10-Q 1 abcl-20240331.htm 10-Q abcl-20240331
000170305712-31Q12024falsehttp://www.abcellera.com/20240331#PropertyPlantAndEquipmentAndOperatingLeaseRightOfUseAssetsAfterAccumulatedDepreciationAndAmortizationhttp://www.abcellera.com/20240331#PropertyPlantAndEquipmentAndOperatingLeaseRightOfUseAssetsAfterAccumulatedDepreciationAndAmortizationhttp://www.abcellera.com/20240331#PropertyPlantAndEquipmentAndOperatingLeaseRightOfUseAssetsAfterAccumulatedDepreciationAndAmortizationhttp://www.abcellera.com/20240331#PropertyPlantAndEquipmentAndOperatingLeaseRightOfUseAssetsAfterAccumulatedDepreciationAndAmortizationhttp://fasb.org/us-gaap/2023#AccountsPayableAndOtherAccruedLiabilitiesCurrenthttp://fasb.org/us-gaap/2023#AccountsPayableAndOtherAccruedLiabilitiesCurrent00017030572024-01-012024-03-3100017030572024-05-01xbrli:shares00017030572023-12-31iso4217:USD00017030572024-03-31iso4217:USDxbrli:shares0001703057abcl:ResearchFeesMember2023-01-012023-03-310001703057abcl:ResearchFeesMember2024-01-012024-03-310001703057us-gaap:LicenseMember2023-01-012023-03-310001703057us-gaap:LicenseMember2024-01-012024-03-310001703057abcl:MilestonePaymentsMember2023-01-012023-03-310001703057abcl:MilestonePaymentsMember2024-01-012024-03-3100017030572023-01-012023-03-310001703057us-gaap:CommonStockMember2023-12-310001703057us-gaap:AdditionalPaidInCapitalMember2023-12-310001703057us-gaap:RetainedEarningsMember2023-12-310001703057us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001703057us-gaap:CommonStockMember2024-01-012024-03-310001703057us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001703057us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001703057us-gaap:RetainedEarningsMember2024-01-012024-03-310001703057us-gaap:CommonStockMember2024-03-310001703057us-gaap:AdditionalPaidInCapitalMember2024-03-310001703057us-gaap:RetainedEarningsMember2024-03-310001703057us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001703057us-gaap:CommonStockMember2022-12-310001703057us-gaap:AdditionalPaidInCapitalMember2022-12-310001703057us-gaap:RetainedEarningsMember2022-12-310001703057us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-3100017030572022-12-310001703057us-gaap:CommonStockMember2023-01-012023-03-310001703057us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001703057us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001703057us-gaap:RetainedEarningsMember2023-01-012023-03-310001703057us-gaap:CommonStockMember2023-03-310001703057us-gaap:AdditionalPaidInCapitalMember2023-03-310001703057us-gaap:RetainedEarningsMember2023-03-310001703057us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-3100017030572023-03-310001703057us-gaap:ComputerEquipmentMember2023-12-310001703057us-gaap:ComputerEquipmentMember2024-03-310001703057us-gaap:LandMember2023-12-310001703057us-gaap:LandMember2024-03-310001703057us-gaap:BuildingMember2023-12-310001703057us-gaap:BuildingMember2024-03-310001703057abcl:LaboratoryEquipmentMember2023-12-310001703057abcl:LaboratoryEquipmentMember2024-03-310001703057us-gaap:LeaseholdImprovementsMember2023-12-310001703057us-gaap:LeaseholdImprovementsMember2024-03-310001703057abcl:LicenseBasedIntangibleAssetsMember2024-03-310001703057us-gaap:TechnologyBasedIntangibleAssetsMember2024-03-310001703057us-gaap:InProcessResearchAndDevelopmentMember2024-03-31abcl:jointVenture0001703057abcl:DayhuJointVentureMember2024-03-31xbrli:pure0001703057abcl:BeedieJointVentureMember2024-03-310001703057abcl:DayhuJointVentureMember2023-12-310001703057abcl:DayhuJointVentureMember2023-01-012023-03-310001703057abcl:DayhuJointVentureMember2024-01-012024-03-310001703057abcl:DayhuJointVentureMemberabcl:DayluJVLoanMember2023-12-31iso4217:CAD0001703057abcl:DayhuJointVentureMemberabcl:DayluJVLoanMember2024-03-310001703057abcl:BeedieJointVentureMember2023-12-310001703057srt:MaximumMemberabcl:BeedieJointVentureMember2023-12-310001703057srt:MaximumMemberabcl:BeedieJointVentureMember2024-03-310001703057abcl:PreInitialPublicOfferingPlanMember2023-12-310001703057abcl:PreInitialPublicOfferingPlanMember2024-01-012024-03-310001703057abcl:PreInitialPublicOfferingPlanMember2024-03-310001703057abcl:TwoThousandTwentyShareOptionAndIncentivePlanMember2023-12-310001703057abcl:TwoThousandTwentyShareOptionAndIncentivePlanMember2024-01-012024-03-310001703057abcl:TwoThousandTwentyShareOptionAndIncentivePlanMember2024-03-310001703057abcl:TwoThousandTwentyShareOptionAndIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMember2023-12-310001703057abcl:TwoThousandTwentyShareOptionAndIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001703057abcl:TwoThousandTwentyShareOptionAndIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMember2024-03-310001703057us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-03-310001703057us-gaap:ResearchAndDevelopmentExpenseMember2024-01-012024-03-310001703057us-gaap:SellingAndMarketingExpenseMember2023-01-012023-03-310001703057us-gaap:SellingAndMarketingExpenseMember2024-01-012024-03-310001703057us-gaap:GeneralAndAdministrativeExpenseMember2023-01-012023-03-310001703057us-gaap:GeneralAndAdministrativeExpenseMember2024-01-012024-03-310001703057abcl:TrianniMemberabcl:ContingentConsiderationMemberus-gaap:FairValueInputsLevel3Member2022-12-310001703057abcl:TrianniMemberabcl:ContingentConsiderationMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-03-310001703057abcl:TrianniMemberabcl:ContingentConsiderationMemberus-gaap:FairValueInputsLevel3Member2023-03-310001703057abcl:TetraGeneticMemberabcl:ContingentConsiderationMemberus-gaap:FairValueInputsLevel3Member2022-12-310001703057abcl:TetraGeneticMemberabcl:ContingentConsiderationMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-03-310001703057abcl:TetraGeneticMemberabcl:ContingentConsiderationMemberus-gaap:FairValueInputsLevel3Member2023-03-310001703057abcl:TrianniMemberabcl:ContingentConsiderationMemberus-gaap:FairValueInputsLevel3Member2023-12-310001703057abcl:TrianniMemberabcl:ContingentConsiderationMemberus-gaap:FairValueInputsLevel3Member2024-01-012024-03-310001703057abcl:TrianniMemberabcl:ContingentConsiderationMemberus-gaap:FairValueInputsLevel3Member2024-03-310001703057abcl:TetraGeneticMemberabcl:ContingentConsiderationMemberus-gaap:FairValueInputsLevel3Member2023-12-310001703057abcl:TetraGeneticMemberabcl:ContingentConsiderationMemberus-gaap:FairValueInputsLevel3Member2024-01-012024-03-310001703057abcl:TetraGeneticMemberabcl:ContingentConsiderationMemberus-gaap:FairValueInputsLevel3Member2024-03-310001703057us-gaap:MeasurementInputDiscountRateMemberabcl:TrianniMember2024-03-310001703057us-gaap:MeasurementInputDiscountRateMemberabcl:TetraGeneticMember2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Member2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CertificatesOfDepositMember2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CertificatesOfDepositMember2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel3Member2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CertificatesOfDepositMember2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel1Member2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel3Member2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2024-03-310001703057us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2024-03-310001703057us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2024-03-310001703057us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2024-03-310001703057us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001703057us-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2024-03-310001703057us-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2024-03-310001703057us-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2024-03-310001703057us-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2024-03-310001703057us-gaap:FairValueMeasurementsRecurringMember2024-03-310001703057abcl:GovernmentContribution1Member2020-05-310001703057abcl:PhaseOneAndTwoMemberabcl:GovernmentContribution1Membercountry:CA2024-01-012024-03-310001703057abcl:PhaseOneMemberabcl:GovernmentContribution1Membercountry:CA2024-01-012024-03-310001703057abcl:GovernmentContribution1Membercountry:CAabcl:PhaseTwoMember2024-01-012024-03-310001703057abcl:GovernmentContribution2Memberstpr:CA-BC2024-03-310001703057abcl:GovernmentContribution2Member2023-05-310001703057abcl:GovernmentContribution2Membercountry:CA2023-05-310001703057abcl:GovernmentContribution2Membercountry:CA2023-05-012023-05-310001703057abcl:GovernmentContribution2Membercountry:CA2024-03-310001703057abcl:GovernmentContribution2Memberstpr:CA-BC2024-01-012024-03-310001703057srt:MaximumMemberabcl:GovernmentContribution2Memberstpr:CA-BC2024-03-310001703057srt:MaximumMemberabcl:GovernmentContribution2Memberstpr:CA-BC2024-01-012024-03-310001703057abcl:GovernmentContribution1Member2024-01-012024-03-310001703057abcl:GovernmentContribution2Membercountry:CA2024-01-012024-03-310001703057abcl:OtherGovernmentGrantsMember2024-01-012024-03-3100017030572023-01-012023-12-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________________________________________________
FORM 10-Q
_________________________________________________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 001-39781
_________________________________________________________
AbCellera Biologics Inc.
(Exact Name of Registrant as Specified in its Charter)
_________________________________________________________
British ColumbiaNot Applicable
( State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2215 Yukon Street
Vancouver, BC
V5Y 0A1
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (604) 559-9005
_________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange on which registered
Common shares, no par value per shareABCLThe Nasdaq Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filero
Non-accelerated fileroSmaller reporting companyo
Emerging growth companyo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of May 1, 2024, the registrant had 294,054,356 common shares, no par value per share, outstanding.



Table of Contents
i


Summary of the Material and Other Risks Associated with Our Business
Our business is subject to numerous material and other risks and uncertainties. You should carefully consider the following information 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 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, 2023March 31, 2024
Assets
Current assets:
Cash and cash equivalents$133,320 $123,572 
Marketable securities627,265 574,451 
Total cash, cash equivalents, and marketable securities760,585 698,023 
Accounts and accrued receivable30,590 34,419 
Restricted cash25,000 25,000 
Other current assets55,810 56,506 
Total current assets871,985 813,948 
Long-term assets:
Property and equipment, net287,696 306,081 
Intangible assets, net120,425 118,736 
Goodwill47,806 47,806 
Investments in equity accounted investees65,938 71,592 
Other long-term assets94,244 104,933 
Total long-term assets616,109 649,148 
Total assets$1,488,094 $1,463,096 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and other current liabilities$49,580 $42,887 
Contingent consideration payable50,475 51,431 
Deferred revenue18,958 10,565 
Total current liabilities119,013 104,883 
Long-term liabilities:
Operating lease liability71,222 68,079 
Deferred revenue8,195 8,570 
Deferred government contributions95,915 110,579 
Contingent consideration payable4,913 5,063 
Deferred tax liability30,612 30,274 
Other long-term liabilities5,906 5,735 
Total long-term liabilities216,763 228,300 
Total liabilities335,776 333,183 
Commitments and contingencies
Shareholders' equity:
Common shares: no par value, unlimited authorized shares at December 31, 2023 and March 31, 2024: 290,824,970 and 293,621,312 shares issued and outstanding at December 31, 2023 and March 31, 2024, respectively
753,199 764,562 
Additional paid-in capital121,052 127,990 
Accumulated other comprehensive loss(1,720)(1,816)
Accumulated earnings279,787 239,177 
Total shareholders' equity1,152,318 1,129,913 
Total liabilities and shareholders' equity$1,488,094 $1,463,096 
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 March 31,
20232024
Revenue:
Research fees$10,570 $9,774 
Licensing revenue372 180 
Milestone payments1,250 - 
Total revenue12,192 9,954 
Operating expenses:
Research and development(1)
52,647 39,287 
Sales and marketing(1)
3,771 3,365 
General and administrative(1)
15,134 17,352 
Depreciation and amortization5,514 4,844 
Total operating expenses77,066 64,848 
Loss from operations(64,874)(54,894)
Other (income) expense
Interest income(9,759)(10,401)
Grants and incentives(3,374)(3,275)
Other(3,593)1,529 
Total other (income)(16,726)(12,147)
Net loss before income tax(48,148)(42,747)
Income tax recovery(8,038)(2,137)
Net loss$(40,110)$(40,610)
Foreign currency translation adjustment(630)(96)
Comprehensive loss$(40,740)$(40,706)
Net loss per share
Basic$(0.14)$(0.14)
Diluted$(0.14)$(0.14)
Weighted-average common shares outstanding
Basic287,767,136292,723,901
Diluted287,767,136292,723,901
The accompanying notes are an integral part of these condensed consolidated financial statements.
1Exclusive of depreciation and amortization
2


