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 June 30, 2024
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from _________ to _________
Commission File Number: 001-39781
_________________________________________________________
(Exact Name of Registrant as Specified in its Charter)
_________________________________________________________
| Not Applicable | |||||
| ( State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (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 | ||||||||||||
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.
| x | Accelerated filer | o | ||||||||||||
| Non-accelerated filer | o | 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. 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 August 1, 2024, the registrant had 294,665,532 common shares, no par value per share, outstanding.
Table of Contents
| Page | ||||||||
Item 1A. | Risk Factors | |||||||
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 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, including in 2023 and 2024, and we may not be able to generate sufficient revenue to achieve 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.
•Development of a biological molecule 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 technology and 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 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.
•We may not be able to file INDs or IND amendments to commence additional clinical trials on the timelines we expect, and even if we are able to, the FDA may not permit us to proceed.
•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 achieve 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, 2023 | June 30, 2024 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Marketable securities | |||||||||||
| Total cash, cash equivalents, and marketable securities | |||||||||||
| Accounts and accrued receivable | |||||||||||
| Restricted cash | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Long-term assets: | |||||||||||
| Property and equipment, net | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Investments in equity accounted investees | |||||||||||
| Other long-term assets | |||||||||||
| Total long-term assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and shareholders' equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and other current liabilities | $ | $ | |||||||||
| Contingent consideration payable | |||||||||||
| Deferred revenue | |||||||||||
| Total current liabilities | |||||||||||
| Long-term liabilities: | |||||||||||
| Operating lease liability | |||||||||||
| Deferred revenue | |||||||||||
| Deferred government contributions | |||||||||||
| Contingent consideration payable | |||||||||||
| Deferred tax liability | |||||||||||
| Other long-term liabilities | |||||||||||
| Total long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Shareholders' equity: | |||||||||||
Common shares: | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Accumulated earnings | |||||||||||
| Total shareholders' equity | |||||||||||
| Total liabilities and shareholders' equity | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
AbCellera Biologics Inc.
Condensed Consolidated Statements of Loss and Comprehensive Loss
(All figures in U.S. dollars. Amounts are expressed in thousands except share and per share data.)
(Unaudited)
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
| 2023 | 2024 | 2023 | 2024 | |||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Research fees | $ | $ | $ | $ | ||||||||||||||||||||||
| Licensing revenue | ||||||||||||||||||||||||||
| Milestone payments | ||||||||||||||||||||||||||
| Total revenue | ||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
Research and development(1) | ||||||||||||||||||||||||||
Sales and marketing(1) | ||||||||||||||||||||||||||
General and administrative(1) | ||||||||||||||||||||||||||
| Depreciation, amortization, and impairment | ||||||||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||||||||
| Loss from operations | ( | ( | ( | ( | ||||||||||||||||||||||
| Other (income) expense | ||||||||||||||||||||||||||
| Interest income | ( | ( | ( | ( | ||||||||||||||||||||||
| Grants and incentives | ( | ( | ( | ( | ||||||||||||||||||||||
| Other (income) expense | ( | ( | ( | |||||||||||||||||||||||
| Total other (income) | ( | ( | ( | ( | ||||||||||||||||||||||
| Net loss before income tax | ( | ( | ( | ( | ||||||||||||||||||||||
| Income tax recovery | ( | ( | ( | ( | ||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Foreign currency translation adjustment | ( | ( | ( | |||||||||||||||||||||||
| Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Net loss per share | ||||||||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Weighted-average common shares outstanding | ||||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1Exclusive of depreciation, amortization, and impairment
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 Shares | Additional Paid-in Capital | Accumulated Earnings | Accumulated Other Comprehensive Loss | Total Shareholders' Equity | ||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2023 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Shares issued and restricted stock units ("RSUs") vested under stock option plan | ( | – | – | |||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | ( | ( | ||||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | – | ( | ||||||||||||||||||||||||||||||||
| Balances as of March 31, 2024 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Shares issued and restricted stock units ("RSUs") vested under stock option plan | ( | – | – | |||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | ( | ( | ||||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | – | ( | ||||||||||||||||||||||||||||||||
| Balances as of June 30, 2024 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Common Shares | Additional Paid-in Capital | Accumulated Earnings | Accumulated Other Comprehensive Loss | Total Shareholders' Equity | ||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2022 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Shares issued and restricted stock units ("RSUs") vested under stock option plan | ( | – | – | |||||||||||||||||||||||||||||||||||
| Share-based compensation expense | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | ( | ( | ||||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | – | ( | ||||||||||||||||||||||||||||||||
| Balances as of March 31, 2023 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Shares issued and restricted stock units ("RSUs") vested under stock option plan | ( | – | – | |||||||||||||||||||||||||||||||||||
| Share-based compensation expense | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | – | ( | ||||||||||||||||||||||||||||||||
| Balances as of June 30, 2023 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
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)
| Six months ended June 30, | |||||||||||
| 2023 | 2024 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Cash flows from operating activities: | |||||||||||
| Depreciation of property and equipment | |||||||||||
| Amortization and impairment of intangible assets | |||||||||||
| Amortization of operating lease right-of-use assets | |||||||||||
| Stock-based compensation | |||||||||||
| Fair value gain on contingent consideration | ( | ||||||||||
| Other | ( | ( | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Research fees and grants receivable | ( | ( | |||||||||
| Accrued royalties receivable | |||||||||||
| Income taxes payable (receivable) | ( | ||||||||||
| Accounts payable and accrued liabilities | ( | ( | |||||||||
| Deferred revenue | ( | ( | |||||||||
| Accrued royalties payable | ( | ||||||||||
| Deferred grant income | |||||||||||
| Other assets | ( | ( | |||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Purchase of marketable securities | ( | ( | |||||||||
| Proceeds from marketable securities | |||||||||||
| Receipt of grant funding | |||||||||||
| Long-term investments and other assets | ( | ||||||||||
| Investment in equity accounted investees | ( | ( | |||||||||
| Net cash provided by (used in) investing activities | ( | ||||||||||
| Cash flows from financing activities: | |||||||||||
| Payment of liability for in-licensing agreement and other | ( | ( | |||||||||
| Proceeds from long-term liabilities | |||||||||||
| Proceeds from exercise of stock options | |||||||||||
| Net cash provided by (used in) financing activities | ( | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Increase (decrease) in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents and restricted cash, beginning of period | |||||||||||
| Cash and cash equivalents and restricted cash, end of period | $ | $ | |||||||||
| Restricted cash included in other assets | |||||||||||
| Total cash, cash equivalents, and restricted cash shown on the balance sheet | $ | $ | |||||||||
| Supplemental disclosure of non-cash investing and financing activities | |||||||||||
| Property and equipment in accounts payable | |||||||||||
| Right-of-use assets obtained in exchange for operating lease obligation | |||||||||||
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, 2023.
