ABCELLERA BIOLOGICS INC. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of theU.S. Private Securities Litigation Reform Act of 1995 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 "Business," "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 drug-discovery platform;
• companies and technologies in our industry that we compete with;
• our ability to manage and grow our business by expanding our sales to existing partners or introducing our drug-discovery platform to new partners;
• our ability to provide our partners with a full solution from target to IND submission;
• our expectations regarding the completion of our GMP facility and our manufacturing capabilities;
• our ability to establish and maintain intellectual property protection for our technologies and workflows, including with respect to our intellectual
property litigation with Berkeley Lights, or avoid or defend against claims of infringement;
• our ability to attract, hire and retain key personnel and to manage our future growth effectively;
• our ability to obtain additional financing in future offerings; • the volatility of the trading price of our common shares;
• our ability to attract and retain key scientific and engineering personnel;
• our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act;
• business disruptions affecting our operations and the development of our platform due to the global COVID-19 pandemic;
• our ability to remediate our material weaknesses;
• our expectations regarding our PFIC status for our taxable year ended
• our expectations regarding the Trianni acquisition and our ability to realize the intended benefits of such transaction;
• our expectations regarding the use of proceeds from our initial public offering;
• our expectations about market trends; and • our ability to predict and manage 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 make. Moreover, we operate in a competitive and rapidly changing environment. 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 into. You should read this Quarterly Report and the documents that we file with theSecurities and Exchange Commission , or theSEC , with the understanding that our actual future results may be materially different from what we expect. The forward-looking 12 --------------------------------------------------------------------------------
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 of the market data used in this Quarterly Report involves a number of 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
Except as otherwise indicated, references in this Quarterly Report on Form 10-Q to "AbCellera," the "Company," "we," "us" and "our" refer toAbCellera Biologics Inc. and its consolidated subsidiaries.
Impact of COVID-19
At the onset of the pandemic inMarch 2020 , the Company took proactive measures to protect the health and safety of our employees, business partners, vendors, and contractors. The spread of more contagious strains, such as the Delta variant, could cause the COVID-19 pandemic to last longer than expected and could result in the reinstatement of restrictive orders that could disrupt our business. Some of the actions we continue to take include the following:
• We implemented a comprehensive COVID-19 policy and communication platform
and provided real-time updates company-wide relying on directives from
local health authorities. As the situation progressed, we adapted
accordingly, including adjusting all administrative staff to work from
home.
• We implemented protocols for employees necessary to carryout Company
functions in the office and laboratory facilities including physical
distancing, personal and protective equipment, signage, erecting barriers
between desks and lab benches, and implementing space restrictions for
different areas of the facilities.
• Consistent with national and local health authorities, we restricted
business travel and implemented procedures to control and monitor all
office and facility access.
• We have not been required to stop laboratory and research activities due
to the COVID-19 pandemic. We will continue to adapt and apply new measures
as required and as directed by local health authorities.
• In
office facilities pursuant to enhanced health and safety protocols
consistent with guidelines issued by local health authorities.
Overview
We believe that the surest path to a better future is through technological advancement and that the new frontier of technology lies at the interface of computation, engineering and biology. Our mission is to improve health with technologies that transform the way that antibody-based therapies are discovered. We aim to become the centralized operating system for next generation antibody discovery.
Our full-stack, artificial intelligence-, or AI-, powered drug discovery
platform searches and analyzes the database of natural immune systems to find
antibodies that can be developed as drugs. We believe our technology increases
the speed and the probability of success of therapeutic antibody discovery,
including enabling discovery against targets that may otherwise be intractable.
Rather than advancing our own clinical pipeline of drug candidates, we forge
partnerships with drug developers of all sizes, from large cap
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pharmaceutical to small biotechnology companies. We empower them to move
quickly, reduce cost and tackle the toughest problems in drug development. As of
June 30, 2021 , we had 138 discovery programs that are either completed, in
progress or under contract with 33 partners. As a recent example, in a
collaboration with Eli Lilly and Company, we applied our technology stack to
co-develop bamlanivimab and bebtelovimab, two therapeutic antibodies to treat
and prevent COVID-19. Bamlanivimab, which was discovered in March 2020 , was the
first antibody therapy for COVID-19 to reach the clinic and the first to receive
Emergency Use Authorization (EUA) by the U.S. FDA. Since receiving EUA in
November 2020 , bamlanivimab has been used alone and together with other
antibodies to treat over 500,000 high-risk patients with mild to moderate
COVID-19. It is estimated that bamlanivimab alone and together with other
antibodies has prevented tens of thousands of hospitalizations and saved more
than 11,000 lives. Our second COVID-19 antibody therapy from our partnership
with Eli Lilly, bebtelovimab, was developed to address the emergence of variants
in January 2021 . Preclinical data demonstrate that bebtelovimab is effective
against all known variants of concern and interest, and Eli Lilly has advanced
it into Phase 2 clinical testing. Eli 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 into clinical development on this timeframe again in the
future, or at all. We initiated our partnering program in 2015 and have only had
this one AbCellera discovery program and two Trianni programs result in
milestone or royalty payments to us to date, and we have not yet had a program
receive marketing approval.
We structure our agreements in a way that is designed to align our partners'
economic interests with our own. Our partners select a target and define the
antibody properties needed for therapeutic development. We provide discovery
solutions to partners that have a range of discovery capabilities, from the
highly enabled to the less enabled. We enable discovery against targets that
have traditionally been intractable, and we accelerate programs against less
difficult targets.
