, of revenue that had been included in deferred revenue as of December 31, 2021 and December 31, 2022, respectively.
9

11. Financial instruments
Fair Value Measurements
The Company categorizes its financial assets and liabilities measured at fair value into a three-level hierarchy established by U.S. GAAP that prioritizes those inputs to valuation techniques used to measure fair value based on the degree to which they are observable. The three levels of the fair value hierarchy are as follows: Level 1 inputs are quoted prices in active markets for identical assets and liabilities; Level 2 inputs, other than quoted prices included within Level 1, are observable for the asset or liability either directly or indirectly; and Level 3 inputs are not observable in the market.
The Company’s financial instruments consist of cash and cash equivalents, restricted cash, marketable securities, accounts receivable, loans receivable, loans to equity accounted investees, accounts payable and payroll liabilities, royalties payable, and contingent consideration payable. The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and payroll liabilities, royalties payable, loans receivable, and loans to equity accounted investees approximate their fair values, and primarily classified as level 2. At September 30, 2023, the Company also held non-marketable securities included in other long term assets of $32.3 million (December 31, 2022 - $18.5 million).
Contingent Consideration
Contingent consideration related to business acquisitions is recorded at fair value on the acquisition date and adjusted on a recurring basis for changes in its fair value. Changes in the fair value of contingent consideration liabilities can result from changes in anticipated payments and changes in assumed discount periods and rates. These inputs are unobservable in the market and are therefore categorized as Level 3 inputs. There were no changes to the valuation technique and inputs used in these fair value measurements since acquisition.
The following table presents the changes in fair value of the liability for contingent consideration:
Three Months Ended September 30, 2023Liability at
beginning of
the period		Increase (decrease) in fair
value of liability for contingent
consideration		Liability at
end of the
period
Trianni (i)$21,971 $1,123 $23,094 
TetraGenetics (ii)$38,677 $(2,534)$36,143 
Nine months ended September 30, 2023Liability at
beginning of
the period		Increase (decrease) in fair
value of liability for contingent
consideration		Liability at
end of the
period
Trianni (i)$23,505 $(411)$23,094 
TetraGenetics (ii)$36,760 $(617)$36,143 
i)The estimated fair value of the earn-out payments relates to a specific customer license ending on April 9, 2024, was determined by estimating the payout of the expected future net cash flows associated to the specific customer license during the earn-out period. The significant assumptions include the amount and timing of projected future net revenues received by us from the specific customer license, discounted at 22%, the rate that measures the risks inherent in the future cash flows.
ii)The estimated fair value of potential future successful milestone payouts was determined by estimating the expected future cash flows associated with the potential milestone events. The significant assumptions include the amount and timing of projected future cash flows, risk adjusted for various factors including probability of success, discounted at 12.8%, the rate that measures the risks inherent in the future cash flows.
Marketable Securities
As part of the Company’s cash management strategy, the Company holds high credit quality marketable securities that are available to support the Company’s current operations. As of September 30, 2023, our marketable securities were rated A- or higher (or its equivalent) by at least two of the major rating agencies with a weighted average life of approximately 0.5 years.
10

Level 2 marketable securities in the fair value hierarchy were based on quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value. There were no transfers between Level 1, Level 2 and Level 3 during the period.
The following table presents information about the Company’s marketable securities that are measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such fair values:
Fair Value Measurements at September 30, 2023:
Level 1Level 2Level 3Total
Marketable securities
U.S. government agencies$153,463 $- $- $153,463 
Certificate of deposit- 240,021 - 240,021 
Commercial paper- 82,956 - 82,956 
Corporate bonds- 97,672 - 97,672 
Asset backed securities- 39,306 - 39,306 
$153,463 $459,955 $- $613,418 
12. Commitments and contingencies
From time to time, the Company may become involved in routine litigation arising in the ordinary course of business. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company does not have contingency reserves established for any litigation liabilities and any of the costs related to such legal proceedings are expensed as incurred.
The Company may enter into certain agreements with strategic partners in the ordinary course of operations that may include investments in collaborative arrangements, contractual milestone payments related to the achievement of
pre-specified research, development, regulatory and commercialization events and indemnification provisions, which are common in such agreements.
Pursuant to the agreements, the Company may be obligated to make research and development and regulatory milestone payments upon the occurrence of certain events and upon receipt of royalty payments in the low single-digits to mid-twenties based on certain net sales targets. During the three and nine months ended September 30, 2022, $15.0 million and $64.9 million was expensed related to such obligation, respectively, and during the three and nine months ended September 30, 2023, no amounts were expensed related to such obligations. As of December 31, 2022 and September 30, 2023, $19.3 million and $3.1 million was included in current liabilities.
13. Government contributions
In May of 2020, the Company received a funding commitment from the Government of Canada under Innovation, Science and Economic Development’s (ISED) Strategic Innovation Fund (SIF) for a total of CAD $175.6 million ($125.6 million), collectively "Government Contribution 1" which is intended to support research and development efforts related to the discovery of antibodies to treat COVID-19, and to build technology and manufacturing infrastructure for antibody therapeutics against future pandemic threats.
In May of 2023, the Company entered into multi-year contribution agreements with the Government of Canada and the Government of British Columbia for a total of CAD $300.0 million ($222.3 million), collectively "Government Contribution 2." These investments are intended to build new capabilities in Canada to develop, manufacture, and deliver antibody medicines to patients through Phase 1 clinical trials and build expertise in translational science, technical operations, and clinical operations and research.