AbCellera Biologics Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(All figures in U.S. dollars. Amounts are expressed in thousands except share data.)
(Unaudited)

Common SharesAdditional
Paid-in
Capital
Accumulated
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shareholders'
Equity
SharesAmount
Balances as of December 31, 2023290,824,970$753,199 $121,052 $279,787 $(1,720)$1,152,318 
Shares issued and restricted stock units ("RSUs") vested under stock option plan2,796,34211,363(10,471)--892
Stock-based compensation expense--17,409--17,409
Foreign currency translation adjustment----(96)(96)
Net loss---(40,610)-(40,610)
Balances as of March 31, 2024293,621,312$764,562 $127,990 $239,177 $(1,816)$1,129,913 
Common SharesAdditional
Paid-in
Capital
Accumulated
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shareholders'
Equity
SharesAmount
Balances as of December 31, 2022286,851,595$734,365 $74,118 $426,185 $(1,391)$1,233,277 
Shares issued and restricted stock units ("RSUs") vested under stock option plan 1,574,9198,451(7,962)--489
Share-based compensation expense--15,474--15,474
Foreign currency translation adjustment----(630)(630)
Net loss---(40,110)-(40,110)
Balances as of March 31, 2023288,426,514$742,816 $81,630 $386,075 $(2,021)$1,208,500 
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)
Three months ended March 31,
20232024
Cash flows from operating activities:
Net loss$(40,110)$(40,610)
Cash flows from operating activities:
Depreciation of property and equipment2,858 3,155 
Amortization of intangible assets2,656 1,689 
Amortization of operating lease right-of-use assets1,606 1,922 
Stock-based compensation15,474 17,409 
Other(3,634)1,707 
Changes in operating assets and liabilities:
Research fees and grants receivable7,915 (18,576)
Accrued royalties receivable9,260  
Income taxes payable(12,614)(3,182)
Accounts payable and accrued liabilities(5,778)(4,878)
Deferred revenue(3,905)(8,017)
Accrued royalties payable(16,253) 
Deferred grant income4,525 11,278 
Other assets(6,063)(3,605)
Net cash used in operating activities(44,063)(41,708)
Cash flows from investing activities:
Purchases of property and equipment(14,984)(24,140)
Purchase of marketable securities(360,752)(249,371)
Proceeds from marketable securities262,638 306,545 
Receipt of grant funding2,693 7,168 
Long-term investments and other assets(34,735)(4,385)
Investment in equity accounted investees(4,469)(5,907)
Net cash provided by (used in) investing activities(149,609)29,910 
Cash flows from financing activities:
Payment of liability for in-licensing agreement and other(948)(185)
Proceeds from long-term liabilities 2,124 
Proceeds from exercise of stock options490 892 
Net cash provided by (used in) financing activities(458)2,831 
Effect of exchange rate changes on cash and cash equivalents(213)(781)
Decrease in cash and cash equivalents(194,343)(9,748)
Cash and cash equivalents and restricted cash, beginning of period414,650 160,610 
Cash and cash equivalents and restricted cash, end of period$220,307 $150,862 
Restricted cash included in other assets2,290 2,290 
Total cash, cash equivalents, and restricted cash shown on the balance sheet$218,017 $148,572 
Supplemental disclosure of non-cash investing and financing activities
Property and equipment in accounts payable8,918 18,654 
Right-of-use assets obtained in exchange for operating lease obligation2,124 107 
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 months ended March 31, 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
The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Areas of significant estimates include, but are not limited to, revenue recognition including estimated timing of completion of performance obligations and determining whether an option for additional goods or services represents a material right, the impairment assessment of intangible assets and goodwill, and contingent consideration payable, and the estimates of stock-based compensation awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could significantly differ from those estimates.
Recent accounting pronouncements not yet adopted
The Company has reviewed recent accounting pronouncements and concluded that they are either not applicable to the Company or no material impact is expected in the condensed consolidated financial statements as a result of future adoption.
5


4. Net loss per share
Basic and diluted net loss per share was calculated as follows:
Three months ended March 31,
20232024
Basic and diluted loss per share
Net loss$(40,110)$(40,610)
Weighted-average common shares outstanding287,767,136292,723,901
Net loss per share - basic and diluted$(0.14)$(0.14)
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 months ended March 31, 2023 and March 31, 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 months ended March 31, 2023 and March 31, 2024 used to calculate both basic and diluted net loss per share is the same.
The Company excluded 50,844,425 potential common shares for the three months ended March 31, 2023, and 59,062,415 potential common shares for the three months ended March 31, 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, 2023March 31, 2024
Computers$3,517 $3,570 
Land53,405 53,405 
Building43,947 53,398 
Laboratory equipment70,350 74,991 
Leasehold improvements73,944 82,852 
Operating lease right-of-use assets73,141 71,326 
Property and equipment318,304 339,542 
Less accumulated depreciation(30,608)(33,461)
Property and equipment, net$287,696 $306,081 
As of December 31, 2023 and March 31, 2024, property and equipment includes leasehold improvements and construction in progress in the amount of $91.0 million and $93.1 million, respectively, and construction deposits of $13.7 million and $15.2 million, respectively, that have not commenced depreciation. Depreciation expense on property and equipment for the three months ended March 31, 2023 and March 31, 2024 was $2.9 million and $3.2 million, respectively.
6


6. Intangible assets
Intangible assets consisted of the following:
March 31, 2024
Gross
carrying
amount
Accumulated
amortization
Net book
value
License$38,433 $27,892 $10,541 
Technology52,700 8,515 44,185 
IPR&D64,010 - 64,010 
$155,143 $36,407 $118,736 
Amortization expense on intangible assets subject to amortization is estimated to be as follows for each of the next five years ended March 31:
Amortization
Expense
2025$4,297 
20264,297 
20274,297 
20284,297 
20294,297 
$21,485 
7. Investments in equity accounted investees, and other long-term assets
The Company has entered into two separate 50% joint ventures, Dayhu JV and Beedie JV, as part of the construction of future office and laboratory headquarters. The Company recorded immaterial amounts of proportionate income or loss with respect to either venture in the three months ended March 31, 2023 and 2024.

Dayhu JV

As of December 31, 2023 and March 31, 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 March 31, 2024, the Company recorded a right-of-use asset of $49.1 million and $48.6 million, respectively, and an operating lease liability of $50.4 million and $48.9 million, respectively, associated with an office lease with the Dayhu JV. In the three months ended March 31, 2023 and 2024, the Company incurred lease expense of $1.3 million and $1.3 million, respectively, to the Dayhu JV included within operating expenses.

At December 31, 2023 and March 31, 2024, the Company had a loan receivable balance of CAD $45.9 million ($34.7 million) and CAD $46.2 million ($34.0 million), respectively, directly with our JV partner, Dayhu, included in other long-term assets.
Beedie JV
As of December 31, 2023 and March 31, 2024, the equity investment balance was $23.8 million and $29.4 million, respectively, of which substantially all the assets in the Beedie JV is comprised of property and equipment.
At December 31, 2023 and March 31, 2024, the Company had a loan receivable balance of CAD $18.4 million ($13.9 million) and CAD $24.6 million ($18.2 million), respectively, directly with our JV partner, Beedie, which relates to the land and construction loan and is included in other long-term assets.
7


8. Other current assets and liabilities
Other current assets
December 31, 2023March 31, 2024
Taxes receivable$33,792 $34,356 
Prepaid expenses and other20,911 21,412 
Materials and supplies1,107 738 
Total other current assets$55,810 $56,506 

Current accounts payable and other current liabilities
December 31, 2023March 31, 2024
Accounts payable and accrued liabilities$28,603 $26,907 
Current portion of operating lease liability6,158 5,531 
Payroll liabilities7,707 2,847 
Current portion of deferred government contribution7,112 7,602 
Total accounts payable and other current liabilities$49,580 $42,887 
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, 202330,647,575$0.94 
Granted-- 
Exercised(2,151,214)0.44 
Forfeited-- 
Outstanding as of March 31, 202428,496,361$0.97 
Options exercisable as of March 31, 202425,615,040$0.88 
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, 202313,992,304$13.82 
Granted9,988,3235.39 
Exercised-- 
Forfeited(511,802)13.06 
Outstanding as of March 31, 202423,468,825$10.25 
Options exercisable as of March 31, 20246,089,959$15.63 
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, 20234,075,590$11.61 
Granted3,844,1335.38 
Vested and settled(645,128)13.29 
Forfeited(177,366)9.39 
Outstanding as of March 31, 20247,097,229$8.14 
As of March 31, 2024, the number of shares available for issuance under the 2020 Plan was 34,415,643, 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 March 31,
20232024
Research and development$7,496 $8,224 
Sales and marketing1,271 1,431 
General and administrative6,707 7,754 
$15,474 $17,409 
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, 2022March 31, 2023December 31, 2023March 31, 2024
Deferred revenue$41,128 $37,223 $27,153 $19,135 
During the three months ended March 31, 2023 and 2024, the Company recognized $4.8 million and $8.6 million respectively, of revenue that had been included in deferred revenue as of December 31, 2022 and December 31, 2023, respectively.
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 March 31, 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
9


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 March 31, 2023Liability at
beginning of
the period
Increase (decrease) in fair
value of liability for contingent
consideration
Liability at
end of the
period
Trianni (i)$23,505 $(2,602)$20,903 
TetraGenetics (ii)$36,760 $946 $37,706 
Three Months Ended March 31, 2024Liability at
beginning of
the period
Increase in fair
value of liability for contingent
consideration
Liability at
end of the
period
Trianni (i)$18,697 $956 $19,653 
TetraGenetics (ii)$36,691 $150 $36,841 
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.
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 March 31, 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 0.5 years.
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.
10


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 March 31, 2024:
Level 1Level 2Level 3Total
Marketable securities
U.S. government agencies$90,786 $- $- $90,786 
Certificate of deposit- 209,835 - 209,835 
Commercial paper- 65,046 - 65,046 
Corporate bonds- 128,832 - 128,832 
Asset backed securities- 79,952 - 79,952 
$90,786 $483,665 $- $574,451 
12. Commitments and contingencies
From time to time, the Company may become involved in routine litigation arising in the ordinary course of business. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company does not have contingency reserves established for any litigation liabilities and any of the costs related to such legal proceedings are expensed as incurred.
The Company may enter into certain agreements with strategic partners in the ordinary course of operations that may include investments in collaborative arrangements, contractual milestone payments related to the achievement of
pre-specified research, development, regulatory and commercialization events and indemnification provisions, which are common in such agreements.
Pursuant to the agreements, the Company may be obligated to make research and development and regulatory milestone payments upon the occurrence of certain events and upon receipt of royalty payments in the low single-digits to mid-twenties based on certain net sales targets. No amounts were expensed during the three months ended March 31, 2023 or March 31, 2024. As of December 31, 2023 and March 31, 2024, $3.1 million was included in accounts payable and other current liabilities.
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 March 31, 2024, the Company incurred $117.1 million in expenditures in respect of the Canadian government's Strategic Innovation Fund (SIF), of which $46.1 million and $71.1 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 March 31, 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.
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
11


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 March 31, 2024, the Company has recorded CAD 36.8 million ($27.2 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 March 31, 2024, the Company has recorded CAD $25.4 million ($18.9 million) in respect of the funding commitment.


Impact to Consolidated Financial Statements

The Company recognized the following on the consolidated balance sheets:

March 31, 2024
Deferred Government Contribution
Accounts Receivable
Government Grant1
Total
Non-repayable
Conditionally Repayable2
Repayable
Government Contribution 1$15,106 $8,489 $64,625 $ $73,114 
Government Contribution 2 (Canada)9,967 4,959  20,295 25,254 
Government Contribution 2 (British Columbia)18,735  18,827  18,827 
Other Government Grants$277 $986 $ $ $986 
March 31, 2024$44,085 $14,434 $83,452 $20,295 $118,181 
December 31, 2023$36,051 $14,811 $71,796 $16,420 $103,027 
March 31, 2024
Current$30,336 $4,258 $3,344 $ $7,602 
Long-term$13,749 $10,176 $80,108 $20,295 $110,579 
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.
12


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
13


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.
14


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 90 partner-initiated programs with downstream participation and have seen a cumulative total 13 molecules advanced into the clinic, as illustrated by the following chart.