Our deals emphasize participation in the success and upside of future antibody
therapeutics. 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. 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 products derived from
antibodies that we discover for our partners. Our discovery partnerships
generally include royalty payments on net sales in the single digit to
low-double digit range. In some partnerships we may receive equity or
equity-like instruments that allow us to deepen participation in the economic
success of molecules we discover.
We generated revenue of $11.2 million and $15.9 million and $27.6 million and
$230.4 million for the three and six months ended June 30, 2020 and 2021,
respectively. As of June 30, 2021 , we had a total of 33 partners for whom we
were conducting drug discovery activities. We have also grown the number of
programs that we have under contract with our partners, as illustrated by the
following charts.
[[Image Removed]]
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We incurred sales and marketing expenses of$0.5 million and$1.0 million and$1.3 million and$3.9 million for the three and six months endedJune 30, 2020 and 2021, respectively. We are significantly increasing investment into our business development team and into marketing our solutions to new and existing partners. We focus a substantial portion of our resources on research and development efforts towards deepening our technology and expertise along our technology stack, and we expect to continue to make significant investments in this area for the foreseeable future. We incurred research and development expenses of$9.1 million and$13.3 million and$15.0 million and$27.4 million for the three and six months endedJune 30, 2020 and 2021, respectively. We incurred general and administrative expenses of$1.5 million and$3.1 million and$11.2 million and$17.7 million for the three and six months endedJune 30, 2020 and 2021, respectively. We expect to continue to incur significant expenses, and we expect such expenses to increase substantially in connection with our ongoing activities, including as we:
• Invest in research and development activities to improve our technology
stack and platform;
• Market and sell our solutions to existing and new partners;
• Expand and enhance operations to deliver programs, including investments
in manufacturing;
• Acquire businesses or technologies to support the growth of our business;
• Attract, hire and retain qualified personnel;
• Continue to establish, protect and defend our intellectual property and
patent portfolio, including our ongoing litigation; and
• Operate as a public company.
To date, we have financed our operations primarily from revenue from our drug
discovery partnerships in the form of royalties and research fees; from
government funding from grants, external borrowings, and from the issuance and
sale of convertible preferred shares and notes, and common shares.
Our net earnings for the three and six months ended June 30, 2020 , were $6.7
million and $4.6 million , respectively. Our net loss for the three months ended
June 30, 2021 was $2.3 million and our net earnings for the six months ended
June 30, 2021 were $114.9 million . As of June 30, 2021 , we had accumulated
earnings of $229.1 million and we had cash and cash equivalents totaling
$792.6 million .
Recent Developments
In March 2020 , we entered into a discovery partnership agreement with Eli Lilly
and Company, pursuant to which we will perform discovery research for a number
of targets for Eli Lilly that will result in antibodies for Eli Lilly to develop
and potentially commercialize. This partnership includes the licensing of
bamlanivimab, a monoclonal antibody designed to block viral attachment of the
COVID-19 virus and its entry into human cells as well as other candidate
antibodies against COVID-19 discovered by AbCellera. On June 1, 2020 , 90 days
after program initiation, bamlanivimab moved to first-in-human testing and
progressed to Phase 3 clinical trials by July 2020 .
In December 2020 , we completed AbCellera's IPO on the Nasdaq. The Company
completed the sale of 27,772,500 shares of its common shares in the IPO at a
price to the public of $20.00 per share. The Company raised gross proceeds of
$555.5 million , or aggregate net proceeds of $522.8 million , after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company. Immediately prior to the completion of our IPO, our convertible
preferred shares and notes were converted to common shares.
In February 2021 , it was announced that bamlanivimab (LY-CoV555) 700 mg, a human
antibody discovered by AbCellera and developed with Eli Lilly and Company,
administered with a second Eli Lilly antibody, etesevimab (LY-CoV016) 1400 mg,
has received Emergency Use Authorization (EUA) from the U.S. Food and Drug
Administration (FDA) for the treatment of mild to moderate COVID-19 in patients
aged 12 and older who are at high risk for progressing to severe COVID-19 and/or
hospitalization. New protocols enable front-line clinicians to administer
bamlanivimab alone, and bamlanivimab and etesevimab together, in as few as 16
minutes and 21 minutes, respectively.
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In February 2021 , we announced the appointment of Ester Falconer , Ph.D. as our
Chief Technology Officer. As CTO, Dr. Falconer will lead our long-term strategy
in the development, aggregation, and integration of technologies that improve
the speed and success of therapeutic antibody discovery from target to
investigational new drug application submission.
In March 2021 , we entered agreements to expand our collaboration with Gilead
Sciences, Inc. including a multi-year, multi-target antibody discovery
collaboration and access to our humanized mouse technology, the Trianni
Mouse®. Under the financial terms of the agreements, we will receive an upfront
payment and we are eligible for milestone payments and royalties based on the
development and commercialization of antibodies generated by the Company under
this collaboration.
On March 5, 2021 the European Medicines Agency's (EMA) Committee for Medicinal
Products for Human Use (CHMP) issued a positive scientific opinion for
bamlanivimab alone and bamlanivimab administered together with etesevimab. The
opinion advises bamlanivimab alone and bamlanivimab administered together with
etesevimab can be used for the treatment of confirmed COVID-19 in patients aged
12 years and older that do not require supplemental oxygen for COVID-19 and who
are at high risk of progressing.