Government Contribution 1

Since inception, the Company incurred $102.0 million in expenditures in respect of the Canadian government's Strategic Innovation Fund (SIF), of which $46.1 million and $55.9 million relate to phase 1 and 2, respectively as defined in the agreement. Spending under phase 1 of the agreement and such amounts are non-repayable, while repayment on
11

phase 2 of the funding is conditional on achieving certain revenue thresholds over a specified period of time as prescribed in the agreement. As of September 30, 2023, no amounts have been accrued related to the repayment terms.
Government Contribution 2

In May of 2023, the Government of Canada has committed up to CAD $225.0 million ($166.7 million) of which CAD $56.2 million ($41.6 million) is non-repayable, CAD $78.8 million ($58.4 million) is repayable and CAD $90.0 million ($66.7 million) is conditionally repayable. Both the repayable and conditionally repayable amounts are repayable starting in 2033. The repayable and conditionally repayable amounts are treated as repayable, and are included in deferred government contributions. The repayable funding is payable over fifteen years and the conditionally repayable portion repaid based on a computed percentage rate of the Company’s revenue over a period of up to fifteen years, at a factor of up to 1.4 times the original conditionally repayable grant. Receipt of funds is dependent upon the Company’s co-investment expenditures over the term of the agreement. The agreement will expire on the later of April 30, 2047, or the date of the last repayment, unless earlier terminated. The Company considered the contractual terms of the repayable portion of a below-market rate government contribution, and determined that the interest rate is affected by legal restrictions prescribed by a governmental agency. Therefore, the Company will not impute interest on the repayable portion of the government contribution, and it is to be measured equal to the proceeds received.

For the quarter ended September 30, 2023, the Company has claimed $17.3 million under the federal funding, of which $12.9 million is repayable, and included in deferred government contributions on the consolidated balance sheet. The remainder is non-repayable and relates to research and development expenditures of $1.0 million which is reflected in other income, and capital asset expenditures of $3.4 million which is included in deferred government contributions and amortized into other income over the average asset life of 8.5 years. At September 30, 2023, $0.1 million is included in accounts payable and other liabilities, and $3.3 million is included in deferred government contributions on the consolidated balance sheet.

In May of 2023, the Government of British Columbia has committed up to CAD $75.0 million ($55.6 million) which includes partial reimbursement of certain eligible expenditures up to CAD $37.5 million ($27.8 million) towards eligible infrastructure investments paid over five years; and a CAD $37.5 million ($27.8 million) conditional portion paid upon achievement of certain defined milestones, including upon the Company’s undertaking of certain clinical trial activities in British Columbia. Up to a maximum of CAD $64.0 million ($48.0 million) is payable starting in 2032, over up to fifteen years, based on a percentage rate of the Company’s revenue exceeding a given threshold. The agreement will expire on the earlier of 2047, or the date of the last payment, unless earlier terminated, conditional on achieving certain revenue thresholds over a specified period of time as prescribed in the agreement. As of September 30, 2023, no amounts have been accrued related to the payment terms.

For the quarter ended September 30, 2023, the Company has claimed $10.2 million under the provincial funding related to capital asset expenditures which is included in deferred government contributions and amortized into other income over the average asset life of 8.5 years. At September 30, 2023, $0.1 million is included in accounts payable and other liabilities, and $10.1 million included in deferred government contributions on the consolidated balance sheet.

The Company has agreed to certain financial and non-financial covenants and other obligations, including cross default provisions associated with other Canadian funding, and restrictive covenants on dividend payments or other shareholder distributions that would prevent the Company in satisfying its obligations under the arrangement. Other obligations in relation to the project include the maintenance of certain gross capital expenditures in Canada, certain research and development expenditures in Canada, and the achievement of certain headcount requirements in Canada. In addition, the Company has granted notice and consent rights to the counterparties upon certain events related to a change in control (as defined in the agreements) of the Company.

Pursuant to the agreements, certain customary events of default, such as the Company’s breach of its covenants and obligations under the respective agreements, its insolvency, winding up or dissolution, and other similar events, may permit the Governments of Canada and British Columbia to declare an event of default under the respective agreements. Upon an event of default, subject to applicable cure, the Governments of Canada and British Columbia may exercise a number of remedies, including suspending or terminating funding under the respective agreements, demanding repayment of funding previously received and/or terminating the respective agreements. This funding and its associated conditional repayments are not secured by any of AbCellera’s assets or those of the project.