15


2024-Q1 Business Metrics Chart 2024-04-25.jpg





16


Financial Highlights
The following table summarizes our key operating results for the three months ended March 31, 2023 and March 31, 2024. All figures are in U.S. dollars and amounts are expressed in thousands, except loss per share data:
Three Months Ended March 31,
Financial Performance20232024
Revenue:
Research fees$10,570 $9,774 
Licensing revenue372 180 
Milestone payments1,250 
Total revenue12,192 9,954 
Operating expenses:
Research and development(1)
52,647 39,287 
Other operating expenses24,41925,561
Total operating expenses77,06664,848
Loss from operations(64,874)(54,894)
Total other (income)(16,726)(12,147)
Net loss before income tax(48,148)(42,747)
Net loss$(40,110)$(40,610)
Net loss per share
Basic$(0.14)$(0.14)
Diluted$(0.14)$(0.14)
Operating expenses include stock-based compensation:
Research and development7,496 8,224 
Sales and marketing1,271 1,431 
General and administrative6,707 7,754 
Financial Position and LiquidityDecember 31, 2023March 31, 2024
Cash and cash equivalents133,320 123,572 
Marketable securities627,265 574,451 
Total cash, cash equivalents, and marketable securities760,585 698,023 
Total assets1,488,094 1,463,096 
Total shareholders' equity1,152,318 1,129,913 

(1)Exclusive of depreciation and amortization
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.
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
17


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.
As noted in our Annual Report on Form 10-K filed with the SEC on February 20, 2024, we updated our key business metrics to better reflect the value from our pipeline of internal and co-development programs. Previously reported business metrics "number of discovery partners" and "programs under contract" have been discontinued and AbCellera-initiated programs and programs without downstream participation have been excluded from program starts and we report on the number of partner-initiated program starts with downstreams in the current and comparative period.
Cumulative MetricsMarch 31, 2023March 31, 2024Change %
Partner-initiated program starts with downstreams759020 %
Molecules in the clinic91344 %
18


The table below outlines the details of molecules in the clinic as of March 31, 2024:
MoleculeMost advanced stagePartnerTherapy areasProgram type
Bamlanivimab (LY-CoV555)Marketed, EUA*Eli Lilly and CompanyInfectious disease – COVID-19AbCellera-initiated; partner-led
Bebtelovimab (LY-CoV1404)Marketed, EUA*Eli Lilly and CompanyInfectious disease – COVID-19AbCellera-initiated; partner-led
TAK-920/DNL919Phase 1*Denali Therapeutics Inc.Neurology - Alzheimer's DiseaseAbCellera partner-initiated discovery
UndisclosedPhase 1Teva Pharmaceutical Industries Ltd.NeuroscienceAbCellera partner-initiated discovery
IVX-01Clinical field studyInvetxAnimal HealthAbCellera partner-initiated discovery
UndisclosedClinical field studyUndisclosedAnimal HealthAbCellera partner-initiated discovery
UndisclosedClinical field studyUndisclosedAnimal HealthAbCellera partner-initiated discovery
NBL-012Phase 1NovaRock Biotherapeutics Inc.Dermatology, gastrointestinal, immunologyTrianni license
NBL-015/FL-301Phase 1NovaRock Biotherapeutics Inc.OncologyTrianni license
NBL-020Phase 1NovaRock Biotherapeutics Inc.OncologyTrianni license
NBL-028Phase 1NovaRock Biotherapeutics Inc.OncologyTrianni license
UndisclosedPhase 1*UndisclosedUndisclosedTrianni license
AB-2100IND openArsenal BioOncologyTrianni 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 March 31, 2024:

Partner# of Targets & DurationTherapeutic Indication or ModalityDate Announced
Viking Global Investors & ArrowMark PartnersMulti-target, multi-yearImmunology May 1, 2024
Biogen Inc.Single targetNeuroscienceMarch 11, 2024
19


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


Teva Pharmaceutical Industries Ltd.Single targetMembrane proteinJune 13, 2017
Pfizer Inc.Multi-target, multi-yearMembrane proteinJanuary 5, 2017
Undisclosed global biotechnology companyMulti-target, multi-yearUndisclosedNovember 4, 2016
Kodiak Sciences Inc.Single targetOphthalmologyAugust 24, 2016
Teva Pharmaceutical Industries Ltd.UndisclosedUndisclosedFebruary 2, 2016
* Effective date of agreement

Results of Operations
Comparison of the three months ended March 31, 2023 and March 31, 2024:
Revenue
Three Months Ended March 31,Change
20232024Amount %
Revenue:
Research fees$10,570 $9,774 $(796)(8)%
Licensing revenue372 180 (192)(52)%
Milestone payments1,250 — (1,250)(100)%
Total revenue$12,192 $9,954 $(2,238)(18)%

Revenue decreased by $2.2 million from the three months ended March 31, 2023 compared to the three months ended March 31, 2024. The decrease in research fees was attributable to the timing and progress of our research and development efforts and no new milestones were reached within the quarter.
Operating Expenses
Research and Development
Three Months Ended March 31,Change
20232024Amount %
Research and development52,647 39,287 (13,360)(25)%
Research and development expenses decreased by $13.4 million, or (25)%, from the three months ended March 31, 2023 compared to the three months ended March 31, 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 $3.8 million in compensation-related expenses and a $2.9 million increase in facilities, supplies and services expenditure consistent with the overall growth of the Company.
Sales and Marketing
Three Months Ended March 31,Change
20232024Amount %
Sales and marketing3,771 3,365 (406)(11)%
Sales and marketing expenses decreased by $0.4 million, or (11)%, from the three months ended March 31, 2023 compared to the three months ended March 31, 2024. The decrease was attributable to a reduction in consulting fees and other expenses related to our business development activity.
21


General and Administrative
Three Months Ended March 31,Change
20232024Amount %
General and administrative15,134 17,352 2,218 15 %
General and administrative expenses increased by $2.2 million, or 15%, from the three months ended March 31, 2023 compared to the three months ended March 31, 2024. The increase was driven by a $1.0 million increase in compensation-related costs and a $1.2 million increase in legal, software, and other general administrative costs.
Depreciation and Amortization
Three Months Ended March 31,Change
20232024Amount %
Depreciation and amortization5,514 4,844 (670)(12)%
Depreciation and amortization expenses decreased by $0.7 million, or (12)%, from the three months ended March 31, 2023 compared to the three months ended March 31, 2024. The decrease relates primarily to the amortization of intangible assets in the current period.
Interest Income
Three Months Ended March 31,Change
20232024Amount%
Interest income(9,759)(10,401)(642)%
Interest income increased by $0.6 million, or 7%, from the three months ended March 31, 2023 compared to the three months ended March 31, 2024. The increase was primarily driven by an increase in interest rates on our cash and cash equivalents and marketable securities balances in the quarter ended March 31, 2024, compared to the quarter ended March 31, 2023.

Grants and Incentives
Three Months Ended March 31,Change
20232024Amount %
Grants and incentives(3,374)(3,275)99 (3)%
Grants and incentives decreased by $0.1 million, or (3)%, from the three months ended March 31, 2023 compared to the three months ended March 31, 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 March 31,Change
20232024Amount%
Other(3,593)1,529 5,122 (143)%
Other (income) decreased by $5.1 million from the three months ended March 31, 2023 compared to the three months ended March 31, 2024. The decrease included loss on fair value adjustments related to held-for-trading marketable securities and contingent consideration of $4.8 million and a foreign exchange loss of $0.4 million due to fluctuations in the Canadian and U.S. dollar exchange rate.
22


Income Tax Recovery
Three Months Ended March 31,Change
20232024Amount%
Income tax recovery(8,038)(2,137)5,901 (73)%
Income tax recovery decreased by $5.9 million from the three months ended March 31, 2023 compared to the three months ended March 31, 2024. The decrease was driven by the current net loss in the period and a change in effective income tax rates.
Liquidity and Capital Resources
As of March 31, 2024, we had $698.0 million of cash, cash equivalents and marketable securities, comprising $123.6 million in cash and cash equivalents and $574.5 million in marketable securities. The decrease of $62.6 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 three months ended March 31, 2024.
We have generated positive operating cash flow cumulatively since our inception in 2012 and in every year from 2018 to 2022. We intend to significantly invest in our business, and as a result may incur operating losses in future periods. We will continue to 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 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 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 ($75.0 million CAD) was committed by the Government of Canada and the Government of British Columbia, respectively, to build new capabilities in Canada to develop, manufacture, and deliver antibody medicines to patients through Phase 1 clinical trials and build expertise in translational science, technical operations, and clinical operations and research. See the notes to our condensed consolidated financial statements for further information related to the government contributions.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Three Months Ended March 31,
20232024
Net cash provided by (used in):
Operating activities$(44,063)$(41,708)
Investing activities(149,609)29,910 
Financing activities(458)2,831 
Effect of exchange rate fluctuations on cash and cash equivalents(213)(781)
Net decrease in cash and cash equivalents$(194,343)$(9,748)
Operating activities
Net cash used in operating activities decreased from $44.1 million in the three months ended March 31, 2023 to $41.7 million in the three months ended March 31, 2024. The decrease in cash flows used in operations is attributable to
23


working capital movements including higher levels of accounts and other payables in Q1 2023 and timing and amounts of government contributions received in Q1 2024.
Investing activities
Net cash used in investing activities decreased from $149.6 million used in investing activities in the three months ended March 31, 2023 to $29.9 million provided by investing activities in the three months ended March 31, 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 and proceeds from marketable securities in the first quarter of 2024.
Financing activities
Net cash used in financing activities was $0.5 million for the three months ended March 31, 2023 due to the payment of an intangible asset obligation and contingent consideration payment, partly offset by proceeds from long-term liabilities and the exercise of options for common stock. Net cash provided by financing activities was $2.8 million for the three months ended March 31, 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 three months ended March 31, 2024.
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 March 31, 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.
24


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.
25


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
26


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;
27


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 additional financing may not be available on terms acceptable to us or at all.
In any event, we may consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons. For example, this may include reasons such as to:
increase our sales and marketing efforts to drive market recognition of our discovery and development engine and address competitive developments;
fund development and marketing efforts of our current and future internal and partner programs;
28


expand the capabilities of our discovery and development engine into adjacent therapeutic modalities, including vaccine development and cell therapy;
acquire, license or invest in technologies;
acquire or invest in complementary businesses or assets; and
finance capital expenditures and general and administrative expenses.
Our present and future funding requirements will depend on many factors, including:
our ability to achieve revenue growth;
the cost of expanding our operations, including our sales and marketing efforts;
our rate of progress in selling access to our discovery and development engine, the initiation and advancement internal programs and marketing activities associated therewith;
our rate of progress in, and cost of research and development activities associated with, antibody discovery;
the effect of competing technological and market developments;
the costs 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 Schrader, and the outcome of this and any other future civil litigation we may be involved in; and
costs related to any domestic and international expansion.
The various ways we could raise additional capital carry potential risks. If we raise funds by issuing equity securities, dilution to our shareholders would result. Any preferred equity securities issued also would likely provide for rights, preferences or privileges senior to those of holders of our common shares. If we raise funds by issuing debt securities, those debt securities would have rights, preferences and privileges senior to those of holders of our common shares. Debt financing and preferred equity financing, if available, may also involve agreements that include covenants restricting our ability to take specific actions, such as incurring additional debt, selling or licensing our assets, making product acquisitions, making capital expenditures, or declaring dividends. For example, our agreement with the Strategic Innovation Fund, or SIF, requires us to obtain consent in the event that an individual or company (or two or more of them acting in concert) acquires the direct or indirect beneficial ownership of 20% or more of our voting securities. In the event consent is not obtained, the agreement may be terminated and we will be obligated to repay all or a portion of the contribution amounts from SIF.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, if we require it, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges, or unforeseen circumstances could be significantly limited, and could have a material adverse effect on our business, financial condition, results of operations and prospects.
Unstable market and economic conditions may have serious adverse consequences on our business, financial condition, and stock price.
From time to time, the global credit and financial markets have experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that future deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. The financial markets and the global economy may also be adversely
29


