NOTICE SHADOW BEFORE ARD SEE ANNOUNCEMENTS
This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of the
U.S.Private Securities Litigation Reform Act of 1995 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 level of market acceptance մեր of our drug detection platform.
• companies and technologies in our industry that we compete with;
• Develop our ability to manage our business by expanding sales to existing partners or introducing our drug discovery platform to new partners.
• Our ability to provide a complete solution from target to IND presentation to our partners.
• Our expectations for the completion մեր production capacity of our GMP facility.
• Our ability to establish and maintain intellectual property protection for our technologies և workflows, including our intellectual property
property litigation with Berkeley Lights, or avoid or defend
against breach claims;
• Our ability to attract, hire, retain, and effectively manage our future growth.
• our ability to obtain additional financing in future offerings; • the volatility of the trading price of our common shares;
• Our ability to engage and retain key scientific and engineering staff.
• Our expectations for the period during which we qualify as a developing company under the JOBS Act.
• Business failures that affect the development of our business և our platform due to the global COVID-19 epidemic.
• our ability to remediate our material weaknesses;
• Our expectations for our PFIC status for our taxable year are over
• Our expectations regarding the acquisition of Trianni և Our ability to realize the intended benefits of such a transaction.
• Our expectations regarding the use of the proceeds of 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 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 12 --------------------------------------------------------------------------------
The announcements contained in this Quarterly Report are made as of the date of this Quarterly Report; we have no obligation to update any prospective statement, be it new information, future events or otherwise, unless 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 represent all amounts in this quarterly 10-Q horse report
և “C $” և “CAD $” links are Canadian dollars.
Except as otherwise indicated, references in this Quarterly Report on Form 10-Q to "AbCellera," the "Company," "we," "us" and "our" refer to
AbCellera Biologics Inc.and its consolidated subsidiaries.
The effect of COVID-19
At the onset of the pandemic in
March 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 և 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 have carried out protocols for the employees needed to relocate the Company
functions in the office ություններում in laboratory facilities, including physical
distance, personal և protective equipment, signs, installation of barriers
between desks and lab benches, and implementing space restrictions for different areas of the facilities.
• With relevant national և local health authorities, we have limited
business travel and implemented procedures to control and monitor all office and facility access.
• We are not required to discontinue laboratory research
Against the COVID-19 epidemic. We will continue to adapt և apply new measures
as required և as directed by local health authorities.
office facilities in accordance with the extension of health and safety protocols
according to the guidelines given by the local health authorities.
We believe that the most reliable way to a better future is technological advancement, that the new frontier of technology lies in the interface of computing, engineering, and biology. Our mission is to improve our health with technologies that change the way we treat antibody-based therapies. We aim to become the next generation centralized antibody detection operating system.
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 13 -------------------------------------------------------------------------------- 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 millionand $15.9 millionand $27.6 millionand $230.4 millionfor the three and six months ended June 30, 2020and 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]] 14
We incurred sales and marketing expenses of
$0.5 millionand $1.0 millionand $1.3 millionand $3.9 millionfor the three and six months ended June 30, 2020and 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 millionand $13.3 millionand $15.0 millionand $27.4 millionfor the three and six months ended June 30, 2020and 2021, respectively. We incurred general and administrative expenses of $1.5 millionand $3.1 millionand $11.2 millionand $17.7 millionfor the three and six months ended June 30, 2020and 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 to improve our technology
stack and platform; • Market and sell our solutions to existing and new partners;
• Expand և Expand programs, including investments, delivery activities
• Acquire businesses or technologies to support the growth of our business.
• Attract, hire and retain qualified personnel;
• Continue to affirm, protect և protect our intellectual property և
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 millionand $4.6 million, respectively. Our net loss for the three months ended June 30, 2021was $2.3 millionand our net earnings for the six months ended June 30, 2021were $114.9 million. As of June 30, 2021, we had accumulated earnings of $229.1 millionand 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 $20.00per 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. 15 -------------------------------------------------------------------------------- In February 2021, we announced the appointment of Ester Falconer, Ph.D. as our Chief Technology Officer. As CTO, Dr. Falconerwill 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, 2021the European Medicines Agency's(EMA) Committee for Medicinal Productsfor 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.
April 2021, the Company announced it entered into a joint venture (Beedie JV) whereby we will invest in equal shares of a Vancouverbuilding development to be leased exclusively by AbCellera for additional office and lab facilities for our future office headquarters. In April 2021, Eli Lilly and Company requested the U.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 the U.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 the U.S.for the treatment of COVID-19 - as planned with the FDA - followed the modification of contracts with the U.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 on April 16, 2021. In April 2021, we entered into a multi-target collaboration agreement with Empirico 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. In May 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. In June 2021, the Office of the AssistantSecretary for Preparedness and Response paused shipment of bamlanivimab and etesevimab administered together in the U.S.This was due to the prevalence of the Gamma and Beta variants in the U.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. In July 2021, the Company announced the appointment of Neil Berkleyas Chief Business Officer. As CBO, Mr. Berkley'srole 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
August 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.