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, as amended, and “forward-looking information” within the meaning of Canadian securities laws, or collectively, forward-looking statements. Forward-looking statements include statements that may relate to our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs and other information that is not historical information. Many of these statements appear, in particular, under the headings “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Forward-looking statements can often be identified by the use of terminology such as “subject to”, “believe,” “anticipate,” “plan,” “expect,” “intend,” “estimate,” “project,” “may,” “will,” “should,” “would,” “could,” “can,” the negatives thereof, variations thereon and similar expressions, or by discussions of strategy. In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking. In particular, these forward-looking statements include, but are not limited to:
•our expectations regarding the rate and degree of market acceptance of our antibody discovery and development engine;
•companies and technologies in our industry that compete with our business;
•our ability to manage and grow our business by introducing our antibody discovery and development engine to new partners and expanding our relationships with existing partners;
•our operating results and financial performance;
•our partners’ ability to achieve projected discovery and development milestones and other anticipated key events, including commercial sales resulting in royalties owed to us, in the expected timelines or at all;
•our ability to provide our partners with a full solution from target identification to investigational new drug, or IND, application submission;
•our partners’ ability to develop and commercialize a molecule discovered by us, on a timely basis or at all;
•our expectations regarding the completion of our good manufacturing practices, or GMP, facility and our manufacturing capabilities;
•our ability to establish and maintain intellectual property protection for our technologies and workflows and avoid or defend against claims of patent infringement;
•our ability to attract, hire and retain key personnel and to manage our personnel growth effectively;
•our ability to obtain additional financing in future offerings;
•the volatility of the trading price of our common shares;
•business disruptions affecting our operations and the development of our antibody discovery and development engine;
•our ability to avoid material weaknesses or significant deficiencies in our internal control over financial reporting in the future;
•our expectations regarding our Passive Foreign Investment Company, or PFIC, status for our taxable year ended December 31, 2023, or any future taxable year;
•our expectations regarding our recent business acquisitions and our ability to realize the intended benefits of such acquisitions;
•our expectations regarding the use of our cash resources;
•our expectations about market trends; and
•our ability to predict and adapt to government regulation.
We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements. We have included important factors in the cautionary statements included in this Quarterly Report, particularly in “Summary of the Material and Other Risks Associated with Our Business” above and “Risk Factors” below, that we believe could cause actual results or events to differ materially from our forward-looking statements. We operate in a competitive and rapidly changing environment and new risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties
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that could have an impact on the forward-looking statements contained in this Quarterly Report. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures, or investments we may make or enter.
Additionally, inflation generally affects us by increasing our employee-related costs and certain other expenses. Our financial condition and results of operations may also be impacted by other factors we may not be able to control, such as global supply chain disruptions, uncertain global economic conditions, global trade disputes or political instability as further discussed in the section “Risk Factors” in this Quarterly Report.
You should read this Quarterly Report and the documents that we file with the Securities and Exchange Commission, or the SEC, with the understanding that our actual future results may differ materially from what we expect. The forward-looking statements contained in this Quarterly Report are made as of the date of this Quarterly Report, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
This Quarterly Report includes statistical and other industry and market data that we obtained from industry publications and research, surveys, and studies conducted by third parties as well as our own estimates of potential market opportunities. All market data used in this Quarterly Report involves assumptions and limitations, and you are cautioned not to give undue weight to such data. Industry publications and third-party research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential market opportunities for our product candidates include several key assumptions based on our industry knowledge, industry publications, third-party research, and other surveys, which may be based on a small sample size and may fail to accurately reflect market opportunities. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions.
We express all amounts in this Quarterly Report on Form 10-Q in U.S. dollars, except where otherwise indicated. References to “$” and “US$” are to U.S. dollars and references to “C$” and “CAD$” are to Canadian dollars.
Except as otherwise indicated, references in this Quarterly Report on Form 10-Q to “AbCellera,” the “Company,” “we,” “us” and “our” refer to AbCellera Biologics Inc. and its consolidated subsidiaries.
Overview
We are a team of scientists, engineers, creatives, and business professionals addressing the barriers of conventional antibody drug development. We believe investments in technology will improve the quality, speed, and success of drug development and that long-term value creation begins with building a great company that can create multiple products, repeatedly and successfully.
We focus on the development of antibody-based drugs and are committed to improving discovery and development. We aim to be the best in the world in bringing antibody therapeutics from target to the start of clinical testing by combining expertise, technologies, and infrastructure to build an integrated engine for antibody drug discovery and development. We think deeply about capital allocation and strive to maximize long-term value while mitigating the risks that are inherent in drug development and in scaling a company. We look for opportunities where we believe low-risk investments in building technology and operational efficiency can create a sustained competitive advantage and drive long-term value by making biologics drug development faster and more efficient.
We structure our agreements in a way that is designed to align our partners’ economic interests with our own. We partner with companies of all sizes and government organizations to propel programs to the clinic, together. We enable discovery against targets that have traditionally been intractable, and we accelerate programs against less difficult targets.
Our deals emphasize participation in the success and upside of future antibody therapeutic candidates. Our partnership agreements include near-term payments for technology access, research and intellectual property rights, and downstream payments in the form of clinical and commercial milestones, and royalties on net sales. We also participate in
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alternative investment opportunities including equity in our business partners and various rights for deeper involvement in moving molecules forward. Longer-term we are eligible to receive additional payments upon satisfaction of clinical and commercial milestones, which we refer to as milestone payments, as well as royalties on net sales of approved products derived from antibodies that we discover for our partners. Our discovery partnerships generally include royalty payments on net sales in the single-digit to low-double digit range.
We focus a substantial portion of our resources on research and development efforts towards strengthening our discovery and development engine and we expect to continue to make significant investments in this area for the foreseeable future. We expect to continue to incur significant expenses, and we expect such expenses to increase substantially in connection with our ongoing activities, including as we:
•invest in research and development activities to improve our antibody discovery and development engine including investments in building our new headquarters through our joint ventures and building a new small-scale manufacturing facility;
•market and sell our solutions to existing and new partners;
•expand and enhance operations to deliver programs, including investments in manufacturing;
•acquire businesses or technologies to support the growth of our business;
•attract, hire and retain qualified personnel; and
•continue to establish, protect and defend our intellectual property and patent portfolio, including our ongoing litigation.