affected by the current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, terrorism or other geopolitical events such as the conflict in Israel and the Gaza Strip and additional escalating conflicts in the Middle East, and the related impact on our business and the markets generally. Sanctions imposed by the United States and other countries in response to such conflicts, including the one in Ukraine, may also adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. Moreover, there has been recent instability of the global banking system. Continued disruptions in the banking system, both in the U.S. or abroad, may impact our or our customers’ liquidity and, as a result, negatively impact our business and operating results. If the current equity and credit markets deteriorate, the value and liquidity of our cash, cash equivalents and marketable securities may fluctuate substantially and it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Although we have not realized any significant losses on our cash, cash equivalents and our diversified portfolio of high credit quality marketable securities, future fluctuations in their value could result in significant losses and could have a material adverse impact on our results of operations and financial condition. In addition, failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price. There is also a risk that one or more of our current service providers, manufacturers and other partners may not survive an economic downturn, which could directly affect our ability to attain our operating goals on schedule and on budget.
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.
We utilize our antibody discovery and development engine to identify antibodies for further development and potential commercialization by our partners. As a result, the quality and sophistication of our discovery and development engine is critical to our ability to conduct our research discovery activities and to deliver more promising molecules and to accelerate and lower the costs of discovery as compared to traditional methods for our partnerships. In particular, our business depends, among other things, on:
our discovery and development engine’s ability to successfully identify therapeutic antibodies on the desired timeframes that can ultimately be used to prevent and treat diseases;
our ability to execute on our strategy to enter into new partnerships with new or existing partners and establish a robust internal pipeline of antibody discovery programs;
our ability to partner our internally developed pipeline;
our ability to increase awareness of the capabilities of our technology and solutions;
our partners’ and potential partners’ willingness to adopt new technologies;
whether our discovery and development engine reliably provides advantages over legacy and other alternative technologies and is perceived by customers to be cost effective;
the rate of adoption of our solutions by pharmaceutical companies, biotechnology companies of all sizes, government organizations and non-profit organizations and others;
prices we charge for our data packages and the discoveries that we make;
the relative reliability and robustness of our discovery and development engine;
our ability to develop new solutions for partners;
if competitors develop a platform that performs functional testing of cells at a greater throughput than us;
the timing and scope of any approval that may be required by the FDA, or any other regulatory body for drugs that are developed based on antibodies discovered by us;
the impact of our investments in innovation and commercial growth;
negative publicity regarding our or our competitors’ technologies resulting from defects or errors; and
30


our ability to further validate our technology through research and accompanying publications.
There can be no assurance that we will successfully address any of these or other factors that may affect the market acceptance of our discovery and development engine. If we are unsuccessful in achieving and maintaining market acceptance of our discovery and development engine, our business, financial condition, results of operations and prospects could be adversely affected.
Failure to execute our business strategy could adversely impact our growth and profitability.
Our strategy focuses on the development of antibody-based drugs and improving the way these drugs are discovered and developed. Our strategy assumes a certain degree of capital and capacity growth development. Factors such as insufficient capital, inflation, supply chain interruptions, inadequate forecasting, increases in construction material costs, or labor shortages could interfere with the successful execution of our strategy and our ability to timely build infrastructure to satisfy capacity needs and support business growth. If we are unable to successfully execute on this strategy, this could negatively impact our future results of operations and market capitalization. For additional discussion of our business strategy, please see the section entitled “Item 1. Business” included in our Annual Report on Form 10-K for the year ended December 31, 2023.

We allocate our resources to pursue a particular development candidate or indication and, as a result, may fail to capitalize on other development candidates or indications that may be more profitable or for which there is a greater likelihood of success.

We allocate our resources on certain research programs and development candidates. As a result, we may forgo or delay pursuit of opportunities with other development candidates or for our current development candidates in other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable and profitable market opportunities. Our spend on current and future research and development programs and development candidates for specific indications may not yield any commercially viable drugs. If we do not accurately evaluate the commercial potential or target market for a particular development candidate, we may relinquish valuable rights to that candidate through collaboration, licensing or other commercialization opportunities.
If we cannot maintain and expand current partnerships and agreements and enter new partnerships that generate discovery programs for antibodies, our business could be adversely affected.
Our primary focus is on the discovery of antibodies for targets that are selected by our partners. Our partners then use the data packages provided by us to develop their own drug candidates without our involvement. As a result, our success depends on our ability to expand the number and scope of our partnerships. Many factors may impact the success of these partnerships, including our ability to perform our obligations, our partners’ satisfaction with our data packages, our partners’ ability to successfully develop, secure regulatory approval for and commercialize drug candidates using antibodies discovered using our discovery and development engine, our partners’ internal priorities (including fluctuations in research and developments budgets), our partners’ resource allocation decisions and competitive opportunities, disagreements with partners, the costs required of either party to the partnerships and related financing needs, and operating, legal and other risks in any relevant jurisdiction.
In our partnership programs, we maintain rights to large unique data sets that connect information at the level of single-cell measurements, DNA sequence and protein function. We use this data to create an accelerating flywheel of learning: data generation from our partnership business provides the basis for AI modules that lead to expanded capabilities and faster data generation which supports our partnership business. As a result, in addition to reducing our revenue or delaying the development of our future solutions, the loss of one or more of these relationships may reduce our exposure to such information, thus hindering our efforts to further our technological differentiation and improve our discovery and development engine. In certain of our partnership programs, we may elect to make additional investments in certain partnership agreements at progressive stages of preclinical development, clinical development, and commercialization in
31


exchange for an increased share of product sales. Because of the inherent uncertainties in drug development described elsewhere in these Risk Factors, there can be no assurance that any additional investments we may elect to make would yield meaningful return, if at all.
We engage in conversations with companies regarding potential partnerships on an ongoing basis. These conversations may not result in a commercial agreement. Even if an agreement is reached, the resulting relationship may not be successful, including due to our inability to discover any usable antibodies for the selected targets or the antibodies that we do discover may not be successfully developed or commercialized by our partners. In such circumstances, we would not generate any substantial revenues from such a collaboration in the form of discovery research fees, milestone payments, royalties or otherwise. Speculation in the biotechnology industry about our existing or potential partnerships can be a catalyst for adverse speculation about us, or our data packages, which can adversely affect our reputation and our business.
A reduction in demand and research and development activities by current and prospective partners may adversely affect our business.
Our business could be adversely affected by any significant decrease in drug research and development expenditures by pharmaceutical and biotechnology companies, as well as by government agencies or private foundations. Similarly, economic factors and industry trends that affect our partners in these industries also affect their research and development budgets and, consequentially, our business as well.
Our partners include researchers at pharmaceutical and biotechnology companies. Our ability to continue to grow and win new business is dependent in large part upon the ability and willingness of the pharmaceutical and biotechnology industries to continue to spend on molecules in the non-clinical phases of research and development (and in particular discovery and development assessment) and to outsource the products and services we provide. Furthermore, our partners continue to search for ways to maximize the return on their investments with a focus on lowering research and development costs per drug candidate. Fluctuations in the expenditure amounts in each phase of the research and development budgets of these researchers and their organizations could have a significant effect on the demand for our products and services. Research and development budgets fluctuate due to changes in available resources, mergers of pharmaceutical and biotechnology companies, spending priorities (including available resources of our biotechnology partners, particularly those that are cash-negative, who may be highly focused on rationing their liquid assets in a challenging funding environment), general economic conditions, institutional budgetary policies and the impact of government regulations, including potential drug pricing legislation. Available funding for biotechnology partners in particular may be affected by the capital markets, investment objectives of venture capital investors and priorities of biopharmaceutical industry sponsors.
In recent periods, we have depended on a limited number of partners for our revenue, the loss of any of which could have an adverse impact on our business.

In recent periods, a limited number of partnerships accounted for a significant portion of our revenues. For example, royalty revenue for years ended December 31, 2021 and 2022, have come exclusively from our partnership with Lilly. Milestone payments have primarily come from our partnership with Lilly and all licensing revenue has come from the use of the Trianni platform for the years ended December 31, 2021, 2022, and 2023. Because a significant portion of our revenue in 2021 and 2022 was derived from sales of bamlanivimab and bebtelovimab, the reduction in sales of these compounds that we have experienced in recent periods have reduced or eliminated our royalty revenues attributed to sales of this compound. For example, we have not received any royalty revenues from our partnership with Lilly since December 31, 2022. If these reductions are not offset by increases in other sources of revenue, our results of operations for future periods may be materially and adversely affected.
Our existing partnerships cover a large number of current programs under contract, and therefore represent a large portion of potential downstream value. In addition, our partnership agreements are typically terminable at will with 90
32


days’ notice prior to identification of a target, after which point they may only be terminated for cause. As a result, if we fail to maintain our relationships with our partners or if any of our partners discontinue their programs, our future results of operations could be materially and 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.
We use our discovery and development engine to offer antibodies to partners who are engaged in antibody discovery and development. These partners include large cap pharmaceutical companies, biotechnology companies of all sizes and non-profit and government organizations. While we receive upfront payments generated through our receipt of technology access fees and discovery research fees for performing research activities for our partners, we estimate that the vast majority of the economic value of the contracts that we enter into with our partners is in the downstream payments that are payable if certain milestones are met or approved products are sold. As a result, our future growth is dependent on the ability of our partnerships to successfully develop and commercialize therapies based on antibodies discovered using our discovery and development engine. Due to our reliance on our partners, the risks relating to product development, regulatory clearance, authorization or approval and commercialization apply to us derivatively through the activities of our partners. While we believe our discovery and development engine is capable of identifying high quality antibodies, there can be no assurance that our partnerships will successfully develop, secure marketing approvals for and commercialize any drug candidates based on the antibodies that we discover. As a result, we may not realize the intended benefits of our partnerships. 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 clinical marketing approval.

Due to the uncertain, time-consuming and costly clinical development and regulatory approval process, there may not be successful development of any drug candidates with the antibodies that we discover, or we and our partners may choose to discontinue the development of these drug candidates for a variety of reasons, including due to safety, risk versus benefit profile, exclusivity, competitive landscape, commercialization potential, production limitations or prioritization of their resources. It is possible that none of these drug candidates will ever receive regulatory approval and, even if approved, such drug candidates may never be successfully commercialized. For example, under our research agreement with Lilly, we are eligible to receive and have received payments upon the achievement of certain development milestones and are eligible to receive royalties resulting from sales of both COVID-19 and non-COVID-19 products that incorporate antibodies we discovered. While we have received milestone and royalty payments from this collaboration, there can be no assurance that we will receive additional milestone payments or any royalties in the future. For example, in November 2022, the FDA announced bebtelovimab is no longer authorized for emergency use in the U.S., and Lilly and its authorized distributors have paused commercial distribution until further notice by the FDA. Furthermore, there can be no assurance that Lilly will be successful in its further development of bebtelovimab.
In addition, even if these drug candidates receive regulatory approval in the United States, the drug candidates may never obtain approval or commercialize such drugs outside of the United States, which would limit their full market potential and therefore our ability to realize their potential downstream value. Furthermore, approved drugs may not achieve broad market acceptance among physicians, patients, the medical community and third-party payors, in which case revenue generated from their sales would be limited. Likewise, we or our partners have to make decisions about which clinical stage and preclinical drug candidates to develop and advance, and we or our partners may not have the resources to invest in all of the drug candidates that contain antibodies discovered using our discovery and development engine, or clinical data and other development considerations may not support the advancement of one or more drug candidates. Decision-making about which drug candidates to prioritize involves inherent uncertainty, and our partners’ development program decision-making and resource prioritization decisions, which are outside of our control, may adversely affect the potential value of those partnerships. Additionally, subject to its contractual obligations to us, if one more of our partners is involved in a business combination, the partner might deemphasize or terminate the development or commercialization of any drug candidate that utilizes an antibody that we have discovered. If one of our strategic partners terminates its agreement with us, we may find it more difficult to attract new partners.
33