On
InApril 2021 , the Company announced it entered into a joint venture (Beedie JV) whereby we will invest in equal shares of aVancouver building development to be leased exclusively by AbCellera for additional office and lab facilities for our future office headquarters. InApril 2021 , Eli Lilly and Company requested theU.S. FDA revoke the Emergency Use Authorization (EUA) for bamlanivimab (LY-CoV555) 700 mg alone. Eli Lilly made this request due to the evolving variant landscape in theU.S. and the full availability of bamlanivimab and etesevimab together. The request was not due to any new safety concern. This final step in Eli Lilly's transition to only supply bamlanivimab and etesevimab for administration together in theU.S. for the treatment of COVID-19 - as planned with the FDA - followed the modification of contracts with theU.S. government to ensure adequate supply of etesevimab to be used together with bamlanivimab. The FDA announced that it had revoked the EUA for bamlanivimab 700 mg alone onApril 16, 2021 . InApril 2021 , we entered into a multi-target collaboration agreement withEmpirico Inc. Empirico will use its Precision Insights Platform, a human genetics-focused discovery platform, to select up to five therapeutic targets. AbCellera will use its AI-powered antibody discovery technology to search and analyze natural immune responses to identify antibodies with the desired therapeutic properties against the selected targets. Under the terms of the agreement, Empirico will have the rights to develop and commercialize novel antibodies resulting from the collaboration. AbCellera will receive research payments and is eligible to receive downstream clinical and commercial milestone payments and royalties on net sales of products from Empirico. We also have the option to deepen our position in this partnership with further investment in the development of certain collaboration targets in exchange for increased revenue sharing. InMay 2021 , the Company announced that a second antibody from its collaboration with Eli Lilly, bebtelovimab (LY-CoV1404), entered clinical trials in patients with mild-to-moderate COVID-19. Preclinical data demonstrate that bebtelovimab is a highly potent antibody against COVID-19 and retains neutralization activity against all known variants of concern and interest. Eli Lilly has expanded its ongoing BLAZE-4 trials to evaluate bebtelovimab alone and together with other monoclonal antibodies and is currently in Phase 2. InJune 2021 , theOffice of the Assistant Secretary for Preparedness and Response paused shipment of bamlanivimab and etesevimab administered together in theU.S. This was due to the prevalence of the Gamma and Beta variants in theU.S. at that time and the fact that bamlanivimab and etesevimab administered together do not retain neutralization effects against those variants. The COVID-19 pandemic has involved, and may continue to involve, the spread of variants, including the Delta variant which is currently estimated to be the most dominant variant globally. Preclinical data demonstrate that bamlanivimab and etesevimab administered together retain neutralization activity against the variants currently in circulation in many countries, including Delta and Alpha. InJuly 2021 , the Company announced the appointment ofNeil Berkley as Chief Business Officer. As CBO,Mr. Berkley's role will include leading the strategy and continued growth of AbCellera's partnership business, which currently includes a diverse portfolio of more than 130 programs with drug developers of all sizes. 16
-------------------------------------------------------------------------------- InAugust 2021 , the Company announced partnerships with Tachyon and EQRx. The Company has the option to invest in programs at various stages of preclinical development, clinical development, and commercialization in exchange for an increased share of product sales.
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 in order 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 of this report, captioned "Risk Factors".
• Securing additional programs under contract. Our potential to grow
revenue, in both the near and long term, is dependent on our ability to
secure additional programs under contract from new and existing partners.
For existing partners, we seek to expand our relationships with them to
cover multi-year, multi-target programs. Since our first commercial
partnership in 2015, as of
that are either completed, in progress or under contract with 33 partners.
We are building our business development team across the major
biotechnology geographic hubs in order to bring in new partners and new
programs under contract, and we believe that we have a significant
opportunity to continue to increase the number of partners who haveprograms based on our platform. Our ability to continue to grow our number
of programs under contract is dependent upon our ability to educate the
market and support the business through investment in our sales and
marketing efforts and through further research and development to enhance
our technological differentiation.
• Our partners successfully developing and commercializing the antibodies
that we discover. Until recently, we had generated nearly all of our
revenue from research fees. 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 foreach program under contract is represented by potential future milestone
payments and royalties rather than research fees. As a result, we believe
our business and our future results of operations will be highly reliant
on the degree to which our partners successfully develop and commercialize
the antibodies that we discover based on contracts with our partners. As
our partners continue to advance development of the antibodies that we
have discovered, we expect to start receiving additional milestone
payments and royalties if any partners commence commercial sales of such
antibodies.
• Rate and timing of selecting and initiating discovery projects by our
partners. Once programs are secured under contract, partners must select
targets and agree on a detailed statement of work before we commence
discovery research on any antibodies. The rate and timing of such
selection and initiation differs from partner to partner. Because the vast
majority of research fees that we are entitled to recognize under our
partnerships depend on our delivery of antibodies for development by ourpartners, any delays by our partners in selecting targets and agreeing on
statements of work will impact revenue recognition.