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 six months ended June 30, 2023 and 2024 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, 2023.
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
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.
5
4. Net loss per share
Basic and diluted net loss per share was calculated as follows:
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
| 2023 | 2024 | 2023 | 2024 | |||||||||||||||||||||||
| Basic and diluted loss per share | ||||||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Weighted-average common shares outstanding | ||||||||||||||||||||||||||
| Net loss per share - basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
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 six months ended June 30, 2023 and June 30, 2024 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 six months ended June 30, 2023 and June 30, 2024 used to calculate both basic and diluted net loss per share is the same.
The Company excluded 50,707,389 and 50,775,907 potential common shares for the three and six months ended June 30, 2023, and 58,545,821 and 58,804,118 potential common shares for the three and six months ended June 30, 2024, from the computation of diluted net loss per share 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, 2023 | June 30, 2024 | |||||||||||||
| Computers | $ | $ | ||||||||||||
| Land | ||||||||||||||
| Building | ||||||||||||||
| Laboratory equipment | ||||||||||||||
| Leasehold improvements | ||||||||||||||
| Property and equipment | ||||||||||||||
| Less: accumulated depreciation | ( | ( | ||||||||||||
| Property and equipment, net | $ | $ | ||||||||||||
As of December 31, 2023 and June 30, 2024, property and equipment includes leasehold improvements and construction in progress in the amount of $91.0 million and $108.2 million, respectively, and construction deposits of $13.7 million and $13.0 million, respectively, that have not commenced depreciation. Depreciation expense on property and equipment for the three and six months ended June 30, 2023 was $3.0 million and $5.8 million, respectively, and $3.4 million and $6.6 million for the three and six months ended June 30, 2024, respectively.
6
6. Intangible assets
Intangible assets consisted of the following:
| June 30, 2024 | |||||||||||||||||
| Gross carrying amount | Accumulated amortization | Net book value | |||||||||||||||
| License | $ | $ | $ | ||||||||||||||
| Technology | |||||||||||||||||
| IPR&D | |||||||||||||||||
| $ | $ | $ | |||||||||||||||
In the quarter ended June 30, 2024, the Company recorded a full impairment charge of the carrying value of $32.0 million (or $23.2 million, net of deferred income tax) associated with the IPR&D acquired through the 2021 acquisition of TetraGenetics. The impairment was a result of the Company's ongoing internal program portfolio prioritization and is reflected within Depreciation, amortization, and impairment expense. Details of a corresponding impact to contingent consideration associated with the same acquisition are disclosed in Note 11.
Amortization expense on intangible assets subject to amortization is estimated to be as follows for each of the next five years ended June 30:
| Amortization Expense | |||||
| 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| $ | |||||
7. Investments in equity accounted investees, and other long-term assets
The Company has entered into two separate 50
Dayhu JV
As of December 31, 2023 and June 30, 2024, the equity investment balance was $42.1 million and $42.2 million, respectively. Substantially all the assets in the Dayhu JV are comprised of property and equipment. As of December 31, 2023 and June 30, 2024, the Company recorded a of $49.1 million and $48.4 million, respectively, and an operating lease liability of $50.4 million and $48.3 million, respectively, associated with an office lease with the Dayhu JV. In the three and six months ended June 30, 2023, the Company incurred lease expense of $1.3 million and $2.6 million, respectively, and $1.3 million and $2.7 million in the three and six months ended June 30, 2024, respectively, to the Dayhu JV included within operating expenses.
At December 31, 2023 and June 30, 2024, the Company had a loan receivable balance of CAD $45.9 million ($34.7 million) and CAD $46.2 million ($33.6 million), respectively, directly with our JV partner, Dayhu, included in other long-term assets.
Beedie JV
As of December 31, 2023 and June 30, 2024, the equity investment balance was $23.8 million and $33.9 million, respectively, of which substantially all the assets in the Beedie JV is comprised of property and equipment.
7
At December 31, 2023 and June 30, 2024, the Company had a loan receivable balance of CAD $18.4 million ($13.9 million) and CAD $30.6 million ($22.4 million), respectively, directly with our JV partner, Beedie, which relates to the land and construction loan and is included in other long-term assets.
8. Other current assets and liabilities
Other current assets
| December 31, 2023 | June 30, 2024 | |||||||||||||
| Taxes receivable | $ | $ | ||||||||||||
| Prepaid expenses and other | ||||||||||||||
| Total other current assets | $ | $ | ||||||||||||
Current accounts payable and other current liabilities
| December 31, 2023 | June 30, 2024 | |||||||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||||||||
| Payroll liabilities | ||||||||||||||
| Current portion of deferred government contribution | ||||||||||||||
| Total accounts payable and other current liabilities | $ | $ | ||||||||||||
9. Shareholders’ equity
The following table summarizes the Company’s stock option activity under the Pre-IPO Plan since December 31, 2023:
| Number of Shares | Weighted- Average Exercise Price | ||||||||||
| Outstanding as of December 31, 2023 | $ | ||||||||||
| Granted | |||||||||||
| Exercised | ( | ||||||||||
| Forfeited | |||||||||||
| Outstanding as of June 30, 2024 | $ | ||||||||||
| Options exercisable as of June 30, 2024 | $ | ||||||||||
The following table summarizes the Company’s stock option activity under the 2020 Plan since December 31, 2023:
| Number of Shares | Weighted- Average Exercise Price | ||||||||||
| Outstanding as of December 31, 2023 | $ | ||||||||||
| Granted | |||||||||||
| Exercised | |||||||||||
| Forfeited | ( | ||||||||||
| Outstanding as of June 30, 2024 | $ | ||||||||||
| Options exercisable as of June 30, 2024 | $ | ||||||||||
8
The following table summarizes the Company’s RSU activity under the 2020 Plan since December 31, 2023:
| Number of Shares | Weighted- Average Grant Date Fair Value | ||||||||||
| Outstanding as of December 31, 2023 | $ | ||||||||||
| Granted | |||||||||||
| Vested and settled | ( | ||||||||||
| Forfeited | ( | ||||||||||
| Outstanding as of June 30, 2024 | $ | ||||||||||
As of June 30, 2024, the number of shares available for issuance under the 2020 Plan was 33,815,931 , 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 loss and comprehensive loss as follows:
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2023 | 2024 | 2023 | 2024 | ||||||||||||||||||||
| Research and development | $ | $ | $ | $ | |||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
10. Revenue
The disaggregated revenue categories are presented on the face of the condensed consolidated statements of loss and comprehensive loss. Deferred revenue outstanding in each respective period is as follows:
| December 31, 2022 | June 30, 2023 | December 31, 2023 | June 30, 2024 | ||||||||||||||||||||
| Deferred revenue | $ | $ | $ | $ | |||||||||||||||||||
During the three and six months ended June 30, 2023, the Company recognized $4.0 million and $8.1 million, respectively, and $4.4 million and $13.0 million, respectively, in the three and six months ended June 30, 2024, of revenue that had been included in deferred revenue as of December 31, 2022 and December 31, 2023.
