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.
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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 be materially different 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 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. Some of the actions taken 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.
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 pharmaceutical to small biotechnology companies. We empower them to move quickly, reduce cost and tackle the toughest problems in drug development As ofMarch 31, 2021 , we had 119 discovery programs that are either completed, in progress or under contract 13 -------------------------------------------------------------------------------- with 29 partners. As a recent example, in a collaboration with Eli Lilly and Company, or Lilly, we applied our technology stack to co-develop bamlanivimab, a potential antibody therapy to treat and prevent COVID-19. Starting from a single blood sample obtained from a convalescent patient, we and our partners identified a viable antibody drug candidate within three weeks that advanced into clinical testing 90 days after initiation of the program. 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 program result in milestone and 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. We forge partnerships with large cap pharmaceutical companies, biotechnology companies of all sizes and non-profit and government organizations. 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. We generated revenue of$4.7 million and$202.7 million for the three months endedMarch 31, 2020 and 2021, respectively. As ofMarch 31, 2021 , we had a total of 29 partners for whom we were conducting drug discovery activities. For the three months endedMarch 31, 2020 , three of our partners accounted for 51%, 12%, and 11% of research fees revenue and five partners accounted for the remaining 26% of research fees revenue. For the three months endedMarch 31, 2021 , three of our partners accounted for 36%, 24% and 20% of research fees revenue, and seven partners accounted for the remaining 20% of research fees revenue. For the three months endedMarch 31, 2021 we recognized a milestone payment and royalty revenue streams, totaling$178.5 million , exclusively from our partnership with Lilly. Our partnership with Lilly constituted one of the partnerships that generated 10% or more of our consolidated revenues during the one or more periods described above. With respect to the other partners, we do not believe the loss of any one or more of such partners would have a material adverse effect on us and our subsidiaries taken as a whole. We have also grown the number of programs that we have under contract with our partners, as illustrated by the following charts. [[Image Removed]] We incurred sales and marketing expenses of$0.5 million and$2.6 million for the three months endedMarch 31, 2020 and 2021, respectively. We are significantly increasing investment into our business development team and into marketing our solutions to new and existing partners. 14 -------------------------------------------------------------------------------- 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$4.1 million and$12.4 million for the three months endedMarch 31, 2020 and 2021, respectively. We incurred general and administrative expenses of$1.7 million and$6.4 million for the three months endedMarch 31, 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 research fees, government funding from
grants, external borrowings, and from the issuance and sale of convertible
preferred shares and notes, and common shares.
Our net loss for the three months ended March 31, 2020 was $2.1 million and our
net earnings for the three months ended March 31, 2021 were $117.2 million . As
of March 31, 2021 , we had accumulated earnings of $231.4 million and we had cash
and cash equivalents totaling $685.8 million .
Recent Developments
InMarch 2020 , we entered into a discovery partnership agreement with Eli Lilly and Company, or Lilly, pursuant to which we will perform discovery research for a number of targets for Lilly that will result in antibodies for 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. OnJune 1, 2020 , 90 days after program initiation, bamlanivimab moved to first-in-human testing and progressed to Phase 3 clinical trials byJuly 2020 . InDecember 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. InFebruary 2021 , it was announced that bamlanivimab (LY-CoV555) 700 mg, a human antibody discovered by AbCellera and developed with Eli Lilly and Company (Lilly), administered with a second Lilly antibody, etesevimab (LY-CoV016) 1400 mg, has received Emergency Use Authorization (EUA) from theU.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. InFebruary 2021 , we announced the appointment ofEster 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. 15 -------------------------------------------------------------------------------- InMarch 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. OnMarch 5, 2021 theEuropean 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 (Lilly) requested theU.S. FDA revoke the Emergency Use Authorization (EUA) for bamlanivimab (LY-CoV555) 700 mg alone. 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 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, 2020 . InApril 2021 , we entered multi-target collaboration agreement withEmpirico Inc. The agreement will leverage the Company's hyper-scale datasets, machine learning, and advanced computation to both identify high-value, genetically-validated drug targets and discover novel therapeutic antibodies while Empirico will use its Precision Insights Platform, a human genetics-focused discovery platform, to select up to five therapeutic 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. InMay 2021 , the Company announced that a second antibody from its collaboration with Lilly, LY-CoV1404, entered clinical trials in patients with mild-to-moderate COVID-19. Lilly expanded its ongoing BLAZE-4 trials to evaluate LY-CoV1404 alone and together with other monoclonal antibodies.