The main factors influencing the results of operations և our future activities
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".
• Provision of additional programs under the contract. Our growth potential
Income, both in the near and long term, depends on our ability
provide additional programs under the contract of new և existing partners.
For existing partners, we seek to expand our relationship with them
include multi-year, diverse programs. Since our first ad
as of 2015
which are either completed, or 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 have
applications based on our platform. Our ability to keep growing
The contracted programs depend on our ability to educate
market ել to support business by investing in our sales և
Strengthen marketing efforts through further research and development
our technological differentiation.
• Our partners successfully develop and market 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 project under the contract is presented with potential future events
Payments և royalties, not research fees. As a result, we believe
Our business ագա The future results of our activities will greatly depend
to the extent that our partners are successfully developing and commercializing
antibodies that we detect based on contracts with our partners. how
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.
• Initiation rate for our selection of detection projects
co-workers: When projects are contracted, partners must choose
Targeting և agree on a detailed job announcement before we begin
Detection of any antibodies. Such exchange rate և time
Choice և initiative differ from partner to partner. Because it is huge
majority of research fees that we are entitled to recognize under our partnerships depend on our delivery of antibodies for development by our
partners, any delays in the selection and coordination of targets of our partners
Employment reports will affect income recognition.
• Invest our technology heap. Our ability to maintain
նել Expand our partnership depends on the benefits of our technology
stack ship 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 our
Ability to detect, develop, and detect antibody drugs; or
those who provide an opportunity to expand our partner business
related treatment methods. We intend to allocate significant funds
to continue to improve our technological differentiation which will impact our financial performance.
• Increase our activities to implement detection programs. How do we provide?
Additional software under the contract և when our partners initiate the discovery
programs, our operational capacity to carry out such research can
to become tense. We make significant investments in capital և time
increase our capacity to address future growth, including building new ones
headquarters, building a new small-scale production plant, making investments
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 expand
ability: We expect a significant increase in staff as the workforce expands
our operating expenses, including stock-based compensation.
Basic business criteria
We regularly review the following key business metrics to evaluate our business, measure our performance, identify trends that affect our business, make financial forecasts, and make strategic decisions. We believe that the following are the criteria
17 -------------------------------------------------------------------------------- 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.
* For the latest regulatory developments regarding this molecule, see the “Recent Developments” above.
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 produce multiple molecules, such as COVID-19 alone
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 milestone
and royalties although the discovery was not performed as an
program, as is the case for several Trianni humanized rodent license agreements. 18
-------------------------------------------------------------------------------- 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 of partnership agreements with pharmaceutical and biotechnology companies, which include downstream participation in 2016
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 transaction results
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. 19
-------------------------------------------------------------------------------- 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 the
SECand 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) expenses. Other (income) expenses consist of interest income on our cash balances, interest expense on loans under any loan agreement, and currency (profit) losses due to exchange rate fluctuations between the Canadian dollar and the dollar.
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's
Ministry of Innovation, Science and Economic Development, such as their Industrial Research Assistance Program, and the Strategic 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 currency conversion adjustments as a result of currency fluctuations in functional Canadian currency organizations.
Results of operations:
The three-six month comparison is over
The table below summarizes our unverified results for three to six months of completed transaction data.
Three months ended Six months ended June 30, June 30, 2020 2021 2020 2021 Revenue: Research fees
$ 8,228 $ 5,215 $ 12,885 $ 9,201Licensing 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 $ 114,898Foreign currency translation adjustment - 2,152 - 2,152
Comprehensive income (loss)
$ 117,050Net earnings (loss) per share attributable to common shareholders Basic $ 0.03 $ (0.01 ) $ 0.02 $ 0.42Diluted $ 0.03 $ (0.01 ) $ 0.02 $ 0.36Weighted-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 excluded from depreciation. 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 $ 6,877General and administrative 86 4,592 694 5,907 Sales and marketing 37 161 50 1,116 $ 606$ 8,473 $ 1,843 $ 13,90021
-------------------------------------------------------------------------------- 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 $ 16,415146 % $ 15,885 $ 230,384 $ 214,4991350 % Revenue increased by $16.4 millionfrom the three months ended June 30, 2020to June 30, 2021. Royalty revenue of $21.2 millionare 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 millionfor the three months ended June 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 ended June 30, 2020. Revenue increased by $214.5 millionfor the six months ended June 30, 2020to June 30, 2021. Royalty revenue of $192.7 millionare directly associated with the specified percentage of proceeds that Eli Lilly received from the sales of bamlanivimab. We earned $20.5 millionin licensing revenue related to the recently acquired Trianni humanized rodent platform business. We earned $8.0 millionin milestone revenue of which $7.0 millionrelates to the first commercial sale in Europeby Eli Lilly relating to molecule bamlanivimab for treatment of COVID-19 and the remaining $1.0 millionmilestone 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 millionfor the six months ended June 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 $ 3,610N/A $ - $ 23,622 $ 23,622N/A Royalty fees for the three and six months ended June 30, 2020and 2021 were $3.6 millionand $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 և Development