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, accounts payable and other liabilities, and contingent consideration payable. The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and other liabilities, and loans receivable approximate their fair values, and are primarily classified as Level 2.
At June 30, 2024, the Company also held non-marketable securities included in other long term assets of $32.3 million (December 31, 2023 - $32.3 million). These non-marketable securities are measured at cost less any
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impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.
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 June 30, 2024 | Liability at beginning of the period | Increase (decrease) in fair value of liability for contingent consideration | Liability at end of the period | ||||||||||||||
| Trianni (i) | $ | $ | $ | ||||||||||||||
| TetraGenetics (ii) | $ | $ | ( | $ | |||||||||||||
| Six Months Ended June 30, 2024 | Liability at beginning of the period | Increase (decrease) in fair value of liability for contingent consideration | Liability at end of the period | ||||||||||||||
| Trianni (i) | $ | $ | $ | ||||||||||||||
| TetraGenetics (ii) | $ | $ | ( | $ | |||||||||||||
i)The estimated fair value of the earn-out payments relates to a specific customer license and the fair value 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 inherent in the development of the value include the amount and timing of projected future net revenues received by us from the specific customer license, and the discount rate selected to measure the risks inherent in the future cash flows, which was approximately 22 %.
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. At June 30, 2024, the fair value of the contingent consideration was adjusted to reflect the expected value of the Company's ongoing internal program portfolio prioritization, resulting in a reduction of $32.4 million recognized as a non-cash fair value gain through other income.
In-Process Research and Development Assets
As discussed in Note 6, the estimated fair values in support of the full impairment charge were categorized within Level 3 of the fair value hierarchy and were determined using an income-based approach, which was based on a probability-adjusted present value of the future estimated after-tax cash flows attributable to the intangible assets. The significant assumptions inherent in estimating the fair values, from the perspective of a market participant, include a probability-adjusted success rate of its continued development through to clinical trials, future revenue, operating and development costs, milestone and regulatory success, obsolescence, and profitability. A de-risked discount rate of 12.8 % was used to present value the probability of success risk adjusted after-tax cash flows attributable to the IPR&D.
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 June 30, 2024, 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 0.6 years.
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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 June 30, 2024: | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Marketable securities | |||||||||||||||||||||||
| U.S. government agencies | $ | $ | $ | $ | |||||||||||||||||||
| Certificate of deposit | $ | ||||||||||||||||||||||
| Commercial paper | $ | ||||||||||||||||||||||
| Corporate bonds | $ | ||||||||||||||||||||||
| Asset backed securities | $ | ||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
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.
13. Government contributions
Government Contribution 1
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. From inception to June 30, 2024, the Company incurred $122.7 million in expenditures in respect of the Canadian government's Strategic Innovation Fund (SIF), of which $46.1 million and $76.7 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 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 June 30, 2024, no amounts have been accrued related to the repayment terms.
Government Contribution 2
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.
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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 funding is payable over fifteen years and the conditionally repayable portion repaid is 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. The agreement will expire on the later of April 30, 2047, or the date of the last repayment, unless earlier terminated. From inception to June 30, 2024, the Company has recorded CAD 46.0 million ($34.1 million) in respect of the funding.
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) may become payable starting in 2032, over up to fifteen years , conditional to the Company achieving revenue exceeding a given threshold. The agreement will expire on the earlier of 2047, or the date of the last payment, unless earlier terminated, as prescribed in the agreement. From inception to June 30, 2024, the Company has recorded CAD $31.0 million ($23.0 million) in respect of the funding commitment.
Impact to Consolidated Financial Statements
The Company recognized the following on the consolidated balance sheets:
| June 30, 2024 | ||||||||||||||||||||||||||
| Deferred Government Contribution | ||||||||||||||||||||||||||
| Accounts Receivable | Government Grant1 | Total | ||||||||||||||||||||||||
| Non-repayable | Conditionally Repayable2 | Repayable | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Government Contribution 2 (Canada) | ||||||||||||||||||||||||||
| Government Contribution 2 (British Columbia) | ||||||||||||||||||||||||||
| Other Government Grants | ||||||||||||||||||||||||||
| June 30, 2024 | $ | $ | $ | $ | $ | |||||||||||||||||||||
| December 31, 2023 | $ | $ | $ | $ | $ | |||||||||||||||||||||
| June 30, 2024 | ||||||||||||||||||||||||||
| Current | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Long-term | $ | $ | $ | $ | $ | |||||||||||||||||||||
1 Government Contributions are amortized into other income over the weighted average life of approximately 8 years.
2 No amounts have been accrued related to the repayment terms as the conditions are estimated to be non-probable.
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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 expectations regarding 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;
•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 Investigational New Drug ("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, 2024, or any future taxable year;
•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
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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 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. To maximize the value and impact of our work, we are advancing a pipeline of programs and strategically partnering with groups with novel science or innovative technology.
We focus on the development of antibody-based drugs and are committed to improving discovery and development. We aim to build a competitive advantage in bringing antibody therapeutics from target into 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.
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We structure our agreements in a way that is designed to align our partners’ economic interests with our own. We deliberately partner with companies of all sizes to propel programs pursuing the best ideas for new antibody-based drugs to the clinic, together. We enable discovery against targets that have traditionally been intractable, and we accelerate programs against less difficult targets.
As our capabilities have grown, we are also strategically leveraging our engine to develop internal programs to address areas of high unmet medical need and to advance our pipeline of first-in-class and best-in-class medicines.
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 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 sales of approved products derived from antibodies that we discover for our partners. Our partnerships generally include royalty payments (or equivalents) on net sales. For discovery agreements, these are typically in the single-digit to low-double digit range. We believe that our internal programs, if successfully out-licensed, may generate substantial upfront payments and royalty positions on net sales in the high single-digits to high teens range, in addition to clinical and commercial milestones.
We focus a substantial portion of our resources on research and development efforts towards strengthening our discovery and development engine and developing a pipeline of internal and co-development programs. We expect to continue to make significant investments in this area for the foreseeable future, over time shifting effort from engine development towards engine application. We expect to continue to incur significant expenses 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 completing the construction of our small-scale manufacturing facility and our new headquarters through our joint ventures;
•pursue internal and co-development programs in preclinical and eventually clinical development;
•market and sell our solutions to existing and new strategic 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 to help fund research and development, including internal programs, and facility construction.