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 29 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 for
each
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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 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.
March 31, March 31,
Metric 2020 2021 Change %
Number of discovery partners 24 29 21 %
Programs under contract, cumulative 73 119 63 %
Program starts, cumulative 47 54 15 %
Programs in the clinic - 1 N/M
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
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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.
Programs in the clinic represent the count of unique molecules for which an
Investigational New Drug, or IND, New Animal Drug or Pre-Market Approval, or
PMA, application, or equivalents under other regulatory regimes, has been filed
based on an antibody that was discovered by us. Where the date of such
application is not known to us, the date of the first public announcement of
clinical trials will be used instead 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.
Components of Results of Operations
Revenue
Our revenue is comprised 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.
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 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
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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 the SEC 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.
Results of operations
Comparison of the three months ended
The following table summarizes our unaudited results of operations data for the
three months ended
Three months ended
March 31,
2020 2021
Revenue:
Research fees $ 4,657 $ 3,986
Licensing revenue - 20,259
Milestone payments - 7,000
Royalty revenue - 171,496
Total revenue 4,657 202,741
Operating expenses:
Royalty fees - 20,010
Research and development(1) 4,118 12,352
Sales and marketing(1) 437 2,578
General and administrative(1) 1,650 6,422
Depreciation and amortization 574 3,305
Total operating expenses 6,779 44,667
Income (loss) from operations (2,122 ) 158,074
Other (income) expense:
Other (income) expense 1,001 (265 )
Grants and incentives (1,030 ) (3,148 )
Total other income (29 ) (3,413 )
Net earnings (loss) before income tax (2,093 ) 161,487
Provision for income tax -
44,266
Net earnings (loss) for the year$ (2,093 ) $
117,221
Net earnings (loss) per share attributable to common shareholders Basic$ (0.01 ) $ 0.43 Diluted$ (0.01 ) $ 0.37 Weighted-average common shares outstanding Basic 151,859,924 269,697,212 Diluted 151,859,924 320,282,747
(1) Amounts are exclusive of depreciation and amortization. Amounts include
stock-based compensation as follows:
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Three months ended March 31,
2020 2021
(in thousands)
Research and development $ 616 $ 3,158
General and administrative 608 1,316
Sales and marketing 13 953
$ 1,237 $ 5,427
Revenue
Three months ended
March 31, Change
2020 2021 Amount %
(in thousands, except percentages)
Revenue
Research fees $ 4,657 $ 3,986 $ (671 ) -14 %
Licensing revenue - 20,259 20,259 N/A
Milestone payments - 7,000 7,000 N/A
Royalty revenue - 171,496 171,496 N/A
Total revenue $ 4,657 $ 202,741 $ 198,084 4253 %
Revenue increased by $198.1 million from the three months ended March 31, 2020
to March 31, 2021 . We received a milestone payment upon the first commercial
sale in Europe by Lilly relating to molecule bamlanivimab for treatment of
COVID-19 in the amount of $7.0 million . Royalty payments of $171.5 million are
directly associated with the specified percentage of proceeds that Lilly
received from the sales of bamlanivimab. We earned $20.3 million in licensing
revenue related to the recently acquired Trianni humanized rodent platform
business. Despite a significant increase in cumulative Programs Under Contract
compared to the same period in the previous year, revenues associated to
research fees decreased by $0.7 million for the three months ended March 31,
2021 . The decrease was driven by a reduction in revenue from our DARPA COVID-19
antibody discovery program.
Operating Expenses
Royalty Fees
Three months ended
March 31, Change
2020 2021 Amount %
(in thousands, except percentages)
Royalty fees $ - $ 20,010 $ 20,010 N/A
Royalty fees for the three months ended March 31, 2021 were $20.0 million . These
were directly attributable to the royalty revenues received by the Company from
sales of bamlanivimab by Lilly due to AbCellera's collaborators in pandemic
response.
Research and Development
Three months ended
March 31, Change
2020 2021 Amount %
(in thousands, except percentages)
Research and development $ 4,118 $ 12,352 $ 8,234 200 %
Research and development expenses increased by $8.2 million , or 200%, from the
three months ended March 31, 2020 to March 31, 2021 . $5.9 million of the
increase is due to the increase in compensation expense consistent with the
increase in headcount. $2.3 million of the increase is attributed to an increase
in research materials, facilities, supplies and services consistent with the
overall increase in research and development activities.