• Investing in enhancements to our technology stack. Our ability to maintain
and expand our partnerships is dependent on the advantages our technology
stack delivers to our partners. We intend to maintain our leading position
through research and development investments to refine and add
capabilities in areas such as computation, protein engineering,
immunization technologies, genetically engineered rodents and cell line
selection. We have successfully closed and will continue to look for
strategic technology acquisitions to improve, broaden and deepen ourcapabilities and expertise in antibody drug discovery and development, or
those that offer opportunities to expand our partnership business into
adjacent therapeutic modalities. We intend to devote substantial resources
to continue to improve our technological differentiation which will impact
our financial performance.
• Scaling our operations to execute on discovery programs. As we secure
additional programs under contract and as our partners initiate discovery
programs, our operational capacity to execute such research activities may
become strained. We are making significant investments in capital and time
to increase our ability to address future growth, including building new
headquarters, building a new small-scale manufacturing plant, investing in
research and development and hiring more talented personnel across
functions. We have new facilities under development scheduled to take
occupancy in late 2021 and 2023 that are intended to materially expandcapacity. As we expand our workforce, we expect a significant increase in
our operating expenses, including stock-based compensation.
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
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important to understand our current business. These metrics may change or may be
substituted for additional or different metrics as our business develops. For
example, as our business matures and to the extent programs are discontinued, we
anticipate updating these metrics to reflect such changes.
Metric June 30, 2020 June 30, 2021 Change %
Number of discovery partners 25 33 32 %
Programs under contract, cumulative 76 138 82 %
Program starts, cumulative 48 60 25 %
Molecules in the clinic 1 4 300 %
The table below outlines the details of molecules in the clinic as at June 30,
2021 :
Most
advanced
Molecule stage Partner Therapy areas Program type
Bamlanivimab Marketed Eli Lilly and COVID-19 Discovery
(LY-CoV555) (EUA)* Company partnership
Bebtelovimab Phase 2 Eli Lilly and COVID-19 Discovery
(LY-CoV1404) Company partnership
NBL-012 Phase 1 NovaRock Dermatology, Trianni
Biotherapeutics gastrointestinal, license
Inc. immunology
NBL-015 IND NovaRock Oncology Trianni
approved Biotherapeutics license
Inc.
* See "Recent Developments" above for recent regulatory developments related to this molecule.
Number of discovery partners represents the unique number of partners with whom we have executed partnership contracts. We view this metric as an indication of the competitiveness of our technology stack and our current level of market penetration. The metric also relates to our opportunities to secure programs under contract from existing customers through repeat business opportunities. Programs under contract represent the number of antibody development programs that are under contract for delivery of discovery research activities. A program under contract is counted when a contract is executed with a partner under which we commit to discover antibodies against one selected target. A target is any relevant antigen for which a partner seeks our support in developing binding antibodies. We view this metric as an indication of commercial success and technological competitiveness. It further relates to revenue from technology access fees. The cumulative number of programs under contract with downstream participation is related to our ability to generate future revenue from milestone payments and royalties. Program starts represent the number of unique programs under contract for which we have commenced the discovery effort. The discovery effort commences on the later of (i) the day on which we receive sufficient reagents to start discovery of antibodies against a target and (ii) the day on which the kick-off meeting for the program is held. We view this metric as an indication of our operational capacity to execute on programs under contract. It is also an indication of the selection and initiation of discovery projects by our partners and the resulting near-term potential to earn research fees. Cumulatively, program starts with downstream participation indicate our total opportunities to earn downstream revenue from milestone fees and royalties in the mid- to long-term. Molecules in the clinic represent the count of unique molecules for which an Investigational New Drug, or IND, New Animal Drug, or equivalent under other regulatory regimes, application has been approved based on an antibody that was discovered either by us or by a partner using licensed AbCellera technology. Where the date of such application approval is not known to us, the date of the first public announcement of a clinical trial will be used for the purpose of this 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. Going forward, AbCellera intends to report on molecules in the clinic metric in place of the previously reported programs in the clinic metric. The change is required to reflect two new dynamics which we believe are important to our business:
o One program can yield multiple molecules, e.g. the single COVID-19
antibody discovery program with Eli Lilly has produced both
bamlanivimab and bebtelovimab.
o As part of an acquisition, AbCellera may come to own stakes in
molecules for which the company is also entitled to milestonepayments
and royalties although the discovery was not performed as an AbCellera
program, as is the case for several Trianni humanized rodent license
agreements.
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-------------------------------------------------------------------------------- As part of the change, we have raised the threshold for reaching the clinic from IND application (or equivalent) to IND approval. We believe this more stringent definition better reflects the common understanding for achieving clinical status. The approval date is also more likely to be known than the application date. We believe this change would thus make our disclosures more consistent between molecules. The change produces no difference to historical business results. Until the second quarter of 2021, the previous metric of programs in the clinic was identical to the new metric of molecules in the clinic, with the COVID-19 antibody program and bamlanivimab having been the first and only program and molecule to have reached the clinic under either definition. AbCellera also intends to disclose additional details about each molecule to the extent made public or permitted by its partners. We believe that the updated metric together with the additional list of molecules will give investors a better understanding of AbCellera's downstream portfolio and bring AbCellera's reporting in line with other public companies with economic stakes in therapeutic molecules.