The Company has advanced 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 and best-in-class antibody therapies. We have started a cumulative total of 93 partner-initiated programs with downstream participation and have seen a cumulative total 14 molecules advanced into the clinic, as illustrated by the following chart.
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Recent Developments
On July 18, 2024, Invetx announced its upcoming acquisition by Dechra Pharmaceuticals for up to $520 million in total consideration. AbCellera is a founding partner in Invetx, has a low-single-digit royalty stake in Invetx’s programs, and a mid-single-digit equity ownership position.
On July 31, 2024, we announced an expanded collaboration with Lilly to discover therapeutic antibodies for programs in immunology, cardiovascular disease, and neuroscience.
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Financial Highlights
The following table summarizes our key operating results for the three and six months ended June 30, 2023 and June 30, 2024. All figures are in U.S. dollars and amounts are expressed in thousands, except loss per share data:
| Three Months Ended June 30, 2024 | Six Months Ended June 30, | |||||||||||||||||||||||||
| Financial Performance | 2023 | 2024 | 2023 | 2024 | ||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Research fees | $ | 9,830 | $ | 5,453 | $ | 20,400 | $ | 15,227 | ||||||||||||||||||
| Licensing revenue | 226 | 370 | 598 | 550 | ||||||||||||||||||||||
| Milestone payments | – | 1,500 | 1,250 | 1,500 | ||||||||||||||||||||||
| Total revenue | 10,056 | 7,323 | 22,248 | 17,277 | ||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
Research and development(1) | 36,473 | 40,927 | 89,120 | 80,214 | ||||||||||||||||||||||
| Other operating expenses | 24,972 | 59,850 | 49,391 | 85,411 | ||||||||||||||||||||||
| Total operating expenses | 61,445 | 100,777 | 138,511 | 165,625 | ||||||||||||||||||||||
| Loss from operations | (51,389) | (93,454) | (116,263) | (148,348) | ||||||||||||||||||||||
| Total other (income) | (13,385) | (45,267) | (30,112) | (57,414) | ||||||||||||||||||||||
| Net loss before income tax | (38,004) | (48,187) | (86,151) | (90,934) | ||||||||||||||||||||||
| Net loss | $ | (30,528) | $ | (36,930) | $ | (70,638) | $ | (77,540) | ||||||||||||||||||
| Net loss per share | ||||||||||||||||||||||||||
| Basic | $ | (0.11) | $ | (0.13) | $ | (0.24) | $ | (0.26) | ||||||||||||||||||
| Diluted | $ | (0.11) | $ | (0.13) | $ | (0.24) | $ | (0.26) | ||||||||||||||||||
| Operating expenses include stock-based compensation: | ||||||||||||||||||||||||||
| Research and development | $ | 8,078 | $ | 8,354 | $ | 15,574 | $ | 16,578 | ||||||||||||||||||
| Sales and marketing | 1,329 | 1,497 | 2,600 | 2,928 | ||||||||||||||||||||||
| General and administrative | 6,992 | 7,931 | 13,699 | 15,685 | ||||||||||||||||||||||
| Financial Position and Liquidity | December 31, 2023 | June 30, 2024 | ||||||||||||||||||||||||
| Cash and cash equivalents | 133,320 | 148,312 | ||||||||||||||||||||||||
| Marketable securities | 627,265 | 522,044 | ||||||||||||||||||||||||
| Total cash, cash equivalents, and marketable securities | 760,585 | 670,356 | ||||||||||||||||||||||||
| Total assets | 1,488,094 | 1,412,481 | ||||||||||||||||||||||||
| Total shareholders' equity | 1,152,318 | 1,110,968 | ||||||||||||||||||||||||
(1)Exclusive of depreciation, amortization, and impairment
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.
•Engaging with strategic partners. Our potential to grow revenue, in both the near and long term, is dependent on successfully engaging with strategic partners. For existing strategic partners, we seek to expand our relationships with them to collaborate on additional programs initiated by them as well as to create a basis for potentially out-licensing some of our internal programs. Our teams are selective in determining which partners we choose to engage with, focusing on the opportunities with the strong potential to generate significant value in the long term.
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•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 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 propose 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.
•Successfully out-licensing drug candidates from our internal programs. We believe that our internal programs may result in drug candidates of interest to other drug developers with capabilities complimentary to our own. Where these capabilities can be expected to enhance the value of our drug candidate, we may seek to out-license. Successful out-licensing agreements could generate substantial up-front payments in addition to later milestone payments and royalties. Our financial performance may therefore be impacted by our ability to produce and out-license such drug candidates from our internal programs.
•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 and our internal programs. 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. Specifically, we are currently completing our investments in integrated preclinical development and antibody manufacturing. We have also 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 business into adjacent therapeutic modalities. We intend to continue to devote resources to continue to improve our discovery differentiation which will impact our financial performance.
•Pursuing drug discovery and development opportunities internally. As the capabilities of our discovery and development engine have matured we are increasingly in a position to pursue attractive, well-validated targets ourselves, e.g. in the GPCR, ion channel, and TCE spaces. Such programs have the potential to yield first-in-class drug candidates in indications with substantial unmet medical need which we would wholly own. We plan on investing significant resources in the preclinical and, eventually, clinical development of internal programs which will impact our financial results. The investments in each program are undertaken at risk and may ultimately not yield a return.
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 as further described below with respect to changes in this and upcoming reports.
