10-Q 1 abcl-10q_20220930.htm 10-Q abcl-10q_20220930.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 001-39781

 

AbCellera Biologics Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

British Columbia

Not Applicable

( State or other jurisdiction of

incorporation or organization)

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

2215 Yukon Street

Vancouver, BC

V5Y 0A1

(Address of principal executive offices)

(Zip Code)

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

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common shares, no par value per share

 

ABCL

 

The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  

 

As of November 3, 2022, the registrant had 286,100,427 common shares, no par value per share, outstanding.

 

 

 


 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

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

2

 

Condensed Consolidated Statements of Stockholders’ Equity

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

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

12

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

62

Item 5.

Other Information

63

Item 6.

Exhibits

64

 

Signatures

65

 

 

i


 

 

Summary of the Material and Other Risks Associated with Our Business

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

We have invested, and expect to continue to invest, in research and development efforts that further enhance our antibody discovery 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.

 

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

 

Our business has been and may continue to be adversely affected by the ongoing COVID-19 pandemic.

 

The ongoing military action between Russia and Ukraine and related sanctions could adversely affect our business, financial condition, and patent administration.

 

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

 

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.

 

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.

 

ii


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

AbCellera Biologics Inc.

Condensed Consolidated Balance Sheets

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

(Unaudited)

 

 

 

December 31, 2021

 

 

September 30, 2022

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

476,142

 

 

$

371,973

 

Marketable securities

 

 

246,835

 

 

 

496,233

 

Total cash, cash equivalents, and marketable securities

 

 

722,977

 

 

 

868,206

 

Accounts and accrued receivable

 

 

160,576

 

 

 

105,964

 

Restricted cash

 

 

25,000

 

 

 

25,000

 

Other current assets

 

 

21,247

 

 

 

46,499

 

Total current assets

 

 

929,800

 

 

 

1,045,669

 

Long-term assets:

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

111,616

 

 

 

200,602

 

Intangible assets, net

 

 

148,392

 

 

 

142,548

 

Goodwill

 

 

47,806

 

 

 

47,806

 

Investments in and loans to equity accounted investees

 

 

50,313

 

 

 

66,718

 

Other long-term assets

 

 

30,642

 

 

 

49,066

 

Total long-term assets

 

 

388,769

 

 

 

506,740

 

Total assets

 

$

1,318,569

 

 

$

1,552,409

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and other liabilities

 

$

32,017

 

 

$

25,866

 

Current portion of contingent consideration payable

 

 

22,934

 

 

 

32,531

 

Income taxes payable

 

 

35,683

 

 

 

23,018

 

Accrued royalties payable

 

 

22,506

 

 

 

17,822

 

Deferred revenue

 

 

7,536

 

 

 

6,815

 

Total current liabilities

 

 

120,676

 

 

 

106,052

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Operating lease liability

 

 

36,413

 

 

 

71,591

 

Deferred revenue and grant funding

 

 

60,758

 

 

 

62,202

 

Contingent consideration payable

 

 

35,886

 

 

 

25,392

 

Deferred tax liability

 

 

37,370

 

 

 

34,143

 

Other long-term liabilities

 

 

1,733

 

 

 

2,857

 

Total long-term liabilities

 

 

172,160

 

 

 

196,185

 

Total liabilities

 

 

292,836

 

 

 

302,237

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common shares: no par value, unlimited authorized shares at December 31, 2021 and September 30, 2022: 283,257,104 and 285,761,492 shares issued and outstanding at December 31, 2021 and September 30, 2022, respectively

 

 

722,430

 

 

 

730,427

 

Additional paid-in capital

 

 

35,357

 

 

 

64,384

 

Accumulated other comprehensive income (loss)

 

 

280

 

 

 

(717

)

Accumulated earnings

 

 

267,666

 

 

 

456,078

 

Total shareholders' equity

 

 

1,025,733

 

 

 

1,250,172

 

Total liabilities and shareholders' equity

 

$

1,318,569

 

 

$

1,552,409

 

 

 

 

 

 

 

 

 

 

 

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

1


 

AbCellera Biologics Inc.