Summary partnership agreements with pharmaceutical and biotechnology companies
that include downstream participation from 2016 to
Partner # of Targets & Therapeutic Indication
Duration or Modality Date Announced
EQRx Multi-target, Oncology and immunology
multi-year (initially) August 4, 2021
Tachyon Single target Oncology August 3, 2021
Undisclosed biotech Up to 4 targets, Undisclosed *
multi-year June 30, 2021
Angios Multi-target, Ophthalmology
multi-year May 6, 2021
Undisclosed biotech Multi-target, Oncology *
multi-year May 6, 2021
Empirico Up to 5 targets, Undisclosed
multi-year April 14, 2021
Gilead Sciences 8 targets, Undisclosed
multi-year April 1, 2021
Abdera Therapeutics 9 targets, Oncology
multi-year January 14, 2021
Invetx Multi-target, Animal Health
multi-year November 19, 2020
Kodiak Sciences Multi-target, Ophthalmology
multi-year October 29, 2020
IGM Biosciences Multi-target, Oncology and immunology
multi-year September 24, 2020
Undisclosed Single target Bispecific June 3, 2020 *
Eli Lilly Up to 9 targets, COVID-19 program and *
multi-year additional indications May 22, 2020
Regeneron Multi-target, Multiple undisclosed *
Pharmaceuticals multi-year March 16, 2020
Invetx Multi-target, Animal health
multi-year February 23, 2020
Undisclosed Multi-target, Cell therapy *
multi-year September 25, 2019
Gilead Sciences Single target Infectious disease June 13, 2019
Denali Therapeutics 8 targets, Neurological diseases
multi-year February 28, 2019
Novartis Up to 10 targets, Undisclosed
multi-year February 14, 2019
Autolus Therapeutics Single target Cell therapy (CAR-T) November 29, 2018
Denali Therapeutics Single target Neurological diseases June 12, 2018
Undisclosed mid-cap Undisclosed Undisclosed
biopharma January 25, 2018
Teva Pharmaceutical Single target Membrane protein
Industries June 13, 2017
Pfizer Multi-target, Membrane protein
multi-year January 5, 2017
Undisclosed global Multi-target, Undisclosed
biotech multi-year November 4, 2016
Kodiak Sciences Single target Ophthalmology August 24, 2016
Teva Pharmaceutical Undisclosed Undisclosed
Industries February 2, 2016
* Effective date of agreement
Components of Results of Operations
Revenue
Our revenue consists of partnership research fees, licensing revenue,
development milestones, and royalty payments from commercial products. Research
fees consist primarily of technology access fees, which are generally generated
upon execution of our partnership agreements, and discovery research fees, which
are generated through our performance of antibody discovery research for our
partners. Licensing revenue is primarily from our licensing of our humanized
rodent platform, Trianni™. Our partnership agreements also entitle us to receive
payments upon the satisfaction of clinical, approval, and commercial milestones
as well as royalties on our partners' commercial sales of the molecules that we
discover.
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-------------------------------------------------------------------------------- We expect revenue to increase over time as we secure additional programs under contract and conduct discovery efforts for our partners, and as our partners continue the development of the antibodies that we deliver. We expect that our revenue will fluctuate from period to period due to the timing of securing additional programs under contract, the inherently uncertain nature of the timing of milestone achievement and our dependence on the program decisions of our partners. Operating Expenses Royalty Fees. Royalty fees consist of certain contractual royalty payments to our strategic partners upon receipt of royalty revenue based on our customers third-party net sales. Royalty fees are not included in every program. For royalties received from Eli Lilly for commercial sales of bamlanivimab, royalty fees are due to collaboration partners in AbCellera's DARPA P3 (Pandemic Preparedness Program) project focused on rapid pandemic response. Royalty fees are recorded when the third-party sale occurs. Research and Development Expenses. Research and development expenses primarily consist of salaries, benefits, incentive compensation, stock-based compensation, laboratory supplies, materials expenses for employees and contractors engaged in research and product development, and facilities expenses related to direct research and development activities. These expenses are exclusive of depreciation and amortization. Research and development activities consist of discovery research for partners as well as our internal platform development. We derive improvements to our technology stack from both types of activities. We expect to continue to incur substantial research and development expenses as we conduct discovery research for our partners. In addition, we plan to continue to invest in research and development to enhance our solutions and offerings to our partners, including hiring additional employees and continuing research and development projects obtained through strategic technology acquisitions. As a result, we expect that our research and development expenses will continue to increase in absolute dollars in future periods and vary from period to period as a percentage of revenue. Sales and Marketing Expenses. Our sales and marketing expenses consist primarily of salaries, benefits, and stock-based compensation costs for employees within our commercial sales functions, as well as marketing, travel expenses and information technology costs that are directly associated with sales and marketing efforts, such as client relationship management tools and other information technology data tools to provide insight into market segments and trends. This activity has been complemented with research and development staff attending a variety of scientific conferences, which has helped increase the business development pipeline. The associated expenses are included in research and development expenses as scientific conference attendance is primarily related to our research and development efforts. We expect our sales and marketing expenses to increase in absolute dollars as we expand our commercial sales, marketing and business development teams; increase our presence globally; and increase marketing activities to drive awareness and adoption of our platform. General and Administrative Expenses. General and administrative expenses primarily consist of salaries, benefits and stock-based compensation costs for employees in our executive, accounting and finance, project management, corporate development, office administration, legal and human resources functions as well as professional services fees, such as consulting, audit, tax and legal fees, general corporate costs and allocated overhead expenses. We expect that our general and administrative expenses will continue to increase in absolute dollars in future periods, primarily due to increased headcount to support anticipated growth in the business and due to incremental costs associated with operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of theSEC and stock exchange listing standards, public relations, insurance and professional services. We expect these expenses to vary from period to period as a percentage of revenue. Depreciation and Amortization. Depreciation expense consists of the depreciation of property and equipment used actively in the business, primarily by research and development activities. Amortization expense includes the amortization of intangible assets over their respective useful lives.