We are also subject to industry-wide FDA and other regulatory risk. The number of new drug applications, or NDAs, and biologics license applications, or BLAs, approved by the FDA varies significantly over time and if there were to be an extended reduction in the number of NDAs and BLAs approved by the FDA, the biotechnology industry would contract and our business would be materially harmed.
The failure to effectively advance, market and sell suitable drug candidates with the antibodies that we discover could have a material adverse effect on our business, financial condition, results of operations and prospects, and cause the market price of our common shares to decline. In addition to the inherent uncertainty in drug development addresses above, our ability to forecast our future revenues may be limited.
The failure of our partners to meet their contractual obligations to us could adversely affect our business.
Our reliance on our partners poses a number of additional risks, including the risk that they may not perform their contractual obligations to us to our standards, in compliance with applicable legal or contractual requirements, in a timely manner or at all; they may not maintain the confidentiality of our proprietary information; and disagreements or disputes could arise that could cause delays in, or termination of, the research, development or commercialization of products using our antibodies or result in litigation or arbitration.
In addition, certain of our partners are large, multinational organizations that run many programs concurrently, and we are dependent on their ability to accurately track and make milestone payments to us pursuant to the terms of our agreements with them. Any failure by them to inform us when milestones are reached and make related payments to us could adversely affect our results of operations.
Moreover, some of our partners are located in markets subject to political and social risk, corruption, infrastructure problems and natural disasters, and are often subject to country-specific privacy and data security risk as well as burdensome legal and regulatory requirements. Any of these factors could adversely impact their financial condition and results of operations, which could impair their ability to meet their contractual obligations to us, which may have a material adverse effect on our business, financial condition and results of operations.
We may be unable to manage our current and future growth effectively, which could make it difficult to execute on our business strategy.
Since our inception in 2012, we have experienced rapid growth and anticipate further growth in our business operations. This growth requires managing complexities across all aspects of our business, including complexities associated with increased headcount, integration of acquisitions, expansion of international operations, expansion of facilities, including our new GMP facility, execution on new lines of business and implementations of appropriate systems and controls to grow the business. Our growth has required significant time and attention from our management, and placed strains on our operational systems and processes, financial systems and internal controls and other aspects of our business.
We expect to continue to increase headcount and to hire more specialized personnel in the future as we grow our business. We will need to continue to hire, train and manage additional qualified scientists, engineers, laboratory personnel, client and account services personnel and sales and marketing staff and improve and maintain our technology to properly manage our growth. We may also need to hire, train and manage individuals with expertise that is separate, supplemental or different from expertise that we currently have, and accordingly we may not be successful in hiring, training and managing such individuals. For example, if our new hires perform poorly, if we are unsuccessful in hiring, training, managing and integrating these new employees, or if we are not successful in retaining our existing employees, our business may be harmed. Improving our technology and processes have required us to hire and retain additional scientific, engineering, sales and marketing, software, manufacturing, distribution and quality assurance personnel. We currently serve partners around the world and plan to continue to expand to new international jurisdictions as part of our growth strategy, which will lead to increased dispersion of our employees. Moreover, we may need to hire additional accounting, finance and other personnel in connection with our efforts to continue to comply with the requirements of being a public company. As a public
34


company, our management and other personnel need to devote a substantial amount of time towards maintaining compliance with these requirements. A risk associated with maintaining this rate of growth, for example, is that we may face challenges integrating, developing and motivating our rapidly growing and increasingly dispersed employee base.
We may not be able to maintain the quality, reliability or robustness of our discovery and development engine, or the expected turnaround times of our solutions and support, or to satisfy customer demand as we grow. Our ability to manage our growth properly will require us to continue to improve our operational, financial and management controls, as well as our reporting systems and procedures. If we are unable to manage our growth properly, we may experience future weaknesses in our internal controls, which we may not successfully remediate on a timely basis or at all. To effectively manage our growth, we must continue to improve our operational and manufacturing systems and processes, our financial systems and internal controls and other aspects of our business and continue to effectively expand, train and manage our personnel. The time and resources required to improve our existing systems and procedures, implement new systems and procedures and to adequately staff such existing and new systems and procedures is uncertain, and failure to complete this in a timely and efficient manner could adversely affect our operations and negatively impact our business and financial results.
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.
Since our inception, we have dedicated a substantial portion of our resources on the development of our engine and the technology that we incorporate to further enhance our antibody discovery and development engine, and our internal pipeline. These investments may involve significant time, risks, and uncertainties, including the risk that the expenses associated with these investments may affect operating results and that such investments may not generate sufficient technological advantage relative to alternatives in the market which would, in turn, impact revenues to offset liabilities assumed and expenses associated with these new investments. The industry in which we operate changes rapidly as a result of technological and drug developments, which may render our solutions less desirable. We believe that we must continue to invest a significant amount of time and resources in our discovery and development engine, and our internal pipeline, to maintain and improve our competitive position. If we do not achieve the benefits anticipated from these investments, if the achievement of these benefits is delayed, if our discovery and development engine is not able to accelerate the process of antibody discovery as quickly as we anticipate, or if our internal pipeline is not successful, our revenue and operating results may be adversely affected.
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, and the price of our common shares may decline as a result of announcements of unexpected results or developments.
Our partners have significant discretion in determining when and whether to make announcements about the status of our partnerships, including about preclinical and clinical developments and timelines for advancing antibodies discovered using our discovery and development engine. We do not plan to disclose the development status and progress of individual drug candidates of our partners, unless and until those partners do so first. Our partners may wish to report such information more or less frequently than we intend to or may not wish to report such information at all, in which case we would not report that information either. In addition, if partners choose to announce a collaboration with us, there is no guarantee that we will recognize research discovery fees in that quarter or even the following quarter, as such fees are not payable to us until our partner begins discovery activities. The price of our common shares may decline as a result of the public announcement of unexpected results or developments in our partnerships, or as a result of our partners withholding such information.
35


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.
From time to time, we may make public statements regarding the expected timing of certain milestones and key events, as well as regarding developments and milestones under our partnerships, to the extent that our partners have publicly disclosed such information or permit us to make such disclosures. Certain of our partners have also made public statements regarding their expectations for the development of programs under partnership with us and they and other partners may in the future make additional statements about their goals and expectations for partnerships with us. The actual timing of these events can vary dramatically due to a number of factors such as delays or failures in our or our current and future partners’ antibody discovery and development programs, the amount of time, effort, and resources committed by us and our current and future partners, and the numerous uncertainties inherent in the development of drugs. As a result, there can be no assurance that our partners’ current and future programs will advance or be completed in the time frames we or they expect. If our partners fail to achieve one or more of these milestones or other key events as planned, our business could be materially adversely affected and the price of our common shares could decline.
Our future success is dependent on the eventual approval and commercialization of products developed by our partners for which we have no control over the clinical development plan, regulatory strategy or commercialization efforts.
Our business model is dependent on the eventual progression of therapeutic candidates discovered or initially developed utilizing our discovery and development engine into clinical trials and commercialization. This requires us to attract partners and enter into agreements with them that contain obligations for the partners to pay us milestone payments as well as royalties on sales of approved products for the therapeutic candidates they develop that are generated utilizing our discovery and development engine. Given the nature of our relationships with our partners, we do not control the progression, clinical development, regulatory strategy or eventual commercialization, if approved, of these therapeutic candidates. As a result, our future success and the potential to receive milestones and royalties are entirely dependent on our partners’ efforts over which we have no control. Additionally, unless publicly disclosed by our partners, we do not have access to information related to our partners’ preclinical studies or clinical trial results, including serious adverse events, or ongoing communications with the FDA or other regulatory authorities regarding our partners’ development strategy, which limits our visibility into how such programs may be progressing. If our partners determine not to proceed with the future development of a drug candidate discovered or initially developed utilizing our discovery and development engine, or if they implement preclinical, clinical or regulatory strategies that ultimately do not result in the further development or approval of the therapeutic candidate, we will not receive the benefits of our partnerships, which may have a material and adverse effect on our operations.

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.
We may not be able to file INDs for our internal pipeline candidates on the timelines we expect. For example, we may experience delays with IND-enabling studies or manufacturing delays. Moreover, we cannot be sure that submission of an IND will result in the FDA allowing further clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate clinical trials. Additionally, even if such regulatory authorities agree with the design and implementation of the clinical trials set forth in an IND, we cannot guarantee that such regulatory authorities will not change their requirements in the future. These considerations also apply to new clinical trials we may submit as amendments to a new IND. Any failure to file INDs on the timelines we expect or to obtain regulatory approvals for our trials may prevent us from completing our clinical trials or commercializing our products on a timely basis, if at all.

We have no marketed proprietary products and have not yet independently started clinical development, which makes it difficult to assess our ability to independently develop future product candidates and monetize any resulting products.
As a company, we have no previous experience in advancing and completing clinical trials, and navigating and complying with the related regulatory requirements, including with respect to the submission of a New Drug Application,
36


or NDA, or equivalent submission. We have not yet demonstrated our ability to independently conduct clinical development and obtain regulatory approval. To execute on our business plan, we will need to successfully reach agreement with multiple regulatory agencies on clinical and pre-clinical studies required for registration, execute our clinical development and manufacturing plans; and manage our spending as costs and expenses increase due to clinical trials, and regulatory approvals. If we are unsuccessful in accomplishing these objectives, we will not be able to develop any future product candidates independently and could fail to realize the potential advantages of doing so.
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.
We face significant competition in the life sciences technology market. Our technologies address antibody therapeutic discovery and development challenges that are addressed by other platform technologies controlled by companies that have a variety of business models, including the development of internal pipelines of therapeutics, technology licensing, and the sale of instruments and devices. Examples of technical competition at different steps of our discovery and development engine include:
In the field of single-cell screening, companies that provide access to similar technologies such as Bruker, Twist Bioscience Corp, HiFiBio Inc., Ligand Pharmaceuticals Inc., and Sphere Fluidics Ltd.
In antibody RepSeq, companies that provide access to similar technologies such as 10X Genomics Inc., Adaptive Biotechnologies Corp., Atreca Inc. and Distributed Bio Inc. (acquired by Charles River Laboratories in 2021)
In bispecific antibody engineering, from companies that provide access to similar technologies such as AbbVie Inc., Genmab A/S, Merus N.V. and Zymeworks Inc.
In discovery using genetically engineered rodents, companies that provide access to similar technologies such as Ablexis LLC, Crescendo Biologics Ltd., Harbour Antibodies BV, Kymab Ltd., Ligand Pharmaceuticals Inc., Alloy Therapeutics LLC, and RenBio Inc.
We also face direct business competition from companies that provide antibody discovery services using technologies such as hybridoma and display. Companies with discovery business models that include downstream payments include Adimab LLC, Distributed Bio Inc. (acquired by Charles River Laboratories in 2021) and WuXi Biologics Inc. In addition, we compete with a variety of fee-for-service contract research organizations that provide services, in most cases using legacy technologies, that compete with one or more steps in our discovery and development engine. In addition, our partners may also elect to develop their workflows on legacy systems rather than rely on our discovery and development engine.
Our competitors and potential competitors may enjoy a number of competitive advantages over us. For example, these may include:
longer operating histories;
larger customer bases;
greater brand recognition and market penetration;
greater financial resources;
greater technological and research and development resources;
better system reliability and robustness;
greater selling and marketing capabilities; and
better established, larger scale and lower cost manufacturing capabilities.
37