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

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

(Unaudited)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2021

 

 

2022

 

 

2021

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research fees

 

$

5,128

 

 

$

7,508

 

 

$

14,330

 

 

$

29,378

 

Licensing revenue

 

 

190

 

 

 

154

 

 

 

20,692

 

 

 

531

 

Milestone payments

 

 

-

 

 

 

400

 

 

 

8,000

 

 

 

400

 

Royalty revenue

 

 

190

 

 

 

93,321

 

 

 

192,850

 

 

 

433,570

 

Total revenue

 

 

5,508

 

 

 

101,383

 

 

 

235,872

 

 

 

463,879

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalty fees

 

 

-

 

 

 

15,035

 

 

 

23,622

 

 

 

64,882

 

Research and development(1)

 

 

17,450

 

 

 

26,582

 

 

 

44,853

 

 

 

79,634

 

Sales and marketing(1)

 

 

1,217

 

 

 

3,089

 

 

 

5,086

 

 

 

8,579

 

General and administrative(1)

 

 

11,271

 

 

 

13,792

 

 

 

28,958

 

 

 

42,470

 

Depreciation and amortization

 

 

3,666

 

 

 

5,150

 

 

 

10,493

 

 

 

14,025

 

Total operating expenses

 

 

33,604

 

 

 

63,648

 

 

 

113,012

 

 

 

209,590

 

Income (loss) from operations

 

 

(28,096

)

 

 

37,735

 

 

 

122,860

 

 

 

254,289

 

Other (income) expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (income) expense

 

 

1,256

 

 

 

(6,702

)

 

 

595

 

 

 

(7,343

)

Grants and incentives

 

 

(4,380

)

 

 

(2,150

)

 

 

(12,174

)

 

 

(8,879

)

Total other (income)

 

 

(3,124

)

 

 

(8,852

)

 

 

(11,579

)

 

 

(16,222

)

Net earnings (loss) before income tax

 

 

(24,972

)

 

 

46,587

 

 

 

134,439

 

 

 

270,511

 

Income tax (recovery) expense

 

 

(3,592

)

 

 

19,963

 

 

 

40,923

 

 

 

82,099

 

Net earnings (loss)

 

$

(21,380

)

 

$

26,624

 

 

$

93,516

 

 

$

188,412

 

Foreign currency translation adjustment

 

 

(1,508

)

 

 

(1,293

)

 

 

644

 

 

 

(997

)

Comprehensive income (loss)

 

$

(22,888

)

 

$

25,331

 

 

$

94,160

 

 

$

187,415

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss) per share attributable to common shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.08

)

 

$

0.09

 

 

$

0.34

 

 

$

0.66

 

Diluted

 

$

(0.08

)

 

$

0.08

 

 

$

0.29

 

 

$

0.60

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

278,933,760

 

 

 

285,322,719

 

 

 

273,642,542

 

 

 

284,639,599

 

Diluted

 

 

278,933,760

 

 

 

315,818,163

 

 

 

323,323,053

 

 

 

314,183,994

 

 

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 Shares

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income (loss)

 

 

Equity

 

Balances as of December 31, 2021

 

 

283,257,104

 

 

$

722,430

 

 

$

35,357

 

 

$

267,666

 

 

$

280

 

 

$

1,025,733

 

Shares issued and restricted stock units ("RSUs") vested under stock option plan

 

 

1,264,077

 

 

 

3,325

 

 

 

(2,922

)

 

 

-

 

 

 

-

 

 

 

403

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

12,291

 

 

 

-

 

 

 

-

 

 

 

12,291

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

507

 

 

 

507

 

Net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

168,573

 

 

 

-

 

 

 

168,573

 

Balances as of March 31, 2022

 

 

284,521,181

 

 

$

725,755

 

 

$

44,726

 

 

$

436,239

 

 

$

787

 

 

$

1,207,507

 

Shares issued and restricted stock units ("RSUs") vested under stock option plan

 

 

531,121

 