Other (Income) Expense. Other (income) expense consists of interest income
earned on our cash balances, interest expense related to borrowings under any
credit agreements, and foreign exchange (gain) loss due to fluctuation in
exchange rates between the Canadian dollar and the
Grants and Incentives. Grants and incentives include cost recovery on activities that qualified for approved projects supported by grant funding or tax credits. Grants primarily include the benefit from programs administered by the Canadian government'sMinistry of Innovation , Science and Economic Development, such as theirIndustrial Research Assistance Program , and theStrategic Innovation Fund . To the extent that grant funding covers capital expenditures, a deferred credit is recorded on the balance sheet and recognized rateably over the benefit period of the related expenditure for which the grant was intended to compensate. 20 --------------------------------------------------------------------------------
Other Comprehensive Income. Other comprehensive income includes foreign currency translation adjustments as a result of currency fluctuations in Canadian functional currency entities.
Results of operations
Comparison of the three and six months ended
The following table summarizes our unaudited results of operations data for the
three and six months ended
Three months ended Six months ended
June 30, June 30,
2020 2021 2020 2021
Revenue:
Research fees $ 8,228 $ 5,215 $ 12,885 $ 9,201
Licensing revenue - 263 - 20,522
Milestone payments 3,000 1,000 3,000 8,000
Royalty revenue - 21,165 - 192,661
Total revenue 11,228 27,643 15,885 230,384
Operating expenses:
Royalty fees - 3,610 - 23,622
Research and development(1) 9,144 15,046 13,262 27,403
Sales and marketing(1) 547 1,295 984 3,869
General and administrative(1) 1,498 11,203 3,148 17,688
Depreciation and amortization 893 3,522 1,467 6,827
Total operating expenses 12,082 34,676 18,861 79,409
Income (loss) from operations (854 ) (7,033 ) (2,976 ) 150,975
Other (income) expense:
Other (income) expense 293 (314 ) 1,294 (645 )
Grants and incentives (7,850 ) (4,646 ) (8,880 ) (7,794 )
Total other income (7,557 ) (4,960 ) (7,586 ) (8,439 )
Net earnings (loss) before income
tax 6,703 (2,073 ) 4,610 159,414
Provision for income tax - 250 - 44,516
Net earnings (loss) $ 6,703 $ (2,323 ) $ 4,610 $ 114,898
Foreign currency translation
adjustment - 2,152 - 2,152
Comprehensive income (loss)
4,610 $ 117,050
Net earnings (loss) per share
attributable to common
shareholders
Basic $ 0.03 $ (0.01 ) $ 0.02 $ 0.42
Diluted $ 0.03 $ (0.01 ) $ 0.02 $ 0.36
Weighted-average common shares
outstanding
Basic 152,326,424 272,196,107 152,091,589 270,953,541
Diluted 260,810,864 272,196,107 226,039,616 321,555,443
(1) Amounts are exclusive of depreciation and amortization. Amounts include
stock-based compensation as follows:
Three months ended June 30, Six months ended June 30,
2020 2021 2020 2021
(in thousands) (in thousands)Research and development$ 483 $ 3,720$ 1,099 $ 6,877 General and administrative 86 4,592 694 5,907 Sales and marketing 37 161 50 1,116$ 606 $ 8,473$ 1,843 $ 13,900 21
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Revenue
Three months ended Six months ended
June 30, Change June 30, Change
2020 2021 Amount % 2020 2021 Amount %
(in thousands, except percentages) (in thousands, except percentages)Revenue Research fees$ 8,228 $ 5,215 $ (3,013 ) -37 %$ 12,885 $ 9,201 $ (3,684 ) -29 % Licensing revenue - 263 263 N/A - 20,522 20,522 N/A Milestone payments 3,000 1,000 (2,000 ) -67 % 3,000 8,000 5,000 167 % Royalty revenue - 21,165 21,165 N/A - 192,661 192,661 N/A Total revenue$ 11,228 $ 27,643 $ 16,415 146 %$ 15,885 $ 230,384 $ 214,499 1350 % Revenue increased by$16.4 million from the three months endedJune 30, 2020 toJune 30, 2021 . Royalty revenue of$21.2 million are directly associated with the specified percentage of proceeds that Eli Lilly received from the sales of bamlanivimab. The increase in royalty revenue was partly offset by a decrease in milestone payments and research fees compared to the same period in the prior year. Despite a significant increase in cumulative Programs Under Contract and Program Starts compared to the same period in the previous year, revenues associated with research fees decreased by$3.0 million for the three months endedJune 30, 2021 . The decrease was driven by a reduction in revenue from our COVID-19 antibody discovery program which was running at its peak activity for the three months endedJune 30, 2020 . Revenue increased by$214.5 million for the six months endedJune 30, 2020 toJune 30, 2021 . Royalty revenue of$192.7 million are directly associated with the specified percentage of proceeds that Eli Lilly received from the sales of bamlanivimab. We earned$20.5 million in licensing revenue related to the recently acquired Trianni humanized rodent platform business. We earned$8.0 million in milestone revenue of which$7.0 million relates to the first commercial sale inEurope by Eli Lilly relating to molecule bamlanivimab for treatment of COVID-19 and the remaining$1.0 million milestone revenue relates to milestone payments received from our Trianni licenses. Despite a significant increase in cumulative Programs Under Contract and Program Starts compared to the same period in the previous year, revenues associated with research fees decreased by$3.7 million for the six months endedJune 30, 2021 . The decrease was driven by a reduction in revenue from our COVID-19 antibody discovery program. Operating Expenses Royalty Fees Three months ended Six months ended June 30, Change June 30, Change 2020 2021 Amount % 2020 2021 Amount % (in thousands, except percentages) (in thousands, except percentages)