| Cumulative Metrics | June 30, 2023 | June 30, 2024 | Change % | |||||||||||||||||
| Partner-initiated program starts with downstreams | 80 | 93 | 16 | % | ||||||||||||||||
| Molecules in the clinic | 9 | 14 | 56 | % | ||||||||||||||||
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The table below outlines the details of molecules in the clinic as of June 30, 2024:
| Molecule | Most advanced stage | Partner | Therapy areas | Program type | ||||||||||||||||||||||
| Bamlanivimab (LY-CoV555) | Marketed, EUA* | Eli Lilly and Company | Infectious disease – COVID-19 | AbCellera-initiated; partner-led | ||||||||||||||||||||||
| Bebtelovimab (LY-CoV1404) | Marketed, EUA* | Eli Lilly and Company | Infectious disease – COVID-19 | AbCellera-initiated; partner-led | ||||||||||||||||||||||
| TAK-920/DNL919 | Phase 1* | Denali Therapeutics Inc. | Neurology - Alzheimer's Disease | AbCellera partner-initiated discovery | ||||||||||||||||||||||
| Undisclosed | Phase 1 | Teva Pharmaceutical Industries Ltd. | Neuroscience | AbCellera partner-initiated discovery | ||||||||||||||||||||||
| ABD-147 | IND cleared (Fast Track-designated) | Abdera Therapeutics | Oncology | AbCellera partner-initiated discovery | ||||||||||||||||||||||
| IVX-01 | Clinical field study | Invetx | Animal Health | AbCellera partner-initiated discovery | ||||||||||||||||||||||
| Undisclosed | Clinical field study | Invetx | Animal Health | AbCellera partner-initiated discovery | ||||||||||||||||||||||
| Undisclosed | Clinical field study | Invetx | Animal Health | AbCellera partner-initiated discovery | ||||||||||||||||||||||
| AB-2100 | Phase 1/2 | Arsenal Bio | Oncology | Trianni license | ||||||||||||||||||||||
| NBL-012 | Phase 1 | NovaRock Biotherapeutics Inc. | Dermatology, gastrointestinal, immunology | Trianni license | ||||||||||||||||||||||
| NBL-015/FL-301 | Phase 1 | NovaRock Biotherapeutics Inc. | Oncology | Trianni license | ||||||||||||||||||||||
| NBL-020 | Phase 1 | NovaRock Biotherapeutics Inc. | Oncology | Trianni license | ||||||||||||||||||||||
| NBL-028 | Phase 1 | NovaRock Biotherapeutics Inc. | Oncology | Trianni license | ||||||||||||||||||||||
| Undisclosed | Phase 1* | Undisclosed | Undisclosed | Trianni license | ||||||||||||||||||||||
*Expect no further progress | ||||||||||||||||||||||||||
Partner-initiated program starts with downstreams represent the number of unique partner-initiated programs where we stand to participate financially in downstream success 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 the selection and initiation of projects by our partners and the resulting potential for near-term payments. Cumulatively, partner-initiated program starts with downstream participation indicate our total opportunities to earn downstream revenue from milestone fees and royalties (or royalty equivalents) 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 reached "open" status or has otherwise 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 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 June 30, 2024:
| Partner | # of Targets & Duration | Therapeutic Indication or Modality | Date Announced | ||||||||||||||||||||
| Viking Global Investors & ArrowMark Partners | Multi-target, multi-year | Immunology | May 1, 2024 | ||||||||||||||||||||
| Biogen Inc. | Single target | Neuroscience | March 11, 2024 | ||||||||||||||||||||
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| Undisclosed biotechnology company | Multi-target, multi-year | Undisclosed | December 20, 2023 | * | |||||||||||||||||||
| Undisclosed biotechnology company | Multi-target, multi-year | Undisclosed | December 4, 2023 | * | |||||||||||||||||||
| Prelude Therapeutics | Up to 5 targets, multi-year | Oncology | November 1, 2023 | ||||||||||||||||||||
| Regeneron Pharmaceuticals, Inc. | Up to 4 targets, multi-year | Undisclosed | September 20, 2023 | ||||||||||||||||||||
| Incyte Corporation | Undisclosed | Oncology | September 13, 2023 | ||||||||||||||||||||
| RQ Biotechnology Ltd. | Up to 3 targets, multi-year | Infectious disease | March 22, 2023 | ||||||||||||||||||||
| AbbVie Inc. | Up to 5 targets, multi-year | Undisclosed | December 15, 2022 | ||||||||||||||||||||
| Rallybio Corporation | Up to 5 targets, multi-year | Rare metabolic disorder and undisclosed | December 1, 2022 | ||||||||||||||||||||
| Atlas' stealth stage company | Up to 3 targets, multi-year | Undisclosed | August 3, 2022 | ||||||||||||||||||||
| Undisclosed biotechnology company | Up to 3 targets, multi-year | Undisclosed | June 29, 2022 | * | |||||||||||||||||||
| Empirico Inc. | 2 additional targets | Undisclosed | May 3, 2022 | ||||||||||||||||||||
| Everest Medicines Ltd. | Up to 10 targets, multi-year | Oncology and undisclosed | September 22, 2021 | ||||||||||||||||||||
| Moderna, Inc. | Up to 6 targets, multi-year | RNA-encoded antibodies | September 15, 2021 | ||||||||||||||||||||
| EQRx, Inc. | Multi-target, multi-year | Oncology and immunology (initially) | August 4, 2021 | ||||||||||||||||||||
| Tachyon Inc. | Single target | Oncology | August 3, 2021 | ||||||||||||||||||||
| Undisclosed biotechnology company | Up to 4 targets, multi-year | Undisclosed | June 30, 2021 | * | |||||||||||||||||||
| Angios | Multi-target, multi-year | Ophthalmology | May 6, 2021 | ||||||||||||||||||||
| Undisclosed biotechnology company | Multi-target, multi-year | Oncology | May 6, 2021 | * | |||||||||||||||||||
| Empirico Inc. | 5 targets, multi-year | Undisclosed | April 14, 2021 | ||||||||||||||||||||
| Gilead Sciences, Inc. | 8 targets, multi-year | Undisclosed | April 1, 2021 | ||||||||||||||||||||
| Abdera Therapeutics Inc. | 9 targets, multi-year | Oncology | January 14, 2021 | ||||||||||||||||||||
| Invetx, Inc. | Multi-target, multi-year | Animal Health | November 19, 2020 | ||||||||||||||||||||
| Kodiak Sciences Inc. | Multi-target, multi-year | Ophthalmology | October 29, 2020 | ||||||||||||||||||||
| IGM Biosciences, Inc. | Multi-target, multi-year | Oncology and immunology | September 24, 2020 | ||||||||||||||||||||
| Undisclosed | Single target | Bispecific | June 3, 2020 | * | |||||||||||||||||||
| Eli Lilly and Company | Up to 9 targets, multi-year | COVID-19 program and additional indications | May 22, 2020 | * | |||||||||||||||||||
| Regeneron Pharmaceuticals, Inc. | 4 targets, multi-year | Multiple undisclosed | March 16, 2020 | * | |||||||||||||||||||
| Invetx, Inc. | Multi-target, multi-year | Animal health | February 23, 2020 | ||||||||||||||||||||
| Undisclosed | Multi-target, multi-year | Cell therapy | September 25, 2019 | * | |||||||||||||||||||
| Gilead Sciences, Inc. | Single target | Infectious disease | June 13, 2019 | ||||||||||||||||||||
| Denali Therapeutics, Inc. | 8 targets, multi-year | Neurological diseases | February 28, 2019 | ||||||||||||||||||||
| Novartis AG | Up to 10 targets, multi-year | Undisclosed | February 14, 2019 | ||||||||||||||||||||
| Autolus Therapeutics plc | Single target | Cell therapy (CAR-T) | November 29, 2018 | ||||||||||||||||||||
| Denali Therapeutics, Inc. | Single target | Neurological diseases | June 12, 2018 | ||||||||||||||||||||
| Undisclosed mid-cap biopharmaceutical company | Undisclosed | Undisclosed | January 25, 2018 | ||||||||||||||||||||
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| Teva Pharmaceutical Industries Ltd. | Single target | Membrane protein | June 13, 2017 | ||||||||||||||||||||