 

 

1,070

 

 

 

(838

)

 

 

-

 

 

 

-

 

 

 

232

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

12,113

 

 

 

-

 

 

 

-

 

 

 

12,113

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(211

)

 

 

(211

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,785

)

 

 

-

 

 

 

(6,785

)

Balances as of June 30, 2022

 

 

285,052,302

 

 

$

726,825

 

 

$

56,001

 

 

$

429,454

 

 

$

576

 

 

$

1,212,856

 

Shares issued and restricted stock units ("RSUs") vested under stock option plan

 

 

709,190

 

 

 

3,602

 

 

 

(3,371

)

 

 

-

 

 

 

-

 

 

 

231

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

11,754

 

 

 

-

 

 

 

-

 

 

 

11,754

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,293

)

 

 

(1,293

)

Net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

26,624

 

 

 

-

 

 

 

26,624

 

Balances as of September 30, 2022

 

 

285,761,492

 

 

$

730,427

 

 

$

64,384

 

 

$

456,078

 

 

$

(717

)

 

$

1,250,172

 

 

 

 

Common Shares

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income (loss)

 

 

Equity

 

Balances as of December 31, 2020

 

 

269,497,768

 

 

$

710,387

 

 

$

5,919

 

 

$

114,202

 

 

$

-

 

 

$

830,508

 

Shares issued under stock option plan

 

 

1,428,162

 

 

 

752

 

 

 

(579

)

 

 

-

 

 

 

-

 

 

 

173

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

4,021

 

 

 

-

 

 

 

-

 

 

 

4,021

 

Reclassification of liability classified options

 

 

-

 

 

 

-

 

 

 

5,201

 

 

 

-

 

 

 

-

 

 

 

5,201

 

Net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

117,221

 

 

 

-

 

 

 

117,221

 

Balances as of March 31, 2021

 

 

270,925,930

 

 

$

711,139

 

 

$

14,562

 

 

$

231,423

 

 

$

-

 

 

$

957,124

 

Shares issued under stock option plan

 

 

6,056,748

 

 

 

3,619

 

 

 

(1,840

)

 

 

-

 

 

 

-

 

 

 

1,779

 

Share-based compensation expense

 

 

-

 

 

 

-

 

 

 

8,473

 

 

 

-

 

 

 

-

 

 

 

8,473

 

Reclassification of liability classified options

 

 

-

 

 

 

-

 

 

 

474

 

 

 

-

 

 

 

-

 

 

 

474

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,152

 

 

 

2,152

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,323

)

 

 

-

 

 

 

(2,323

)

Balances as of June 30, 2021

 

 

276,982,678

 

 

$

714,758

 

 

$

21,669

 

 

$

229,100

 

 

$

2,152

 

 

$

967,679

 

Shares issued under stock option plan

 

 

4,169,199

 

 

 

3,330

 

 

 

(2,431

)

 

 

-

 

 

 

-

 

 

 

899

 

Share-based compensation expense

 

 

-

 

 

 

-

 

 

 

7,707

 

 

 

-

 

 

 

-

 

 

 

7,707

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,508

)

 

 

(1,508

)

Net Loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(21,380

)

 

 

-

 

 

 

(21,380

)

Balances as of September 30, 2021

 

 

281,151,877

 

 

$

718,088

 

 

$

26,945

 

 

$

207,720

 

 

$

644

 

 

$

953,397

 

 

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

3


 

AbCellera Biologics Inc.

Condensed Consolidated Statements of Cash Flows

(Expressed in thousands of U.S. dollars)

(Unaudited)

 

 

 

Nine months ended September 30,

 

 

 

2021

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

93,516

 

 

$

188,412

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Depreciation of property and equipment

 

 

3,060

 

 

 

6,212

 

Amortization of intangible assets

 

 

7,432

 

 

 

7,844

 

Amortization of operating lease right-of-use assets

 

 

1,895

 

 

 

3,686

 

Stock-based compensation

 

 

21,608

 

 

 

36,158

 

Other

 

 

(2,379