Royalty fees $ -$ 3,610 $ 3,610 N/A $ -$ 23,622 $ 23,622 N/A Royalty fees for the three and six months endedJune 30, 2020 and 2021 were$3.6 million and$23.6 million , respectively. These were primarily attributable to the royalty revenues received by the Company from sales of bamlanivimab by Eli Lilly due to AbCellera's collaborators in pandemic response. Research and Development Three months ended Six months ended June 30, Change June 30, Change 2020 2021 Amount % 2020 2021 Amount % (in thousands, except percentages) (in thousands, except percentages)
Research and development
Research and development expenses increased by$5.9 million , or 65%, from the three months endedJune 30, 2020 toJune 30, 2021 , reflecting continuing strong investments in the capacity and capabilities of AbCellera's discovery and development platform. Of this increase,$6.6 million is due to the increase in compensation expense consistent with the increase in headcount. The overall increase was partly offset by the decrease in IPR&D expense of$4.0 million attributable to the purchase of the OrthoMab bispecific platform during the prior period.$2.8 million of the increase is attributed to an increase in facilities, research materials, supplies and services consistent with the overall increase in research and development activities. 22 -------------------------------------------------------------------------------- Research and development expenses increased by$14.1 million , or 107%, from the six months endedJune 30, 2020 toJune 30, 2021 , reflecting continuing strong investments in the capacity and capabilities of AbCellera's discovery and development platform. Of this increase,$12.0 million is due to the increase in compensation expense consistent with the increase in headcount.$5.9 million of the increase is attributed to an increase in facilities, research materials, supplies and services consistent with the overall increase in research and development activities. The overall increase was partly offset by the decrease in IPR&D expense of$4.0 million attributable to the purchase of the OrthoMab bispecific platform during the prior period. Sales and Marketing Three months ended Six months ended June 30, Change June 30, Change 2020 2021 Amount % 2020 2021 Amount % (in thousands, except percentages) (in thousands, except percentages) Sales and marketing$ 547 $ 1,295 $ 748 137 %$ 984 $ 3,869 $ 2,885 293 % Sales and marketing expenses increased by$0.7 million , or 137%, from the three months endedJune 30, 2020 toJune 30, 2021 and reflects the on going investment to build AbCellera's Business Development team.$0.4 million of the increase is due to increase in compensation expense consistent with increased headcount. The remaining increase is attributable to increased recruiting and consulting fees. Sales and marketing expenses increased by$2.9 million , or 293%, from the six months endedJune 30, 2020 toJune 30, 2021 .$1.5 million of the increase is due to the increase in compensation expense consistent with increased headcount.$0.8 million of the increase is attributable to a donation made toSurrey Hospital to fund a study related to bamlanivimab inCanada . The remaining increase is attributable to increased recruiting and consulting fees. Sales and marketing expenses related to travel were significantly lower for the three and six months endedJune 30, 2021 due to continued COVID-19 related travel restrictions. General and Administrative Three months ended Six months ended June 30, Change June 30, Change 2020 2021 Amount % 2020 2021 Amount % (in thousands, except percentages) (in thousands, except percentages)
General and administrative
General and administrative expenses increased by$9.7 million , or 648%, from the three months endedJune 30, 2020 toJune 30, 2021 .$4.5 million of the increase in general and administrative expense is related to the increased impact of non-cash stock-based compensation expense as a publicly listed company.$1.5 million of the increase is related to increased compensation expense, excluding stock-based compensation, which was driven by increased headcount within the general and administrative function.$2.5 million is attributable to legal fees and other corporate matters relating to being a public company and protecting our intellectual property.$1.4 million of the increase in general and administrative expense is due to increased expenditures related to director and officer insurance and increased general office and facilities expenses to support the growth of the company. General and administrative expenses increased by$14.5 million , or 462%, from the six months endedJune 30, 2020 toJune 30, 2021 .$5.2 million of the increase in general and administrative expense is related to the increased impact of non-cash stock-based compensation expense as a publicly listed company.$2.8 million of the increase is related to increased compensation expense, excluding stock-based compensation, which was driven by increased headcount within the general and administrative function.$4.8 million is attributable to legal fees and other corporate matters relating to being a public company and protecting our intellectual propertly.$1.5 million of the increase in general and administrative expense is due to increased expenditures related to director and officer insurance and increased general office and facilities expenses to support the growth of the company.