| Pfizer Inc. | Multi-target, multi-year | Membrane protein | January 5, 2017 | ||||||||||||||||||||
| Undisclosed global biotechnology company | Multi-target, multi-year | Undisclosed | November 4, 2016 | ||||||||||||||||||||
| Kodiak Sciences Inc. | Single target | Ophthalmology | August 24, 2016 | ||||||||||||||||||||
| Teva Pharmaceutical Industries Ltd. | Undisclosed | Undisclosed | February 2, 2016 | ||||||||||||||||||||
| * Effective date of agreement | |||||||||||||||||||||||
Results of Operations
Comparison of the three and six months ended June 30, 2023 and June 30, 2024:
Revenue
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | Amount | % | 2023 | 2024 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Research fees | $ | 9,830 | $ | 5,453 | $ | (4,377) | (45) | % | $ | 20,400 | $ | 15,227 | $ | (5,173) | (25) | % | ||||||||||||||||||||||||||||||||||
| Licensing revenue | 226 | 370 | 144 | 64 | % | 598 | 550 | (48) | (8) | % | ||||||||||||||||||||||||||||||||||||||||
| Milestone payments | – | 1,500 | 1,500 | 100 | % | 1,250 | 1,500 | 250 | 20 | % | ||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 10,056 | $ | 7,323 | $ | (2,733) | (27) | % | $ | 22,248 | $ | 17,277 | $ | (4,971) | (22) | % | ||||||||||||||||||||||||||||||||||
Revenue decreased by $2.7 million from the three months ended June 30, 2023 compared to the three months ended June 30, 2024, and decreased $5.0 million from the six months ended June 30, 2023 compared to the six months ended June 30, 2024. The decrease in research fees in both periods was attributable to the timing and progress of our research and development efforts and was partially offset by two milestones reached within 2024.
Operating Expenses
Research and Development
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | Amount | % | 2023 | 2024 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| Research and development | 36,473 | 40,927 | 4,454 | 12 | % | 89,120 | 80,214 | (8,906) | (10) | % | ||||||||||||||||||||||||||||||||||||||||
Research and development expenses increased by $4.5 million, or 12%, from the three months ended June 30, 2023 compared to the three months ended June 30, 2024. 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. Of the total increase, $1.8 million is attributable to compensation-related expenses and $2.7 million is attributable to facilities, supplies and services expenditure consistent with the overall growth of the Company.
Research and development expenses decreased by $8.9 million, or (10)%, from the six months ended June 30, 2023 compared to the six months ended June 30, 2024. 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 decrease is attributable to specific one-time investments in co-development and internal programs of approximately $20.0 million made in the first quarter of 2023. The overall decrease was partially offset by an increase of $5.6 million in compensation-related expenses and a $5.5 million increase in facilities, supplies and services expenditure consistent with the overall growth of the Company.
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Sales and Marketing
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | Amount | % | 2023 | 2024 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 3,841 | 3,136 | (705) | (18) | % | 7,612 | 6,501 | (1,111) | (15) | % | ||||||||||||||||||||||||||||||||||||||||
Sales and marketing expenses decreased by $0.7 million, or (18)%, from the three months ended June 30, 2023 compared to the three months ended June 30, 2024. The decrease was attributable to a reduction in consulting fees and other expenses related to our business development activity.
Sales and marketing expenses decreased by $1.1 million, or (15)%, from the six months ended June 30, 2023 compared to the six months ended June 30, 2024. The decrease was attributable to a reduction in consulting fees and other expenses related to our business development activity.
General and Administrative
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | Amount | % | 2023 | 2024 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| General and administrative | 15,521 | 20,192 | 4,671 | 30 | % | 30,655 | 37,544 | 6,889 | 22 | % | ||||||||||||||||||||||||||||||||||||||||
General and administrative expenses increased by $4.7 million, or 30%, from the three months ended June 30, 2023 compared to the three months ended June 30, 2024. The increase was driven by a $0.8 million increase in compensation-related costs and a $4.0 million increase in legal, software, and other general administrative costs.
General and administrative expenses increased by $6.9 million, or 22%, from the six months ended June 30, 2023 compared to the six months ended June 30, 2024. The increase was driven by a $1.8 million increase in compensation-related costs and a $5.2 million increase in legal, software, and other general administrative costs.
Depreciation, Amortization, and Impairment
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | Amount | % | 2023 | 2024 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| Depreciation, amortization, and impairment | 5,610 | 36,522 | 30,912 | 551 | % | 11,124 | 41,366 | 30,242 | 272 | % | ||||||||||||||||||||||||||||||||||||||||
Depreciation, amortization, and impairment expenses increased by $30.9 million, or 551%, from the three months ended June 30, 2023 compared to the three months ended June 30, 2024 and increased by $30.2 million, or 272%, from the six months ended June 30, 2023 compared to the six months ended June 30, 2024. The increase relates primarily to a full impairment charge of the carrying value of $32.0 million (or $23.2 million, net of deferred income tax) associated with the IPR&D acquired through the 2021 acquisition of TetraGenetics. The impairment was a result of the Company's ongoing internal program portfolio prioritization.
Interest Income
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | Amount | % | 2023 | 2024 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| Interest income | (10,779) | (9,801) | 978 | (9) | % | (20,537) | (20,202) | 335 | (2) | % | ||||||||||||||||||||||||||||||||||||||||
Interest income decreased by $1.0 million, or (9)%, from the three months ended June 30, 2023 compared to the three months ended June 30, 2024 and decreased $0.3 million, or (2)%, from the six months ended June 30, 2023 compared to the six months ended June 30, 2024. The decrease was primarily driven by a decrease in our average cash and cash equivalents and marketable securities balances in the respective periods.
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Grants and Incentives
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | Amount | % | 2023 | 2024 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| Grants and incentives | (4,576) | (3,310) | 1,266 | (28) | % | (7,951) | (6,585) | 1,366 | (17) | % | ||||||||||||||||||||||||||||||||||||||||
Grants and incentives decreased by $1.3 million, or (28)%, from the three months ended June 30, 2023 compared to the three months ended June 30, 2024 and decreased $1.4 million, or (17)%, from the six months ended June 30, 2023 compared to the six months ended June 30, 2024.. This decrease was primarily driven by activity relating to research and development expenditures that are eligible for reimbursement under government programs for the period.