To date, we have financed our operations primarily from revenue from our antibody discovery partnerships in the form of royalty revenue, government funding from grants, and from the issuance and sale of convertible preferred shares and notes, and common shares. Additionally, we have twice secured significant government co-investments in the form of non-dilutive capital.

In the third quarter, the Company committed to advance two AbCellera-led programs into IND-enabling studies. The programs align with the Company's strategy of building value, both through strategic partnerships, and through internal discovery and development of potential first-in-class antibody therapies. We have grown the number of programs that we have under contract with our partners, as illustrated by the following chart. In the third quarter of 2023, we had 4 partnered program starts and had a cumulative total of 182 discovery programs that are either completed, in progress or under contract with 42 partners as of September 30, 2023.


Q3'23 KPB JPEG.jpg


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Results of operations
The following table summarizes our key operating results for the three and nine months ended September 30, 2022 and September 30, 2023. All figures are in U.S. dollars and amounts are expressed in thousands, except per share data:
Three Months Ended September 30,Nine Months Ended September 30,
2022202320222023
Revenue:
Research fees$7,508 $6,413 $29,378 $26,812 
Licensing revenue154 186 531 784 
Milestone payments400 - 400 1,250 
Royalty revenue93,321 - 433,570 - 
Total revenue101,383 6,599 463,879 28,846 
Operating expenses:
Royalty fees15,035 - 64,882 - 
Research and development(1)
26,582 37,917 79,634 127,036 
Other operating expenses22,03123,57265,07472,964
Total operating expenses63,64861,489209,590200,000
Income (loss) from operations37,735(54,890)254,289(171,154)
Total other (income)(8,852)(15,614)(16,222)(45,727)
Net earnings (loss) before income tax46,587(39,276)270,511(125,427)
Net earnings (loss)$26,624 $(28,610)$188,412 $(99,248)
Net earnings (loss) per share attributable to common shareholders
Basic$0.09 $(0.10)$0.66 $(0.34)
Diluted$0.08 $(0.10)$0.60 $(0.34)
____________________________________
(1)Exclusive of depreciation and amortization