As a result, our competitors and potential competitors may be able to respond more quickly to changes in customer requirements, devote greater resources to the development, promotion and sale of their platforms or instruments than we can or sell their platforms or instruments, or offer solutions competitive with our discovery and development engine and solutions at prices designed to win significant levels of market share. In addition, we may encounter challenges in marketing our solutions with our pricing model, which is structured to capture the potential downstream revenues associated with drug candidates that were discovered using our discovery and development engine. Our partners and potential partners may prefer one or more pricing models employed by our competitors that involve upfront payments rather than downstream revenues. We may not be able to compete effectively against these organizations.
In addition, competitors may be acquired by, receive investments from or enter into other commercial relationships with larger, well-established and well-financed companies. Certain of our competitors may be able to secure key inputs from vendors on more favorable terms, devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing policies and devote substantially more resources to technology and platform development than we can. If we are unable to compete successfully against current and future competitors, we may be unable to increase market adoption and sales of our discovery and development engine, which could prevent us from increasing our revenue or sustaining profitability.
Our antibody discovery and development engine may not meet the expectations of our partners, which means our business, financial condition, results of operations and prospects could suffer.
Our success depends on, among other things, the market’s confidence that our discovery and development engine is capable of substantially shortening the amount of time necessary to perform certain research activities as compared to the use of legacy and other alternative technologies, and will enable more efficient or improved pharmaceutical and biotechnology product development. For example, while we have in the past been able to identify a potential drug candidate for human testing within 90 days, there is no assurance that we will be able to do so on this timeframe again in the future, or at all. To date, we have only had three AbCellera discovery programs and three Trianni programs result in milestone or royalty payments to us. While our partnership with Lilly has produced bamlanivimab and bebtelovimab, antibodies for which Lilly was granted two EUAs by the FDA, we have not yet had a program receive full marketing approval. We also believe that pharmaceutical and biotechnology companies are likely to be particularly sensitive to defects and errors in the use of our discovery and development engine, including if our engine fails to deliver meaningful acceleration of certain research timelines accompanied by results at least as good as the results generated using legacy or other alternative technologies. There can be no guarantee that our discovery and development engine will meet the expectations of pharmaceutical and biotechnology companies.
If we are unable to support demand for our antibody discovery and development engine, including ensuring that we have adequate teams and facilities to meet our current and future pipeline, or if we are unable to successfully manage our anticipated growth, our business could suffer.
As we initiate discovery programs and progress on internal programs, our operational capacity to execute such research activities may become strained. We may also need to purchase additional equipment, some of which can take several months or more to procure and set up. There is no assurance that the allocation of these resources, and investment in additional resources, will be successfully implemented and in a timely manner. For example, we are currently expanding our facilities in Vancouver, British Columbia. Such facilities require purpose-built buildings often with rezoning requirements. Such projects are typically long in duration and subject to delays. Failure to manage this growth could result in delays, higher costs, declining quality, and slower responses to competitive challenges. A failure in any one of these areas could make it difficult for us to meet market expectations for our data packages and could damage our reputation and the prospects for our business.
Our management uses certain key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions and such metrics may not
38


accurately reflect all of the aspects of our business needed to make such evaluations and decisions, in particular as our business continues to grow.
In addition to our consolidated financial results, our management regularly reviews a number of operating and financial metrics, including number of programs under contract, the trend of potential downstream revenue terms (milestones and royalties) of the portfolio, the performance of the portfolio in probability of success in achieving clinical milestones as compared to historical averages and the performance of the portfolio in the time taken to achieve clinical milestones, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe that these metrics are representative of our current business; however, these metrics may not accurately reflect all aspects of our business and we anticipate that these metrics may change or may be substituted for additional or different metrics as our business grows and as we introduce new solutions. If our management fails to review other relevant information or change or substitute the key business metrics they review as our business grows, their ability to accurately formulate financial projections and make strategic decisions may be compromised and our business, financial results and future growth prospects may be adversely impacted.
The sizes of the markets and forecasts of market growth for the demand of our antibody discovery and development engine and other of our key performance indicators are based on a number of complex assumptions and estimates and may be inaccurate.
We estimate annual total addressable markets and forecasts of market growth for our discovery and development engine, data packages and technologies. We have also developed a standard set of key performance indicators in order to enable us to assess the performance of our business in and across multiple markets, and to forecast future revenue. These estimates, forecasts and key performance indicators are based on a number of complex assumptions, internal and third-party estimates and other business data, including assumptions and estimates relating to our ability to generate revenue from the development of new workflows. While we believe our assumptions and the data underlying our estimates and key performance indicators are reasonable, there are inherent challenges in measuring or forecasting such information. As a result, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors and indicators. As a result, our estimates of the annual total addressable market and our forecasts of market growth and future revenue from technology access fees, discovery research fees, milestone payments or royalties may prove to be incorrect, and our key business metrics may not reflect our actual performance. For example, if the annual total addressable market or the potential market growth for our discovery and development engine is smaller than we have estimated or if the key business metrics we utilize to forecast revenue are inaccurate, it may impair our sales growth and have an adverse impact on our business, financial condition, results of operations and prospects.
We must adapt to rapid and significant technological change and respond to introductions of new products and technologies by competitors to remain competitive.
The industries we serve are characterized by significant enhancements and evolving industry standards. As a result, our and our partners’ needs are rapidly evolving. If we do not appropriately innovate and invest in new technologies, our discovery and development engine and internal pipeline may become less desirable in the markets we serve, our partners could move to new technologies offered by our competitors or engage in antibody discovery themselves, and the internal pipeline we invest in could be less successful. Without the timely introduction of new solutions and technological enhancements, our offerings will likely become less competitive over time, in which case our competitive position and operating results could suffer. Accordingly, we focus significant efforts and resources on the development and identification of new technologies and markets to further broaden and deepen our capabilities and expertise in antibody discovery and development. For example, to the extent we fail to timely introduce new and innovative technologies or solutions, adequately predict our partners’ needs or fail to obtain desired levels of market acceptance, our business may suffer and our operating results could be adversely affected.
39


We depend on our information technology systems, and any failure of these systems could harm our business.
We depend on information technology and telecommunications systems for significant elements of our operations, including our laboratory information management system, our computational biology system, our knowledge management system, our customer reporting, our discovery and development engine, our advanced automation systems, and advanced application software. We have installed, and expect to expand, a number of enterprise software systems that affect a broad range of business processes and functional areas, including for example, systems handling human resources, financial controls and reporting, contract management, regulatory compliance and other infrastructure operations. These implementations were expensive and required a significant effort in terms of both time and effort. In addition to the aforementioned business systems, we intend to extend the capabilities of both our preventative and detective security controls by augmenting the monitoring and alerting functions, the network design and the automatic countermeasure operations of our technical systems. These information technology and telecommunications systems support a variety of functions, including manufacturing operations, laboratory operations, data analysis, quality control, customer service and support, billing, research and development activities, scientific and general administrative activities. A significant risk in implementing these systems, for example, is the integration and communication between separate IT systems.
Information technology and telecommunications systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious software, bugs or viruses, human acts and natural disasters. Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Any disruption or loss of information technology or telecommunications systems on which critical aspects of our operations depend could have an adverse effect on our business and our reputation, and we may be unable to regain or repair our reputation in the future.
Upgrading and integrating our business systems could result in implementation issues and business disruptions.
In recent years, we have been and will continue updating and consolidating systems and automating processes in many parts of our business with a variety of systems, including in connection with the integration of acquired businesses and the implementation of a new enterprise resource planning software. The expansion and ongoing implementation of operational systems may occur at a future date based on value to the business. In general, the process of planning and preparing for these types of integrated, wide-scale implementations is extremely complex and are required to address a number of challenges, including information security assessment and remediation, data conversion, network and system cutover, user training, and integration with existing processes or systems. Incongruities in any of these areas could cause operational problems during implementation including inconsistent practices, delayed report and/or data shipments, missed sales, billing errors and accounting errors.
Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or protected health information or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.
In the ordinary course of our business, we collect and store petabytes of sensitive data, including legally protected health information, personally identifiable information, intellectual property and proprietary business information owned or controlled by ourselves or our strategic partners. We manage and maintain our applications and data by utilizing a combination of on-site systems, managed data center systems and cloud-based data center systems. These applications and data encompass a wide variety of business-critical information, including research and development information, commercial information and business and financial information. We face four primary risks relative to protecting this critical information: loss of access risk, inappropriate disclosure risk, inappropriate modification risk and the risk of being unable to adequately monitor our controls over the first three risks.
Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure and that of any third-party provider we may utilize, may be vulnerable to attacks by hackers or viruses or breached due to employee error, malfeasance or other disruptions. Any such breach or interruption could compromise our networks and the information stored there could be accessed by unauthorized parties, publicly
40


disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, such as the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), and regulatory penalties. Although we have implemented security measures and a formal enterprise security program to prevent unauthorized access to sensitive data, there is no guarantee that we can protect our systems from breach. Unauthorized access, loss or dissemination could also disrupt our operations (including our ability to conduct our analyses, pay providers, conduct research and development activities, collect, process and prepare company financial information, provide information about any future products, and manage the administrative aspects of our business) and damage our reputation, any of which could adversely affect our business.
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and its implementing regulations, impose certain requirements relating to the privacy, security, transmission and breach reporting of individually identifiable health information upon entities subject to the law, such as health plans, healthcare clearinghouses and healthcare providers and their respective business associates that perform services for them that involve individually identifiable health information. Mandatory penalties for HIPAA violations can be significant, and criminal and monetary penalties, as well as injunctive relief, may be imposed for HIPAA violations. Although drug manufacturers are not directly subject to HIPAA, prosecutors are increasingly using HIPAA-related theories of liability against drug manufacturers and their agents and we also could be subject to criminal penalties if we knowingly obtain individually identifiable health information from a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.
Furthermore, in the event of a breach as defined by HIPAA, HIPAA regulations impose specific reporting requirements to regulators, individuals impacted by the breach and the media. Issuing such notifications can be costly, time and resource intensive, and can generate significant negative publicity. Breaches of HIPAA may also constitute contractual violations that could lead to contractual damages or terminations. In addition, U.S. states have enacted and are considering enacting laws relating to the protection of patient health and other data, which may be more rigorous than, or impose additional requirements beyond those required by, HIPAA. For example, the California Consumer Privacy Act (“CCPA”), which became effective on January 1, 2020, gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used by requiring covered companies to provide new disclosures to California consumers (as that term is broadly defined) and provide such consumers new ways to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations as well as a limited private right of action for data breaches, which may increase the volume of data breach litigation. While limited CCPA exemptions may apply to portions of our business, the recency of the CCPA’s implementing regulations and the California Attorney General’s enforcement activity means our obligations under the CCPA could evolve in the future, which may increase our compliance costs and potential liability.
Further, a California ballot initiative, the California Privacy Rights Act, or CPRA, was passed by California voters on November 3, 2020. The CPRA, which became effective on January 1, 2023, creates additional obligations with respect to processing and storing personal information. Additionally, some observers have noted that the CCPA, as modified by the CPRA could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business. Already, in the United States, we have witnessed significant developments at the state level. For example, Virginia, Utah, Colorado, and Connecticut have all enacted comprehensive consumer privacy laws. While these state laws incorporate many similar concepts of the CCPA and CPRA, there are also several key differences in the scope, application, and enforcement of the law that will change the operational practices of regulated businesses. The new laws will, among other things, impact how regulated businesses collect and process personal sensitive data, conduct data protection assessments, transfer personal data to affiliates, and respond to consumer rights requests.
A number of other states have proposed new privacy laws, some of which are similar to the above discussed recently passed laws. Such proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies. The existence of comprehensive privacy laws in different states in the country would make our
41


compliance obligations more complex and costly and may increase the likelihood that we may be subject to enforcement actions or otherwise incur liability for noncompliance.
We may also become subject to laws and regulations in non-U.S. countries covering data privacy and the protection of health-related and other personal information. In particular, the European Economic Area (“EEA”) has adopted data protection laws and regulations that impose significant compliance obligations. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure, processing and security of personal information that identifies or may be used to identify an individual, such as names, contact information, and sensitive personal data such as health data. These laws and regulations are subject to frequent revisions and differing interpretations, and have generally become more stringent over time.
The collection, use, storage, disclosure, transfer, or other processing of personal data regarding individuals in the EEA including personal health data, is subject to the EU General Data Protection Regulation (“EU GDPR”) and similarly, processing of personal data regarding individuals in the UK is subject to the UK General Data Protection Regulation and the UK Data Protection Act 2018 (“UK GDPR” and together with the EU GDPR “GDPR”). The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors. The GDPR also imposes strict rules on the transfer of personal data to countries outside the EEA/UK, including the United States, and permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million (£17.5 million under UK GDPR) or 4% of annual global revenues, whichever is greater. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. In addition, the GDPR includes restrictions on cross-border data transfers of personal data to countries outside the EEA/UK that are not considered by the European Commission and UK government as providing “adequate” protection to personal data (“third countries”), including the United States. The GDPR may increase our responsibility and liability in relation to personal data that we process where such processing is subject to the GDPR, and we may be required to put in place additional mechanisms to ensure compliance with the GDPR, including as implemented by individual countries. Compliance with the GDPR is rigorous and time-intensive process that may increase our cost of doing business or require us to change our business practices, and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation, and reputational harm in connection with our European activities.