Other (Income)
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | Amount | % | 2023 | 2024 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| Other (income) expense | 1,970 | (32,156) | (34,126) | (1732) | % | (1,624) | (30,627) | (29,003) | 1786 | % | ||||||||||||||||||||||||||||||||||||||||
Other (income) increased by $34.1 million from the three months ended June 30, 2023 compared to the three months ended June 30, 2024. The increase included a gain on fair value adjustments related to held-for-trading marketable securities and Trianni contingent consideration of $2.4 million, partially offset by a foreign exchange loss of $0.7 million due to fluctuations in the Canadian and U.S. dollar exchange rate. Further to the intangible asset impairment discussion above, at June 30, 2024, the fair value of the contingent consideration was adjusted to reflect the expected value of the Company's ongoing internal program portfolio prioritization, resulting in a $32.4 million non-cash fair value gain.
Other (income) increased by $29.0 million from the six months ended June 30, 2023 compared to the six months ended June 30, 2024. The $32.4 million fair value gain discussed in the three months ended June 30, 2024 above was partially offset by fair value adjustments related to held-for-trading marketable securities and contingent consideration of $2.4 million and a foreign exchange loss of $1.0 million due to fluctuations in the Canadian and U.S. dollar exchange rate.
Income Tax Recovery
| Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | Amount | % | 2023 | 2024 | Amount | % | |||||||||||||||||||||||||||||||||||||||||||
| Income tax recovery | (7,476) | (11,257) | (3,781) | 51 | % | (15,513) | (13,394) | 2,119 | (14) | % | ||||||||||||||||||||||||||||||||||||||||
Income tax recovery increased by $3.8 million from the three months ended June 30, 2023 compared to the three months ended June 30, 2024 and decreased by $2.1 million from the six months ended June 30, 2023 compared to the six months ended June 30, 2024. The movement in each period was driven by the current net loss and a change in effective income tax rates.
Liquidity and Capital Resources
As of June 30, 2024, we had $670.4 million of cash, cash equivalents and marketable securities, comprising $148.3 million in cash and cash equivalents and $522.0 million in marketable securities. The decrease of $90.2 million since December 31, 2023, was primarily from a combination of cash flow used in operations due to our continued research and development activity, our internal pipeline, continued investment in the capacity and capabilities of our discovery and development engine, investments in our corporate headquarters and GMP facility under construction, and offset by government contributions received in the six months ended June 30, 2024.
While we have generated positive operating cash flows in the past, we intend to significantly invest in our business, and as a result may continue to incur operating losses in future periods. We will continue to use our significant available liquidity from our cash, cash equivalents and marketable securities to fund and invest in research and development efforts towards expanding our capabilities and expertise along our discovery and development engine, the building of our business development team and marketing our solutions to new and existing partners, and the expansion of our corporate headquarters, GMP facility and related infrastructure, including optimization of long-term office-lease arrangements. Based
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on our current business plan, we believe that our available liquidity from existing cash, cash equivalents, marketable securities, loan receivables, and government contributions, will be sufficient to meet our working capital and capital expenditure needs and do not anticipate the need of additional 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 the notes to our condensed consolidated financial statements for further information related to the government contributions.
Cash Flows
The following table summarizes our cash flows for the periods presented:
| Six Months Ended June 30, | ||||||||||||||
| 2023 | 2024 | |||||||||||||
| Net cash provided by (used in): | ||||||||||||||
| Operating activities | $ | (24,160) | $ | (71,674) | ||||||||||
| Investing activities | (183,999) | 82,008 | ||||||||||||
| Financing activities | (39) | 5,482 | ||||||||||||
| Effect of exchange rate fluctuations on cash and cash equivalents | 584 | (824) | ||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | (207,614) | $ | 14,992 | ||||||||||
Operating activities
Net cash used in operating activities increased from $24.2 million in the six months ended June 30, 2023 to $71.7 million in the six months ended June 30, 2024. The increase in cash flows used in operations was attributable to research and development activity, program execution, and investment in partnered and internal programs.
Investing activities
Net cash used in investing activities decreased from $184.0 million used in investing activities in the six months ended June 30, 2023 to $82.0 million provided by investing activities in the six months ended June 30, 2024. The decrease in cash used in investing activities was primarily attributable to specific one-time investments that occurred in the first quarter of 2023, receipt of grant funding, and proceeds from marketable securities in the six months ended June 30, 2024.
Financing activities
For the six months ended June 30, 2023, net cash used in financing activities included a $0.9 million contingent consideration payment, partially offset by proceeds from the exercise of options for common stock. Net cash provided by financing activities was $5.5 million for the six months ended June 30, 2024 due to proceeds from other long-term liabilities and the exercise of stock options.
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, 2023. There have been no significant changes to these policies during the six months ended June 30, 2024.
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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, 2023. 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 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 June 30, 2024 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, 2023.
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Item 1A. Risk Factors.
Risks Related to Our Business and Strategy
We have incurred losses in certain years since inception, including in 2023, and we may not be able to generate sufficient revenue to achieve profitability.
We expect to continue investing in our business. We expect to experience fluctuations in revenue and expenses which makes it difficult to evaluate our business. We may incur losses that are materially larger than what we have previously incurred. During the year ended December 31, 2023, we incurred a net loss of approximately $146.4 million. We have also incurred losses in certain other years since our inception and anticipate that we may incur significant losses for the foreseeable future. We expect that our operating expenses will continue to increase significantly, including as we:
•invest in research and development activities to improve our discovery and development engine and initiate and advance internal programs;
•market our solutions to new and existing partners;
•acquire businesses or technologies to support our business;
•attract, hire and retain qualified personnel;
•maintain, expand, enforce, protect and defend our intellectual property portfolio;
•prosecute and defend our ongoing and any future patent litigation;
•continue to build our new GMP manufacturing facility;
•create additional infrastructure to support our operations, including expanding our sales and marketing organization;
•add operational, financial and management information systems and personnel to support our operations as a public company; and
•experience any delays or encounter issues with any of the above.
Our expenses could increase beyond expectations for a variety of reasons, including our growth strategy and the increase in our operations. Since our inception, we have financed our operations primarily from royalty revenue, revenue from upfront payments generated through our receipt of technology access fees and discovery research fees through the performance of service contracts with our partners, payments from partners upon the satisfaction of clinical milestones, government funding and one-off government grants, incurring debt, and from private placements of our common and convertible preferred shares. Given our strategy and plans to invest in enhancing and scaling our business, we will need to generate significant additional revenue to achieve and sustain future profitability. Even though we have achieved profitability in recent periods, we cannot be sure that we will remain profitable for any sustained period of time. We may not be able to generate sufficient revenue to achieve profitability and our recent and historical growth should not be considered indicative of our future performance.