Operating expenses include stock-based compensation as follows:
Three months ended September 30,Nine months ended September 30,
2022202320222023
Research and development$5,554 $7,796 $17,755 $23,370 
Sales and marketing763 1,264 2,232 3,864 
General and administrative5,437 6,802 16,171 20,501 
 $11,754 $15,862 $36,158 $47,735 
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Key Factors Affecting Our Results of Operations and Future Performance
We believe that our financial performance has been, and in the foreseeable future will continue to be, primarily driven by multiple factors as described below, each of which presents growth opportunities for our business. These factors also pose important challenges that we must successfully address to sustain our growth and improve our results of operations. Our ability to successfully address these challenges is subject to various risks and uncertainties, including those described in Part II, Item 1A, Risk Factors.
•Securing additional programs under contract. Our potential to grow revenue, in both the near and long term, is dependent on our ability to secure additional programs under contract from new and existing partners. For existing partners, we seek to expand our relationships with them to cover multi-year, multi-target programs. Since our first commercial partnership in 2015, as of September 30, 2023, we had 182 discovery programs that are either completed, in progress or under contract with 42 partners. We are building our business development team across the major biotechnology geographic hubs to bring in new partners and new programs under contract, and we believe that we have a significant opportunity to continue to increase the number of partners who have programs based on our discovery and development engine. Our ability to continue to grow our number of programs under contract is dependent upon our ability to educate the market and support the business through investment in our sales and marketing efforts and through further research and development to enhance our discovery differentiation.
•Our partners successfully developing and commercializing the antibodies that we discover. We estimate that, based on the terms of our existing contracts and estimates of historical rates of success of antibody drug development, the vast majority of the potential value for each program under contract is represented by potential future milestone payments and royalties rather than research fees. As a result, we believe our business and our future results of operations will be highly reliant on the degree to which our partners successfully develop and commercialize the antibodies that we discover based on contracts with our partners. As our partners continue to advance development of the antibodies that we have discovered, we expect to start receiving additional milestone payments and royalties if any partners commence commercial sales of such antibodies.
•Rate and timing of selecting and initiating discovery projects by our partners. Once programs are secured under contract, partners must select targets and agree on a detailed statement of work before we commence discovery research on any antibodies. The rate and timing of such selection and initiation differs from partner to partner. Research fees that we recognize under our partnerships depend on our delivery of antibodies for development by our partners and delays by our partners in selecting targets and agreeing on statements of work will impact revenue recognition.
•Investing in enhancements to our discovery and development engine. Our ability to maintain and expand our partnerships is dependent on the advantages our discovery and development engine delivers to our partners. We intend to maintain our leading position through investments in research and development to refine and add capabilities in areas such as computation, protein engineering, immunization technologies, genetically engineered rodents and cell line selection. We have successfully executed and will continue to look for strategic technology acquisitions to improve, broaden and deepen our capabilities and expertise in antibody discovery and development, or those that offer opportunities to expand our partnership business into adjacent therapeutic modalities. We intend to devote substantial resources to continue to improve our discovery differentiation which will impact our financial performance.
•Scaling our operations to execute on discovery and internal programs. As we secure additional programs under contract and as we or our partners initiate discovery programs, our operational capacity to execute such research activities may become strained. We are making significant investments in capital and time to increase our ability to address future growth, including building new headquarters through our Dayhu and Beedie joint ventures, building a new small-scale manufacturing facility, investing in research and development, and continuing to hire talented personnel across functions. We have new facilities under development scheduled to take occupancy in 2024 that are intended to materially expand capacity.
Key Business Metrics
We regularly review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe that the following metrics are important to understand our current business. These metrics may change or may be substituted for additional or different metrics as our business develops.
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Cumulative MetricsSeptember 30, 2022September 30, 2023Change %
Number of discovery partners384211 %
Programs under contract16418211 %
Partnered program starts9211020 %
Molecules in the clinic71043 %
The table below outlines the details of molecules in the clinic as of September 30, 2023:
MoleculeMost advanced stagePartnerTherapy areasProgram type
Bamlanivimab (LY-CoV555)Marketed, EUAEli Lilly and CompanyInfectious disease – COVID-19AbCellera-initiated Program - Partnered
Bebtelovimab (LY-CoV1404)Marketed, EUAEli Lilly and CompanyInfectious disease – COVID-19AbCellera-initiated Program - Partnered
TAK-920/DNL919Phase 1Denali Therapeutics Inc.Neurology - Alzheimer's DiseaseAbCellera Partner-initiated Discovery
UndisclosedPhase 1Teva Pharmaceutical Industries Ltd.NeuroscienceAbCellera Partner-initiated Discovery
UndisclosedPhase 1UndisclosedUndisclosedTrianni license
NBL-012Phase 1NovaRock Biotherapeutics Inc.Dermatology, gastrointestinal, immunologyTrianni license
NBL-015/FL-301Phase 1NovaRock Biotherapeutics Inc.OncologyTrianni license
NBL-020Phase 1NovaRock Biotherapeutics Inc.OncologyTrianni license
NBL-028IND/CTA authorizedNovaRock Biotherapeutics Inc.OncologyTrianni license
IVX-01Clinical field studyInvetxAnimal healthAbCellera Partner-initiated Discovery
Number of discovery partners represents the unique number of partners with whom we have executed partnership contracts. We view this metric as an indication of the competitiveness of our engine and our level of market penetration. The metric also relates to our opportunities to secure programs under contract.
Programs under contract represent the number of antibody development programs that are under contract for delivery of discovery research activities. A program under contract is counted when a contract is executed with a partner under which we commit to discover or deliver antibodies against one selected target. A target is any relevant antigen for which a partner seeks our support in developing binding antibodies. We view this metric as an indication of commercial success and technological competitiveness. It further relates to revenue from access fees. The cumulative number of programs under contract with downstream participation is related to our ability to generate future revenue from milestone payments and royalties.
Partnered program starts represent the number of unique programs under contract for which we have commenced the discovery effort. The discovery effort commences on the later of (i) the day on which we receive sufficient reagents to start discovery of antibodies against a target and (ii) the day on which the kick-off meeting for the program is held. We view this metric as an indication of our operational capacity to execute on programs under contract. It is also an indication of the selection and initiation of discovery projects by our partners and the resulting potential for near-term payments. Cumulatively, partnered program starts with downstream participation indicate our total opportunities to earn downstream revenue from milestone fees and royalties in the mid- to long-term.
Molecules in the clinic represent the count of unique molecules for which an Investigational New Drug, or IND, New Animal Drug, or equivalent under other regulatory regimes, application has been approved based on an antibody that was discovered either by us or by a partner using licensed AbCellera technology. Where the date of such application approval is not known to us, the date of the first public announcement of a clinical trial will be used for the purpose of this
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metric. We view this metric as an indication of our near- and mid-term potential revenue from milestone fees and potential royalty payments in the long term.
Summary partnership agreements with pharmaceutical and biotechnology companies that include downstream participation from 2016 to September 30, 2023:

Partner# of Targets & DurationTherapeutic Indication or ModalityDate Announced
Regeneron Pharmaceuticals, Inc.Up to 4 targets, multi-yearUndisclosedSeptember 20, 2023
Incyte CorporationUndisclosedOncologySeptember 13, 2023
RQ Biotechnology Ltd.Up to 3 targets, multi-yearInfectious diseaseMarch 22, 2023
AbbVie Inc.Up to 5 targets, multi-yearUndisclosedDecember 15, 2022
Rallybio CorporationUp to 5 targets, multi-yearRare metabolic disorder and undisclosedDecember 1, 2022
Atlas' stealth stage companyUp to 3 targets, multi-yearUndisclosedAugust 3, 2022
Undisclosed biotechnology companyUp to 3 targets, multi-yearUndisclosedJune 29, 2022*
Empirico Inc.2 additional targetsUndisclosedMay 3, 2022
Everest Medicines Ltd.Up to 10 targets, multi-yearOncology and undisclosedSeptember 22, 2021
Moderna, Inc.Up to 6 targets, multi-yearRNA-encoded antibodiesSeptember 15, 2021
EQRx, Inc.Multi-target, multi-yearOncology and immunology (initially)August 4, 2021
Tachyon Inc.Single targetOncologyAugust 3, 2021
Undisclosed biotechnology companyUp to 4 targets, multi-yearUndisclosedJune 30, 2021*
AngiosMulti-target, multi-yearOphthalmologyMay 6, 2021
Undisclosed biotechnology companyMulti-target, multi-yearOncologyMay 6, 2021*
Empirico Inc.5 targets, multi-yearUndisclosedApril 14, 2021
Gilead Sciences, Inc.8 targets, multi-yearUndisclosedApril 1, 2021
Abdera Therapeutics Inc.9 targets, multi-yearOncologyJanuary 14, 2021
Invetx, Inc.Multi-target, multi-yearAnimal HealthNovember 19, 2020
Kodiak Sciences Inc.Multi-target, multi-yearOphthalmologyOctober 29, 2020
IGM Biosciences, Inc.Multi-target, multi-yearOncology and immunologySeptember 24, 2020
Undisclosed Single targetBispecificJune 3, 2020*
Eli Lilly and CompanyUp to 9 targets, multi-yearCOVID-19 program and additional indicationsMay 22, 2020*
Regeneron Pharmaceuticals, Inc.Multi-target, multi-yearMultiple undisclosedMarch 16, 2020*
Invetx, Inc.Multi-target, multi-yearAnimal healthFebruary 23, 2020
UndisclosedMulti-target, multi-yearCell therapySeptember 25, 2019*
Gilead Sciences, Inc.Single targetInfectious diseaseJune 13, 2019
Denali Therapeutics, Inc.8 targets, multi-yearNeurological diseasesFebruary 28, 2019
Novartis AGUp to 10 targets, multi-yearUndisclosedFebruary 14, 2019
Autolus Therapeutics plcSingle targetCell therapy (CAR-T)November 29, 2018
Denali Therapeutics, Inc.Single targetNeurological diseasesJune 12, 2018
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Undisclosed mid-cap biopharmaceutical companyUndisclosedUndisclosedJanuary 25, 2018
Teva Pharmaceutical Industries Ltd.Single targetMembrane proteinJune 13, 2017
Pfizer Inc.Multi-target, multi-yearMembrane proteinJanuary 5, 2017
Undisclosed global biotechnology companyMulti-target, multi-yearUndisclosedNovember 4, 2016
Kodiak Sciences Inc.Single targetOphthalmologyAugust 24, 2016
Teva Pharmaceutical Industries Ltd.UndisclosedUndisclosedFebruary 2, 2016
* Effective date of agreement

Results of Operations
Comparison of the three and nine months ended September 30, 2022 and September 30, 2023:
Revenue
Three Months Ended September 30,Change Nine Months Ended September 30,Change
20222023Amount % 20222023Amount %
Revenue:
Research fees$7,508 $6,413 $(1,095)(15)%$29,378 $26,812 $(2,566)(9)%
Licensing revenue154 186 32 21 %531 784 253 48 %
Milestone payments400 - (400)(100)%400 1,250 850213 %
Royalty revenue93,321 - (93,321)(100)%433,570 - (433,570)(100)%
Total revenue$101,383 $6,599 $(94,784)(93)%$463,879 $28,846 $(435,033)(94)%