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Sales and Marketing
Three months ended
March 31, Change
2020 2021 Amount %
(in thousands, except percentages)
Sales and marketing $ 437 $ 2,578 $ 2,141 490 %
Sales and marketing expenses increased by $2.1 million , or 490%, from the three
months ended March 31, 2020 to March 31, 2021 . $1.1 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 to Surrey
Hospital to fund a study related to bamlanivimab in Canada . Sales and marketing
expenses related to travel were significantly lower for the three months ended
March 31, 2021 due to continued COVID-19 related travel restrictions.
General and Administrative
Three months ended
March 31, Change
2020 2021 Amount %
(in thousands, except percentages)
General and administrative $ 1,650 $ 6,422 $ 4,772 289 %
General and administrative expenses increased by $4.8 million , or 289%, from the
three months ended March 31, 2020 to March 31, 2021 . $1.4 million of the
increase was driven by increased headcount within the general and administrative
function and the associated compensation expenses. $2.2 million is attributable
to legal and corporate matters as a public company. $1.0 million of the increase
in general and administrative expense is due to increased expenditures related
to director and office insurance and increased general office expense.
Depreciation and Amortization
Three months ended
March 31, Change
2020 2021 Amount %
(in thousands, except percentages)
Depreciation and amortization
Depreciation and amortization expenses increased by$2.7 million , or 476%, from the three months endedMarch 31, 2020 toMarch 31, 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$0.3 million due to the depreciation of equipment and facilities related to capital equipment purchases. Other (Income) Expense Three months ended March 31, Change 2020 2021 Amount % (in thousands, except percentages) Other (income) expense$ 1,001 $ (265 ) $ (1,266 ) -126 % Other (income) expense decreased by$1.3 million , or 126%, from the three months endedMarch 31, 2020 toMarch 31, 2021 . Other (income) expense for 2020 included a foreign exchange loss of$0.9 million along with offsetting interest income and expense amounts. Other (income) expense for the three months endedMarch 31, 2021 included a foreign exchange loss of$0.5 million and a$1.1 million gain on fair value adjustments. 21
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Grants and Incentives
Three months ended
March 31, Change
2020 2021 Amount %
(in thousands, except percentages)
Grants and incentives $ (1,030 ) $ (3,148 ) $ (2,118 ) 206 %
Grants and incentives increased by $2.1 million , or 206%, from the three months
ended March 31, 2020 to March 31, 2021 . This increase is attributable to
increased research and development expenditures incurred during the quarter that
are eligible for the SIF project.
Liquidity and Capital Resources
As ofMarch 31, 2021 , we had$685.8 million of cash and cash equivalents. The increase of$91.7 million sinceDecember 31, 2020 was driven primarily from cash flow from operations in the first quarter of 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 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:
Three months ended
March 31,
2020 2021
(in thousands)
Net cash provided by (used in):
Operating activities $ (764 ) $ 109,545
Investing activities (5,583 ) (15,839 )
Financing activities 87,738 (1,543 )
Net increase in cash and cash equivalents
Operating activities Net cash (used in) provided by operating activities increased from cash used of$0.8 million in the three months endedMarch 31, 2020 to cash provided by operating activities of$109.5 million in the three months endedMarch 31, 2021 . The increase resulted primarily from increased revenue from royalty and licensing streams, satisfaction of clinical milestones under our partnership with Lilly, and continued discovery research activities, as well as securing new multi-year, multi-target contracts with partners.
Investing activities
Net cash used in by investing activities increased from$5.6 million in the three months endedMarch 31, 2020 to$15.8 million in the three months endedMarch 31, 2021 . Investing activities during the three months endedMarch 31, 2020 were directly attributed to the purchase of intangible assets. Investing activities during the three months endedMarch 31, 2021 are attributable to our investment in real estate, facilities and equipment in ourVancouver offices.
Financing activities
Net cash provide by financing activities was$87.7 million for the three months endedMarch 31, 2020 . This was due to proceeds from our Series A2 financing. Net cash used by financing activities was$1.5 million for the three months endedMarch 31, 2021 due to repayment of long-term debt. 22 --------------------------------------------------------------------------------
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 three months endedMarch 31, 2021 other than for the inclusion of license revenue as disclosed in the condensed consolidated financial statements included elsewhere in this report.
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