Our revenue has fluctuated from period to period, and our revenue for any historical period may not be indicative of results that may be expected for any future period.
During the years ended December 31, 2021, 2022, and 2023, we received payments from our partnership contracts generated upon the satisfaction of clinical milestones, licensing revenue derived from use of the Trianni platform, research fees for research performed for our partners, and royalty payments on sales of bamlanivimab and bebtelovimab. Upfront technology access fees are generated upon execution of our partnership agreements. Research and discovery fees are generated by research activities that we perform for our partners, the timing and nature of which are dictated by the commencement of antibody discovery campaigns selected by our partners. Clinical milestone payments are generated upon the achievement of development milestones by our partners with respect to the antibodies that we deliver. We are also eligible to receive royalty payments upon net sales of antibodies that we have discovered for our partners. In 2021 and
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2022, these royalty payments related to our partnership with Lilly upon sales of bamlanivimab and bebtelovimab, antibodies designed to treat and prevent COVID-19. Therefore, royalty payments that we have received in recent periods are derived from a compound developed in a single partnership. In November 2022, the FDA announced that bamlanivimab and bebtelovimab, respectively, were no longer authorized for emergency use and, as a result, we do not expect to generate revenue from royalties associated with Lilly’s sales of our COVID-19 antibodies going forward. We have not generated any royalty revenues since 2022. We currently do not generate significant recurring revenue and, until such time as we establish significant recurring revenue, if at all, we will be prone to regular fluctuations in our revenue dependent on the timing of our entry into partnership agreements, our partners initiating discovery programs, our partners achieving development milestones or commercial sales, or the progress of our internal discovery programs, with respect to drug candidates utilizing antibodies discovered using our discovery and development engine. We do not expect to generate significant recurring revenue unless and until such time as we secure additional programs under contract that, in the aggregate, result in regular and continuous execution of new partnership contracts, research discovery activities, achievement of development milestones or commencement of commercial sales. However, we are unable to predict whether and the extent to which the minimum annual payments under our partnership agreements will be exceeded, or the timing of the achievement of any milestones under these agreements, if they are achieved at all. In some cases, the timing and likelihood of payments to us under these agreements is dependent on our partners’ successful utilization of the antibodies discovered using our discovery and development engine, which is outside of our control. Because of these factors, our operating results could vary materially from quarter to quarter from our forecasts.
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 quarterly and annual operating results have fluctuated in the past and may fluctuate in the future, which makes it difficult for us to predict our future operating results. These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to:
•the level of demand for our antibody discovery and development engine and solutions, which may vary significantly;
•interest income from our cash management strategy, which is subject to variability due to cash, cash equivalents and marketable securities balance's and market interest yields available to the Company;
•royalty payments received from our partnership with Lilly upon sales of bamlanivimab or bebtelovimab, which have varied significantly and were dependent on obtaining emergency use authorization by the FDA;
•the timing and cost of, and level of investment in, research, development and commercialization activities relating to our discovery and development engine and initiation and advancement of internal programs, which may change from time to time;
•the start and completion of programs in which our discovery and development engine is utilized;
•the relative reliability and robustness of our discovery and development engine, including the data generation and computational tools within our discovery and development engine;
•the introduction of new technologies, platform features or software, by us or others in our industry;
•expenditures that we may incur to acquire, develop or commercialize additional technologies;
•expenditures involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including costs related to our intellectual property litigation with Bruker, and the outcome of this and any other future patent litigation we may be involved in;
•costs related to our civil litigation with the Estate of John Schrader, or Schrader, and the outcome of this and any other future civil litigation we may be involved in;
•the degree of competition in our industry and any change in the competitive landscape of our industry, including consolidation among our competitors or future partners;
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•natural disasters, outbreaks of disease or public health crises, such as the COVID-19 pandemic;
•the timing and nature of any future acquisitions or strategic partnerships;
•future accounting pronouncements or changes in our accounting policies; and
•general social, political and economic conditions and other factors, including inflationary pressures and factors unrelated to our operating performance or the operating performance of our competitors.
For example, 2020 was the first year in which we received payments from a partner beyond upfront fees. The antibody, bamlanivimab, developed by Lilly, has undergone clinical testing and previously received emergency use authorization, or EUA, from the FDA, although the FDA in November 2022 announced that bamlanivimab is no longer authorized for emergency use in the U.S. We have received associated milestone payments and royalties on net sales in 2020, 2021, and 2022. Lilly progressed into these clinical trials at a greatly accelerated pace as a result of the Coronavirus Treatment Acceleration Program, which is a special emergency program for possible coronavirus therapies created by the FDA in 2020 to expedite the development of potentially safe and effective life-saving treatments to combat the COVID-19 pandemic. With respect to other or future product candidates, there is no assurance that any of our partners or collaborators will be able to advance a product candidate through clinical development on this timeframe again in the future, or at all. We initiated our partnering program in 2015 and have only had three AbCellera discovery programs and three Trianni programs result in milestone or royalty payments to us to date, and we have not yet had a program receive marketing approval. There is no guarantee that we will continue to generate the levels of revenue, particularly milestone and royalty revenues, from our partnerships as we have experienced in recent periods. In addition, we have only recently begun to generate licensing revenue from our Trianni humanized rodent platform. There can be no assurance that we will continue to generate or expand our licensing revenue from this product offering in future periods.
The effect of one of the factors discussed above, or the cumulative effects of a combination of factors discussed above, could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance.
We may need to raise additional capital to fund our existing operations, improve our discovery and development engine, advance internal programs, or expand our operations. If we are unable to raise additional capital on terms acceptable to us or at all or generate cash flows necessary to maintain or expand our operations, we may not be able to compete successfully, which would harm our business, operations, and financial condition.
Based on our current business plan, we believe our available liquidity from existing cash and 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 expenditure required for later stage development of our internal pipeline to IND. We do not anticipate the need of additional external funding over at least the next 36 months following the date of this report. If our available cash resources together with our anticipated cash flow from operations are insufficient to satisfy our liquidity requirements including because of lower demand for our antibody discovery and development engine, or the realization of other risks described in this quarterly report, we may be required to raise additional capital prior to such time through issuances of equity or convertible debt securities, entrance into a credit facility or another form of third-party funding or seek other debt financing, including real estate and asset backed financing on the significant investments we have funded towards our corporate headquarters and GMP facility which are currently under construction. Such additio