Depreciation and Amortization
Three months ended Six months ended
June 30, Change June 30, Change
2020 2021 Amount % 2020 2021 Amount %
(in thousands, except percentages) (in thousands, except percentages)Depreciation and amortization$ 893 $ 3,522 $ 2,629 294 %$ 1,467 $ 6,827 $ 5,360 365 % 23
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Depreciation and amortization expenses increased by$2.6 million , or 294%, from the three months endedJune 30, 2020 toJune 30, 2021 . Amortization expense increased by$2.5 million due to the amortization of acquired intangible assets over their respective useful lives. Depreciation expense increased by$0.2 million due to the depreciation of equipment and facilities related to capital equipment purchases. Depreciation and amortization expenses increased by$5.4 million , or 365%, from the six months endedJune 30, 2020 toJune 30, 2021 . Amortization expense increased by$4.9 million due to the amortization of acquired intangible assets over their respective useful lives. Depreciation expense increased by$0.4 million due to the depreciation of equipment and facilities related to capital equipment purchases. Other (Income) Expense Three months ended Six months ended June 30, Change June 30, Change 2020 2021 Amount % 2020 2021 Amount % (in thousands, except percentages)
(in thousands, except percentages)
Other (income) expense
Other (income) expense decreased by$0.6 million , or 207%, for the three months endedJune 30, 2020 toJune 30, 2021 . Other (income) expense for the three months endedJune 30, 2020 included$0.5 million in interest expense partly offset by$0.2 million in financing fees. Other (income) expense for the three months endedJune 30, 2021 included interest income on cash balances of$0.4 million , and a foreign exchange gain of$0.8 million , offset by$0.8 million of financing fees and contingent consideration. Other (income) expense decreased by$1.9 million , or 150%, for the six months endedJune 30, 2020 toJune 30, 2021 . Other (income) expense for the six months endedJune 30, 2020 included$0.6 million in interest expense offset by$0.3 million in financing fees, and$0.9 million in foreign exchange losses. Other (income) expense for the six months endedJune 30, 2021 included interest income on cash balances of$0.6 million and a foreign exchange gain of$0.3 million , offset by$0.2 million of financing fees and contingent consideration. Grants and Incentives Three months ended Six months ended June 30, Change June 30, Change 2020 2021 Amount % 2020 2021 Amount % (in thousands, except percentages) (in thousands, except percentages) Grants and incentives$ (7,850 ) $ (4,646 ) $ 3,204 -41 %$ (8,880 ) $ (7,794 ) $ 1,086 -12 % Grants and incentives decreased by$3.2 million , or 41%, from the three months endedJune 30, 2020 toJune 30, 2021 . This decrease was primarily driven by a decrease in activity relating to research and development expenditures that are eligible for the SIF project. Grants and incentives decreased by$1.1 million , or 12%, from the six months endedJune 30, 2020 toJune 30, 2021 . This decrease was primarily driven by a decrease in activity relating to research and development expenditures that are eligible for the SIF project.
Liquidity and Capital Resources
As ofJune 30, 2021 , we had$792.6 million of cash and cash equivalents. The increase of$198.5 million sinceDecember 31, 2020 was primarily from cash flow from operations and driven by the receipt of accounts receivable relating to royalties from bamlanivimab in the six months endedJune 30, 2021 . We have generated positive operating cash flow cumulatively since our inception in 2012 and in every year since 2018. We intend to significantly invest in our business, and as a result may incur operating losses in future periods. We will continue to invest in research and development efforts towards expanding our capabilities and expertise along our technology stack, the building of our business development team and marketing our solutions to new and existing partners, and the expansion of our future office headquarters, and related infrastructure, including execution of long-term office-lease arrangements. Based on our current business 24 -------------------------------------------------------------------------------- plan, we believe that our existing cash and cash equivalents and anticipated cash flows from operations, will be sufficient to meet our working capital and capital expenditure needs over at least the next 24 months following the date of this report. Cash Flows
The following table summarizes our cash flows for the periods presented:
Six months ended
June 30,
2020 2021
(in thousands)
Net cash provided by (used in):
Operating activities $ 25,213 $ 267,228
Investing activities (7,713 ) (61,472 )
Financing activities 88,084 (6,618 )
Effect of exchange rate fluctuations on cash and
cash equivalents - (683 )
Net increase in cash and cash equivalents $ 105,584 $ 198,455
Operating activities
Net cash provided by operating activities increased from $25.2 million in the
six months ended June 30, 2020 to $267.2 million in the six months ended June
30, 2021 . The increase resulted primarily from increased revenue from royalty
and licensing streams, satisfaction of clinical milestones under our partnership
with Eli Lilly, and continued discovery research activities, as well as upfront
payments from securing new multi-year, multi-target contracts with partners.
Investing activities
Net cash used by investing activities increased from$7.7 million in the six months endedJune 30, 2020 to$61.5 million in the six months endedJune 30, 2021 . Investing activities during the six months endedJune 31, 2020 were directly attributed to the purchase of intangible assets. Investing activities during the six months endedJune 31, 2021 were attributable to our investment in real estate, particularly our land purchase related to our future GMP facility. Additional investing activities during the period were related to facilities and equipment expenditures in ourVancouver offices, offset by grant funding received in the period.
Financing activities
Net cash provided by financing activities was$88.1 million for the six months endedJune 30, 2020 . This was due primarily to proceeds from our Series A2 financing. Net cash used by financing activities was$6.6 million for the six months endedJune 30, 2021 due to repayment of long-term debt and intangible asset obligation, partly offset by proceeds from exercise of options for common stock.
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 endedDecember 31, 2020 . There have been no significant changes to these policies during the six months endedJune 30, 2021 , except as referred to in Note 2 to the condensed consolidated financial statements.
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