Revenue decreased by $94.8 million from the three months ended September 30, 2022 compared to the three months ended September 30, 2023. The decrease was driven primarily by the absence of royalty revenue recognized in the period since the U.S. Food and Drug Administration (FDA) announced that bebtelovimab is no longer authorized for emergency use in any U.S. region in the fourth quarter of 2022. The decrease in research fees was attributable to the timing and progress of our research and development efforts and no new milestones were reached within the quarter.
Revenue decreased by $435.0 million from the nine months ended September 30, 2022 compared to the nine months ended September 30, 2023. The decrease was driven primarily by the absence of royalty revenue recognized in the period since the FDA announced that bebtelovimab is no longer authorized for emergency use in any U.S. region in the fourth quarter of 2022. Research fees decreased by $2.6 million due to the timing and mix of programs executed for our partners. The $0.9 million increase in milestone payments relates to milestone achievements in the first quarter of 2023.
Operating Expenses
Royalty Fees
Three Months Ended September 30,Change Nine Months Ended September 30,Change
20222023Amount %20222023Amount %
Royalty fees15,035 - (15,035)(100)%64,882 - (64,882)(100)%
Royalty fees for the three and nine months ended September 30, 2022 were $15.0 million and $64.9 million, respectively, and no royalty fees were recognized in the three and nine months ended September 30, 2023. Royalty fees in 2022 were attributable to the royalty revenues received by the Company from sales of bamlanivimab and bebtelovimab by Eli Lilly and Company ("Lilly") due to AbCellera’s collaborations in pandemic response.
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Research and Development
Three Months Ended September 30,Change Nine Months Ended September 30,Change
20222023Amount%20222023Amount %
Research and development26,582 37,917 11,335 43 %79,634 127,036 47,402 60 %
Research and development expenses increased by $11.3 million, or 43%, from the three months ended September 30, 2022 compared to the three months ended September 30, 2023. Research and development expenses reflect the continued growth in program execution, platform development, forward integration, and investment in partnered and internal programs, all of which contribute to increased capabilities and capacity of AbCellera's engine for antibody discovery and development. The increase includes a $5.5 million increase in compensation-related expenses consistent with the increase in headcount and a $5.8 million increase in facilities, supplies and services expenditure consistent with the overall growth of the Company.
Research and development expenses increased by $47.4 million, or 60%, from the nine months ended September 30, 2022 compared to the nine months ended September 30, 2023. Research and development expenses reflect the continued growth in program execution, platform development, forward integration, and investment in partnered and internal programs, all of which contribute to increased capabilities and capacity of AbCellera's engine for antibody discovery and development. Approximately $21.6 million of the increase is related to a specific one time investment in co-development and internal programs in the first quarter of 2023. The remaining increase includes a $12.7 million increase in compensation-related expenses consistent with the increase in headcount and a $12.9 million increase in facilities, supplies and services expenditure consistent with the overall growth of the Company.
Sales and Marketing
Three Months Ended September 30,Change Nine Months Ended September 30,Change
20222023Amount%20222023Amount %
Sales and marketing3,089 3,468 379 12 %8,579 11,080 2,501 29 %
Sales and marketing expenses increased by $0.4 million, or 12%, from the three months ended September 30, 2022 compared to the three months ended September 30, 2023. The increase was attributable to business development activity, consulting fees, and compensation costs of $0.4 million.
Sales and marketing expenses increased by $2.5 million, or 29%, from the nine months ended September 30, 2022 compared to the nine months ended September 30, 2023. The increase was attributable to business development activity, consulting fees, and compensation costs of $2.5 million.
General and Administrative
Three Months Ended September 30,Change Nine Months Ended September 30,Change
20222023Amount%20222023Amount %
General and administrative13,792 14,369 577 4 %42,470 45,025 2,555 6 %
General and administrative expenses increased by $0.6 million, or 4%, from the three months ended September 30, 2022 compared to the three months ended September 30, 2023. An increase of $1.1 million in compensation-related costs driven by the increase in headcount was partially offset by a decrease in legal and consulting fees of $0.5 million.
General and administrative expenses increased by $2.6 million, or 6%, from the nine months ended September 30, 2022 compared to the nine months ended September 30, 2023. $3.0 million of the increase in general and administrative expense is compensation-related and driven by the increase in headcount. The remaining expenses incurred to support the growth of the Company was offset by a decrease in legal and consulting fees.
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Depreciation and Amortization
Three Months Ended September 30,Change Nine Months Ended September 30,Change
20222023Amount%20222023Amount %
Depreciation and amortization5,150 5,735 585 11 %14,025 16,859 2,834 20 %
Depreciation and amortization expenses increased by $0.6 million, or 11%, from the three months ended September 30, 2022 compared to the three months ended September 30, 2023. Depreciation expense increased by $0.5 million due to the depreciation of equipment and facilities related to capital equipment purchases.
Depreciation and amortization expenses increased by $2.8 million, or 20%, from the nine months ended September 30, 2022 compared to the nine months ended September 30, 2023. Depreciation expense increased by $2.8 million due to the depreciation of equipment and facilities related to capital equipment purchases.
Interest (Income)
Three Months Ended September 30,ChangeNine Months Ended September 30,Change
20222023Amount%20222023Amount%
Interest (income)(5,556)(10,740)(5,184)93 %(7,609)(31,278)(23,669)311 %
Interest income increased by $5.2 million, or 93%, from the three months ended September 30, 2022 compared to the three months ended September 30, 2023. The increase was primarily driven by an increase in interest rates on our cash and cash equivalents and marketable securities balances in the quarter ended September 30, 2023, compared to the period ended September 30, 2022.
Interest income increased by $23.7 million, or 311%, from the nine months ended September 30, 2022 compared to the nine months ended September 30, 2023. The increase was primarily driven by an increase in interest rates on our cash and cash equivalents and marketable securities balances in the quarter ended September 30, 2023, compared to the period ended September 30, 2022.

Grants and Incentives (Income)
Three Months Ended September 30,Change Nine Months Ended September 30,Change
20222023Amount%20222023Amount %
Grants and incentives(2,150)(2,828)(678)32 %(8,879)(10,779)(1,900)21 %
Grants and incentives increased by $0.7 million, or 32%, from the three months ended September 30, 2022 compared to the three months ended September 30, 2023. This increase was primarily driven by activity relating to research and development expenditures that are eligible for the SIF project for the period.
Grants and incentives increased by $1.9 million, or 21%, from the nine months ended September 30, 2022 compared to the nine months ended September 30, 2023. The increase was primarily driven by activity relating to research and development expenditures that are eligible for the SIF project for the period.
Other (Income)
Three Months Ended September 30,Change Nine Months Ended September 30,Change
20222023Amount%20222023Amount%
Other(1,146)(2,046)(900)79 %266 (3,670)(3,936)(1480)%
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Other (income) increased by $0.9 million from the three months ended September 30, 2022 compared to the three months ended September 30, 2023. The increase included other income and a gain on fair value adjustments related to held-for-trading marketable securities and contingent consideration of $2.0 million, partially offset by a foreign exchange loss of $1.1 million due to fluctuations in the Canadian and U.S. dollar exchange rate.
Other (income) increased by $3.9 million from the nine months ended September 30, 2022 compared to the nine months ended September 30, 2023. The increase included other income and a gain on fair value adjustments related to held-for-trading marketable securities and contingent consideration of $4.8 million and a foreign exchange loss of $0.8 million due to fluctuations in the Canadian and U.S. dollar exchange rate.
Income Tax (Recovery) Expense
Three Months Ended September 30,Change Nine Months Ended September 30,Change
20222023Amount%20222023Amount%
Income tax (recovery) expense19,963 (10,666)(30,629)(153)%82,099 (26,179)(108,278)(132)%
Income tax expense decreased by $30.6 million from the three months ended September 30, 2022 compared to the three months ended September 30, 2023. The decrease was driven by the current net loss in the period and a change in effective income tax rates.
Income tax expense decreased by $108.3 million from the nine months ended September 30, 2022 compared to the nine months ended September 30, 2023. The decrease was driven by a decrease in current net earnings in the period and a change in effective income tax rates.
Liquidity and Capital Resources
As of September 30, 2023, we had $785.8 million of cash, cash equivalents and marketable securities, comprising $172.4 million in cash and cash equivalents and $613.4 million in marketable securities. The decrease of $100.6 million since December 31, 2022, was from a combination of cash flow from operations with an increase in research and development activity, investment in long term assets, and continued investment in the capacity and capabilities of AbCellera’s discovery and development engine in the nine months ended September 30, 2023.
We have generated positive operating cash flow cumulatively since our inception in 2012 and in every year from 2018 to 2022. We intend to significantly invest in our business, and as a result may incur operating losses in future periods. We will continue to invest in research and development efforts towards expanding our capabilities and expertise along our discovery and development engine, continued investments in partnered and internal programs, the building of our business development team and marketing our solutions to new and existing partners, and the expansion of our future office headquarters, and related infrastructure, including execution of long-term office-lease arrangements. Based on our current business plan, we believe that our existing cash, cash equivalents, marketable securities, and anticipated cash flows from operations and government contributions, will be sufficient to meet our working capital and capital expenditure needs and do not anticipate the need of external funding over at least the next 36 months following the date of this report.
Government of Canada and Government of British Columbia Contributions