Research and development expenses increased by
$5.9 million, or 65%, from the three months ended June 30, 2020to June 30, 2021, reflecting continuing strong investments in the capacity and capabilities of AbCellera's discovery and development platform. Of this increase, $6.6 millionis 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 millionattributable to the purchase of the OrthoMab bispecific platform during the prior period. $2.8 millionof 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 ended June 30, 2020to June 30, 2021, reflecting continuing strong investments in the capacity and capabilities of AbCellera's discovery and development platform. Of this increase, $12.0 millionis due to the increase in compensation expense consistent with the increase in headcount. $5.9 millionof 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 millionattributable 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 $ 748137 % $ 984 $ 3,869 $ 2,885293 % Sales and marketing expenses increased by $0.7 million, or 137%, from the three months ended June 30, 2020to June 30, 2021and reflects the on going investment to build AbCellera's Business Development team. $0.4 millionof 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 ended June 30, 2020to June 30, 2021. $1.5 millionof the increase is due to the increase in compensation expense consistent with increased headcount. $0.8 millionof the increase is attributable to a donation made to Surrey Hospitalto fund a study related to bamlanivimab in Canada. 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 ended June 30, 2021due 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 և administrative
General and administrative expenses increased by
$9.7 million, or 648%, from the three months ended June 30, 2020to June 30, 2021. $4.5 millionof 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 millionof 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 millionis attributable to legal fees and other corporate matters relating to being a public company and protecting our intellectual property. $1.4 millionof 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 ended June 30, 2020to June 30, 2021. $5.2 millionof 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 millionof 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 millionis attributable to legal fees and other corporate matters relating to being a public company and protecting our intellectual propertly. $1.5 millionof 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 և Depreciation
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 $ 2,629294 % $ 1,467 $ 6,827 $ 5,360365 % 23
Depreciation and amortization expenses increased by
$2.6 million, or 294%, from the three months ended June 30, 2020to June 30, 2021. Amortization expense increased by $2.5 milliondue to the amortization of acquired intangible assets over their respective useful lives. Depreciation expense increased by $0.2 milliondue 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 ended June 30, 2020to June 30, 2021. Amortization expense increased by $4.9 milliondue to the amortization of acquired intangible assets over their respective useful lives. Depreciation expense increased by $0.4 milliondue 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)
(thousands, excluding interest) Other (income) expenses
Other (income) expense decreased by
$0.6 million, or 207%, for the three months ended June 30, 2020to June 30, 2021. Other (income) expense for the three months ended June 30, 2020included $0.5 millionin interest expense partly offset by $0.2 millionin financing fees. Other (income) expense for the three months ended June 30, 2021included interest income on cash balances of $0.4 million, and a foreign exchange gain of $0.8 million, offset by $0.8 millionof financing fees and contingent consideration. Other (income) expense decreased by $1.9 million, or 150%, for the six months ended June 30, 2020to June 30, 2021. Other (income) expense for the six months ended June 30, 2020included $0.6 millionin interest expense offset by $0.3 millionin financing fees, and $0.9 millionin foreign exchange losses. Other (income) expense for the six months ended June 30, 2021included interest income on cash balances of $0.6 millionand a foreign exchange gain of $0.3 million, offset by $0.2 millionof 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 ended June 30, 2020to June 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 ended June 30, 2020to June 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 և Capital resources
June 30, 2021, we had $792.6 millionof cash and cash equivalents. The increase of $198.5 millionsince December 31, 2020was primarily from cash flow from operations and driven by the receipt of accounts receivable relating to royalties from bamlanivimab in the six months ended June 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 table below 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 $ 267,228Investing 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 $ 198,455Operating activities Net cash provided by operating activities increased from $25.2 millionin the six months ended June 30, 2020to $267.2 millionin 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.
Net cash used by investing activities increased from
$7.7 millionin the six months ended June 30, 2020to $61.5 millionin the six months ended June 30, 2021. Investing activities during the six months ended June 31, 2020were directly attributed to the purchase of intangible assets. Investing activities during the six months ended June 31, 2021were 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 our Vancouveroffices, offset by grant funding received in the period.
Net cash provided by financing activities was
$88.1 millionfor the six months ended June 30, 2020. This was due primarily to proceeds from our Series A2 financing. Net cash used by financing activities was $6.6 millionfor the six months ended June 30, 2021due to repayment of long-term debt and intangible asset obligation, partly offset by proceeds from exercise of options for common stock.
Accounting policy և significant judgments և estimates
Detailed information about our critical accounting policies and estimates is set forth in Part II, Item 7 of our Annual Report on Form 10-K for the year ended
December 31, 2020. There have been no significant changes to these policies during the six months ended June 30, 2021, except as referred to in Note 2 to the condensed consolidated financial statements.
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