    To enable the transfer of personal data outside of the EEA or the UK, adequate safeguards (for example, the European Commission approved Standard Contractual Clauses (“SCCs”)) must be implemented in compliance with European and UK data protection laws. In addition, transfers made pursuant to the SCCs (and other similar appropriate transfer safeguards) need to be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular regarding applicable surveillance laws and relevant rights of individuals with respect to the transferred personal data, to ensure an “essentially equivalent” level of protection to that guaranteed in the EEA in the jurisdiction where the data importer is based (“Transfer Impact Assessment”). On June 4, 2021, the EC issued new forms of standard contractual clauses for data transfers from controllers or processors in the EU/EEA (or otherwise subject to the GDPR) to controllers or processors established outside the EU/EEA. The new standard contractual clauses replace the standard contractual clauses that were adopted previously under the EU Data Protection Directive. The UK is not subject to the EC’s new standard contractual clauses but has published its own transfer mechanism, the International Data Transfer Agreement and International Data Transfer Addendum (“IDTA”), which enable transfers from the UK, and has also implemented a similar Transfer Impact Assessment requirement. We will be required to implement these new safeguards and carry out Transfer Impact Assessments when conducting restricted data transfers under the GDPR and doing so will require significant effort and cost, and may result in us needing to make strategic considerations around where EEA or UK personal data is stored and transferred, and which service providers we can utilize for the processing of EEA/UK personal data. On July 10, 2023, the European Commission adopted an adequacy decision for the new EU-US Data Privacy Framework (“DPF”), the new transatlantic framework designed to support transfers of personal data from the EU to companies in the US that self-certify compliance with the DPF’s privacy requirements, without having to implement
42


additional safeguards. The DPF replaces the Privacy Shield, which was invalidated by the European Court of Justice in July 2020. As with the previous two transatlantic frameworks, it remains to be seen whether the DPF will withstand review by the European courts.
Although the UK is regarded as a third country under the EU GDPR, the European Commission has issued a decision recognizing the UK as providing adequate protection under the EU GDPR (“Adequacy Decision”) and, therefore, transfers of personal data originating in the EEA to the UK remain unrestricted. The UK government has confirmed that personal data transfers from the UK to the EEA remain free flowing. The UK Government has also now introduced a Data Protection and Digital Information Bill (“UK Bill”) into the UK legislative process. The aim of the UK Bill is to reform the UK’s data protection regime following Brexit. If passed, the final version of the UK Bill may have the effect of further altering the similarities between the UK and EEA data protection regime and threaten the UK Adequacy Decision from the EU Commission. This may lead to additional compliance costs and could increase our overall risk. The respective provisions and enforcement of the EU GDPR and UK GDPR may further diverge in the future and create additional regulatory challenges and uncertainties.
The interpretation and application of consumer, health-related and data protection laws in the United States, the EEA, and elsewhere are often uncertain, contradictory and in flux. Any failure or perceived failure to comply with federal, state or foreign laws or regulations, contractual or other legal obligations related to data privacy or data protection may result in claims, warnings, communications, requests or investigations from individuals, supervisory authorities or other legal or regulatory authorities in relation to our processing of personal data. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices. If so, this could result in government-imposed fines or orders requiring that we change our practices, which could adversely affect our business. In addition, these privacy regulations vary between states, may differ from country to country, and may vary based on whether testing is performed in the United States or in the local country. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business.
Furthermore, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on other third parties for the manufacture of our product candidates and to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business.
We may be unable to adequately protect our information systems from cyberattacks, which could result in the disclosure of confidential or proprietary information, including personal data, damage our reputation, and subject us to significant financial and legal exposure.
We rely on information technology systems that we or our third-party providers operate to process, transmit and store electronic information in our day-to-day operations. In connection with our product discovery efforts, we may collect and use a variety of personal data, such as names, mailing addresses, email addresses, phone numbers and clinical trial information. A successful cyberattack could result in the theft or destruction of intellectual property, data, or other misappropriation of assets, or otherwise compromise our confidential or proprietary information and disrupt our operations. Cyberattacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. We may not be able to anticipate all types of security threats, and we may not be able to implement preventive measures effective against all such security threats. The techniques used by cyber criminals change frequently, may not be recognized until launched, and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments or agencies. Cyberattacks could include industrial espionage, wire fraud and other forms of cyber fraud, the deployment of harmful malware, including ransomware, denial-of-service, social engineering fraud or other means to threaten data security, confidentiality, integrity and availability. A successful cyberattack could cause serious negative consequences for us, including, without limitation, the disruption of operations, the misappropriation of confidential business information, including financial information, trade secrets, financial loss and the disclosure of corporate strategic plans. Although we devote resources to protect our information systems, we realize that cyberattacks are a threat, and there can be no assurance
43


that our efforts will prevent information security breaches that would result in business, legal, financial, or reputational harm to us, or would have a material adverse effect on our results of operations and financial condition. If we were to experience an attempted or successful cybersecurity attack of our information systems or data, the costs associated with the investigation, remediation and potential notification of the attack to counterparties, data subjects, regulators or others, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants, could be material. Failure to report any such material cybersecurity incidents in a timely manner to the Securities Exchange Commission, on Form 8-K, may result in adverse impacts to our reputation. In addition, following any such attack, our remediation efforts may not be successful. Any failure to prevent or mitigate security breaches or improper access to, use of, or disclosure of our clinical data or patients’ personal data could result in significant liability under state, federal and international law and may cause a material adverse impact to our reputation, affect our ability to conduct new studies, and potentially disrupt our business.
The loss of any member of our senior management team or our ability to attract and retain talent across the Company, including senior management, could adversely affect our business.
We are highly dependent upon our senior management and other members of our management team as well as our senior scientists, software engineers and salespeople. Our success depends on the skills, experience and performance of key members of our senior management team, scientists, software engineers, salespeople and our other employees. The individual and collective efforts of our employees will be important as we continue to develop our discovery and development engine, and as we expand our commercial activities. The loss or incapacity of existing members of our executive management team could adversely affect our operations if we experience difficulties in hiring qualified successors. While certain of our executive officers are party to employment contracts with us, we cannot guarantee their retention for any period of time beyond the applicable notice period.

Our research and development programs and laboratory operations depend on our ability to attract and retain highly skilled scientists and engineers. We may not be able to attract or retain qualified scientists and engineers in the future due to the competition for qualified personnel among life science businesses. We also face competition from universities and public and private research institutions in recruiting and retaining highly qualified scientific and engineering personnel. We may have difficulties locating, recruiting or retaining qualified salespeople and other employees. Recruiting and retention difficulties can limit our ability to support our research and development and sales programs. A key risk in this area, for example, is that certain of our employees are at-will, which means that either we or the employee may terminate their employment at any time.

Our restructuring and reorganization activities may be disruptive to our operations or ineffective.

Recently, in November 2023, we underwent restructuring to better align our efforts towards the clinical development of new antibody medicines for patients. Headcount was reduced by approximately 10% and the restructuring plans may yield unintended consequences, such as attrition beyond our intended reduction in workforce and reduced employee morale, which may cause our employees who were not affected by the reduction in workforce to seek alternate employment. We cannot be certain that any of our restructuring efforts will be successful, or that we will be able to realize other anticipated benefits, savings and improvements from our current restructuring plan. We may also discover that these restructuring measures will make it difficult for us to pursue new opportunities and initiatives and may require us to hire qualified replacement personnel, which may require us to incur additional and unanticipated costs and expenses. We may also take similar steps in the future as we seek to realize operating synergies, optimize our operations to achieve our target operating model and profitability objectives, respond to market forces or better reflect changes in the strategic direction of our business. Our failure to successfully accomplish any of the above activities and goals may have a material adverse impact on our business, financial condition and results of operations.
44


We have made technology acquisitions and expect to acquire businesses or assets or make investments in other companies or technologies that could negatively affect our operating results, dilute our shareholders’ ownership, increase our debt or cause us to incur significant expense.
We have made technology acquisitions and expect to pursue acquisitions of businesses and assets in the future. We also may pursue strategic alliances and joint ventures that leverage our technologies and industry experience to expand our offerings or distribution. Although we have acquired other businesses or assets in the past, we may not be able to find suitable partners or acquisition or asset purchase candidates in the future, and we may not be able to complete such transactions on favorable terms, if at all. The competition for partners or acquisition candidates may be intense, and the negotiation process will be time-consuming and complex. If we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business, these acquisitions may not strengthen our competitive position, the transactions may be viewed negatively by partners or investors, we may be unable to retain key employees of any acquired business, relationships with key suppliers, manufacturers or partners of any acquired business may be impaired due to changes in management and ownership, and we could assume unknown or contingent liabilities. Any future acquisitions also could result in the incurrence of debt, contingent liabilities or future write-offs of intangible assets or goodwill, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects. We cannot guarantee that we will be able to fully recover the costs of any acquisition. Integration of an acquired company also may disrupt ongoing operations and require management resources that we would otherwise focus on developing our existing business. We may not realize the anticipated benefits of any acquisition, technology license, strategic alliance or joint venture. We also may experience losses related to investments in other companies, which could have a material adverse effect on our business, financial condition, results of operations and prospects. Acquisitions may also expose us to a variety of international and business related risks, including intellectual property, regulatory laws, local laws, tax and accounting.
To finance any acquisitions or asset purchase, we may choose to issue securities as consideration, which would dilute the ownership of our shareholders. Additional funds may not be available on terms that are favorable to us, or at all. If the price of our common shares is low or volatile, we may not be able to acquire companies or assets using our securities as consideration.

Our business is subject to government regulation and the regulatory approval and maintenance process may be expensive, time-consuming and uncertain both in timing and in outcome, and certain agreements to which we are a party contain covenants and other obligations that constrain our business activities.
Our data packages are currently not subject to approval by the FDA. However, our business could in the future become subject to regulation by the FDA, or comparable international agencies.

For example, in May 2020, we announced that we received a commitment from the Government of Canada under Innovation, Science and Economic Development’s, or ISED, Strategic Innovation Fund, or SIF, of up to CAD $175.6 million ($125.6 million), the proceeds of which are being used to build a GMP facility in Vancouver, British Columbia, which will house our manufacturing and manufacturing support infrastructure. This facility, once completed, will become subject to various regulations, which could include regular inspections, certifications and audits. Further, in May 2023, we entered into multi-year contribution agreements where up to CAD $225.0 million ($166.7 million) and CAD $75.0 million ($55.6 million) 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. Such regulatory approval processes or clearances may be expensive, time-consuming and uncertain, and our failure to obtain or comply with such approvals and clearances could have an adverse effect on our business, financial condition and operating results. In addition, changes to the current regulatory framework, including the imposition of additional or new regulations, including regulation of our data packages, could arise at any time, which may negatively affect our ability to obtain or maintain FDA or comparable regulatory approval of our data packages or future products, if required.

Our agreements with the Government of Canada and Government of British Columbia includes certain financial and non-financial covenants and other obligations in relation to the project, including restrictions on dividend payments that would prevent the Company from satisfying the obligations under the agreements, the maintenance of certain gross
45


capital expenditures in Canada, certain research and development expenditures in Canada, and the achievement of certain headcount requirements in Canada. In addition, the Company has agreed to notice and consent rights to the counterparties upon certain events related to a change in control of the Company. Breach of the covenants and obligations under the respective agreements with the Government of Canada and British Columbia, subject to applicable cure, may result in suspending, or terminating funding under the respective agreements, demanding repayment of funding previously received and/or terminating the respective agreements, reputational damages that could impact future government relationships, and have adverse consequences on our business. We may not have enough available cash or be able to obtain financing at the time we are required to repay any such amounts.
Our billing and collections processing activities are time-consuming, and any delay in transmitting invoices or failure to comply with applicable billing requirements, could have an adverse effect on our future revenue.
Billing for our data packages can be time-consuming, as many of our partners are large pharmaceutical or biotechnology companies and engage various models for their accounts payable matters, including outsourcing to third parties. We may face increased risk in our collection efforts, including long collection cycles and the risk that we may never collect at all, which could require to write-off significant accounts receivable and recognize bad debt expenses, which could adversely affect our business, financial condition, results of operations and prospects.
If our operating facilities become damaged or inoperable or we are required to vacate a facility, our ability to conduct and pursue our research and development efforts may be jeopardized.
We currently derive the majority of our revenue based upon scientific and engineering research and development and testing conducted in Vancouver, British Columbia. Our facilities and equipment could be harmed or rendered inoperable or inaccessible by natural or man-made disasters or other circumstances beyond our control, including fire, earthquake, power loss, communications failure, war or terrorism, or another catastrophic event, such as a pandemic or similar outbreak or public health crisis, which may render it difficult or impossible for us to support our partners and develop updates, upgrades and other improvements to our discovery and development engine, advanced automation systems, and advanced application and workflow software for some period of time. The inability to address system issues could develop if our facilities are inoperable or suffers a loss of utilization for even a short period of time, may result in the loss of partners or harm to our reputation, and we may be unable to regain those partners or repair our reputation in the future. Furthermore, our facilities and the equipment we use to perform our research and development work could be unavailable or costly and time-consuming to repair or replace. It would be difficult, time-consuming and expensive to rebuild our facilities, to locate and qualify new facilities or license or transfer our proprietary technology to a third-party. Even in the event we are able to find a third-party to assist in research and development efforts, we may be unable to negotiate commercially reasonable terms to engage with the third-party.
We carry insurance for damage to our property and the disruption of our business, but this insurance may not cover all of the risks associated with damage or disruption to our business, may not provide coverage in amounts sufficient to cover our potential losses and may not continue to be available to us on acceptable terms, if at all.
Our insurance policies are expensive and protect us only from some business risks, which leaves us exposed to significant uninsured liabilities.
We do not carry insurance for all categories of risk that our business may encounter and our policies have limits and significant deductibles. Some of the policies we currently maintain include general liability, property, umbrella and directors’ and officers’ insurance.
Any additional insurance coverage we acquire in the future, may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and in the future we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses. A successful liability claim, or series of claims, in which judgments exceed our insurance coverage could adversely affect our
46