In May 2023, we entered into multi-year contribution agreements with the Government of Canada and the Government of British Columbia. Under the agreements, up to $166.7 million ($225.0 million CAD) and $55.6 million ($75.0 million CAD) was committed by the Government of Canada and the Government of British Columbia, respectively, to build new capabilities in Canada to develop, manufacture, and deliver antibody medicines to patients through Phase 1 clinical trials and build expertise in translational science, technical operations, and clinical operations and research. See Note 13 to our condensed consolidated financial statements for further information related to the government contributions.
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Cash Flows
The following table summarizes our cash flows for the periods presented:
Nine Months Ended September 30,
20222023
Net cash provided by (used in):
Operating activities$246,448 $(24,266)
Investing activities(335,562)(196,785)
Financing activities(1,977)6,591 
Effect of exchange rate fluctuations on cash and cash equivalents(9,963)(479)
Net decrease in cash and cash equivalents$(101,054)$(214,939)
Operating activities
Net cash provided by operating activities decreased from $246.4 million provided by operations in the nine months ended September 30, 2022 to $24.3 million used in operations in the nine months ended September 30, 2023. The decrease in cash flows from operations is attributable to no royalty revenue and a reduction in royalty-related payments in the period, in addition to an increase in expenditures that reflect AbCellera’s investment in research and development activities and growth of the Company.
Investing activities
Net cash used in investing activities decreased from $335.6 million in the nine months ended September 30, 2022 to $196.8 million in the nine months ended September 30, 2023. Investing activities during the nine months ended September 30, 2022 and 2023 were primarily attributable to purchases of property and equipment, marketable securities, and purchases of long-term investments. The decrease in investing activities for the nine months ended September 30, 2023 was largely due to the purchase of and proceeds from marketable securities.
Financing activities
Net cash used in financing activities was $2.0 million for the nine months ended September 30, 2022 due to the payment of an intangible asset obligation and contingent consideration payment, partly offset by proceeds from long-term debt and the exercise of options for common stock. Net cash provided by financing activities was $6.6 million for the nine months ended September 30, 2023 due to proceeds of long-term debt and the exercise of stock options, partly offset by contingent consideration payments.
Critical Accounting Policies and Significant Judgements and Estimates
Detailed information about our critical accounting policies and estimates is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no significant changes to these policies during the three months ended September 30, 2023.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Our exposure to market risk is described in Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk of our annual report on Form 10-K for the year ended December 31, 2022. We believe our exposure to market risk has not changed materially since then.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Our “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are designed to ensure that information required to be disclosed is accumulated
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and communicated to the issuer’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure. The Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of September 30, 2023 and, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.

On August 4, 2023, the District Court lifted the stay in the pending matter against Bruker Cellular Analysis (On October 3, 2023, PhenomeX, the successor to Berkeley Lights was acquired by Bruker Cellular Analysis). The case has since resumed. No trial date has been set. The Company maintains its belief in the merits of this infringement matter and will continue to enforce its intellectual property portfolio worldwide.

On July 26, 2023, Bruker Cellular Analysis filed a Notice of Appeal in IPR2021-1249 matter. The Company believes the appeal is meritless and that the decision of the United States Patent Trial and Appeal Board will be upheld.

In the pending matter Sabariah Schrader, Executrix of the Estate of John William Schrader et al. v. Carl Lars Genghis Hansen, et al., the Company recently filed a Notice of Application seeking to dismiss certain Company affiliates from the matter. No hearing date has been set. All co-defendants have been served. The Company is proceeding to seek dismissal of certain Company affiliates for lack of jurisdiction. No other activity is occurring with respect to this matter. The Company believes that Plaintiffs’ claim is meritless and frivolous in all respects and intends to defend itself appropriately.
There have been no material changes to legal proceedings as set forth in our annual report on Form 10-K for the period ended December 31, 2022.
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