business, financial condition, results of operations and prospects, including preventing or limiting the use of our discovery and development engine to discover antibodies.
Operating as a public company makes it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage, seek alternative insurance options or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our business, financial condition, results of operations and prospects.
Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.
In the ordinary course of our business, we generate and store sensitive data, including research data, intellectual property and proprietary business information owned or controlled by ourselves or our employees, partners and other parties. We manage and maintain our applications and data utilizing a combination of on-site systems and cloud-based data centers. We utilize external security and infrastructure vendors to manage parts of our data centers. These applications and data encompass a wide variety of business-critical information, including research and development information, commercial information and business and financial information. We face a number of risks relative to protecting this critical information, including loss of access risk, inappropriate use or disclosure, accidental exposure, unauthorized access, inappropriate modification and the risk of our being unable to adequately monitor and audit and modify our controls over our critical information. This risk extends to the third-party vendors and subcontractors we use to manage this sensitive data or otherwise process it on our behalf. Further, to the extent our employees are working remotely, additional risks may arise as a result of depending on the networking and security put into place by the employees. The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such information. Although we take reasonable measures to protect sensitive data from unauthorized access, use or disclosure, no security measures can be perfect and our information technology and infrastructure may be vulnerable to attacks by hackers or infections by viruses or other malware or breached due to employee erroneous actions or inactions by our employees or contractors, malfeasance or other malicious or inadvertent disruptions. Any such breach or interruption could compromise our networks and the information stored there could be accessed by unauthorized parties, publicly disclosed, lost or stolen. Any such access, breach, or other loss of information could result in legal claims or proceedings. Unauthorized access, loss or dissemination could also disrupt our operations and damage our reputation, any of which could adversely affect our business.
Growth of our international business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of Canada and the United States.
We currently have entities in Canada, the United States, Australia, and the United Kingdom. Doing business internationally involves a number of risks including:
multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, tariffs, economic sanctions and embargoes, employment laws, regulatory requirements and other governmental approvals, permits and licenses;
failure by us or our distributors to obtain approvals to conduct our business in various countries;
differing intellectual property rights;
complexities and difficulties in obtaining intellectual property protection, enforcing our intellectual property and defending against third-party intellectual property claims;
difficulties in staffing and managing foreign operations;
47


logistics and regulations associated with shipping systems and parts and components for systems, consumables and reagent kits, as well as transportation delays;
travel restrictions that limit the ability of marketing, presales, sales, services and support teams to service partners;
financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our data packages, and exposure to foreign currency exchange rate fluctuations;
international trade disputes that could result in tariffs and other protective measures;
natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and
regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may fall within the purview of the Canadian Corruption of Foreign Public Officials Act, or CFPOA, or U.S. Foreign Corrupt Practices Act, or FCPA, its books and records provisions, or its anti-bribery provisions.
Any of these factors could significantly harm our future international expansion and operations and, consequently, our business, financial condition, results of operations and prospects. In addition, certain international markets are subject to significant political and economic uncertainty, including for example the effect of the withdrawal of the United Kingdom from the European Union. Significant political and economic developments in international markets for which we intend to operate, or the perception that any of them could occur, creates further challenges for operating in these markets in addition to creating instability in global economic conditions.
Our business is subject to risks relating to foreign currency exchange rates.
We currently have entities in Canada, the United States, Australia, and the United Kingdom. Substantially all of our revenue is paid in US dollars. We expect that our US dollar earned revenue will continue to account for a significant percentage of our total revenue for the foreseeable future.
Changes in foreign currency exchange rates, could materially adversely impact our results. Foreign currencies in which we record expenses could be subject to unfavorable exchange rates with the U.S. dollar, resulting in a reduction in the amount of cash flow (and an increase in the amount of expenses) that we recognize and causing fluctuations in reported financial results. We also carry foreign currency exposure associated with differences between where we conduct business, including receipt of government funding denominated in foreign currencies. For example, certain contracts are denominated in currencies other than the currency in which we incur expenses related to those contracts. Where expenses are incurred in currencies other than those in which contracts are priced, fluctuations in the relative value of those currencies could have a material adverse effect on our results of operations.
Our exposure to currency exchange rate fluctuations results from the currency translation exposure associated with the preparation of our consolidated financial statements, as well as from the exposure associated with transactions of our subsidiaries that are denominated in a currency other than the respective subsidiary’s functional currency. While our financial results are reported in U.S. Dollars, the financial statements of certain of our equity method investments are prepared using the local currency as the functional currency. During consolidation, these results are translated into U.S. Dollars by applying appropriate exchange rates. As a result, fluctuations in the exchange rate of the U.S. Dollar relative to the local currencies in which our equity method investments report could cause significant fluctuations in our reported results. Moreover, as exchange rates vary, our operating results may differ materially from our expectations. Adjustments resulting from financial statement translations are included as a separate component of shareholders’ equity.
48


Our business activities are subject to the FCPA and other anti-bribery and anti-corruption laws of the United States and other countries in which we operate, as well as U.S. and certain foreign export controls and trade sanctions. Violations of such legal requirements could subject us to liability.
We are subject to the FCPA, which among other things prohibits companies and their third-party intermediaries from offering, promising, giving or authorizing others to give anything of value, either directly or indirectly, to non-U.S. government officials for the purpose of obtaining or retaining business or securing any other improper advantage. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Companies in the biotechnology and biopharmaceutical field are highly regulated and therefore involve interactions with public officials, including officials of non-U.S. governments. Additionally, in many other countries, hospitals are owned and operated by the government, and doctors and other hospital employees would be considered foreign officials under the FCPA. We are also subject to the Canadian equivalent to the FCPA, the CFPOA. These laws are complex and far-reaching in nature, and, as a result, there is no certainty that all of our employees, agents or contractors will comply with such laws and regulations. Any violations of these laws, or allegations of such violations, could disrupt our operations, involve significant management distraction, involve significant costs and expenses, including legal fees, and could result in a material adverse effect on our business, financial condition, results of operations and prospects. We could also suffer severe penalties, including criminal and civil penalties, disgorgement and other remedial measures.
In addition, our data packages may be subject to U.S. and foreign export controls and trade sanctions. Compliance with applicable regulatory requirements regarding the export of our data packages may create delays in us providing our data packages in international markets or, in some cases, prevent the export thereof to some countries altogether. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products and services to countries, governments, and persons targeted by U.S. sanctions. If we fail to comply with export regulations and such economic sanctions, penalties could be imposed, including fines and/or denial of certain export privileges. Moreover, any new export restrictions, new legislation or shifting approaches in the enforcement or scope of existing regulations, or in the countries, persons, or products targeted by such regulations, could result in decreased use of our data packages by, or in our decreased ability to export our data packages to, existing or potential customers with international operations. Any decreased use of our data packages or limitation on our ability to export or sell our data packages would likely adversely affect our business.
We rely on a limited number of suppliers for laboratory equipment and materials and may not be able to find replacements or immediately transition to alternative suppliers.
We rely on a limited number of suppliers to provide certain consumables and equipment that we use in our operations, as well as reagents and other laboratory materials involved in the development of our technology. Fluctuations in the availability and price of materials and equipment could have an adverse effect on our ability to meet our development goals with our partners and thus our results from operations as well as future partnership opportunities. An interruption in the availability of raw materials or our laboratory operations could occur if we encounter delays, quality issues or other difficulties in securing these consumables, equipment, reagents or other materials, and if we cannot then obtain an acceptable substitute. In addition, while we believe suitable additional or alternative suppliers are available to accommodate our operations, if needed, any transition to new or additional suppliers may cause delays in our processing of samples or development and commercialization of our technology. Any such interruption could significantly affect our business, financial condition, results of operations and reputation.
We must continue to secure and maintain sufficient and stable supplies of raw materials. Any shortage of raw materials or materials necessary for our operations may adversely affect our business.
Unexpected shortages in raw materials or other materials and other unanticipated events could adversely affect our business, prospects, financial condition and results of operation.
49


In addition, as we grow, our existing suppliers may not be able to meet our increasing demand, and we may need to find additional suppliers. There is no assurance that we will always be able to secure suppliers who provide raw materials at the specification, quantity and quality levels that we demand (or at all) or be able to negotiate acceptable fees and terms of services with any such suppliers. Identifying a suitable supplier is an involved process that requires us to become satisfied with their quality control, responsiveness and service, financial stability and labor and other ethical practices. Even if we are able to expand existing sources, we may encounter delays and added costs as a result of the time it takes to train suppliers in our methods and quality control standards.
We historically have not entered into agreements with our suppliers but secure our raw materials and component parts we use in our equipment on a purchase order basis. Our suppliers may reduce or cease their supply of raw materials, component parts and outsourced services and products to us at any time in the future. If the supply of raw materials, component parts and the outsourced services and products is interrupted due to shortages or other reasons, our operations may be delayed. If any such event occurs, our operation and financial position may be adversely affected.
We use biological and hazardous materials that require considerable expertise and expense for handling, storage and disposal and may result in claims against us.
We work with materials, including chemicals, biological agents and compounds that could be hazardous to human health and safety or the environment. Our operations also produce hazardous and biological waste products. Federal, provincial, state and local laws and regulations govern the use, generation, manufacture, storage, handling and disposal of these materials and wastes. We are subject to periodic inspections by Canadian provincial and federal authorities to ensure compliance with applicable laws. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental laws and regulations may restrict our operations. If we do not comply with applicable regulations, we may be subject to fines and penalties.
In addition, we cannot eliminate the risk of accidental injury or contamination from these materials or wastes, which could cause an interruption of our commercialization efforts, research and development programs and business operations, as well as environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations. In the event of contamination or injury, we could be liable for damages or penalized with fines in an amount exceeding our resources and our operations could be suspended or otherwise adversely affected. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance.
Our discovery and development engine, and internal programs, utilize various species of animals that could contract disease or die and could otherwise subject us to controversy and adverse publicity, which may interrupt our business operations or harm our reputation.
Our discovery and development engine utilizes animals to discover and produce antibodies. We cannot completely eliminate the risks of animals contracting disease, or a natural or man-made disaster that could cause death to valuable production animals, or those of the CRO that maintain our mouse colonies. We cannot make any assurance that we or our CROs will be able to contain or reverse any such instance of disease. Although we maintain backup colonies of our animals, disease or death on a broad scale could materially interrupt business operations as animals are a key part of our antibody discovery and development programs, which could have a material adverse effect on our results of operations and financial condition.
Further, genetic engineering and testing of animals has been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals in the United States, the EU and other jurisdictions have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting these activities through protests and other means. To the extent the activities of these groups are successful, our research and development activities and the ability for us and our partners to use our discovery and development engine could be interrupted or delayed, our costs could increase and our reputation could be harmed.
50


Once completed, our manufacturing operations will be dependent upon third-party suppliers, including single source suppliers, making us vulnerable to supply shortages and price fluctuations, which could harm our business.
We are building a GMP facility in Vancouver, British Columbia, to house our manufacturing and manufacturing support infrastructure. We anticipate that some of the suppliers of critical components or materials for our processes may be single or sole source suppliers and the replacement of these suppliers or the identification and qua