AbCellera Biologics Inc. (NASDAQ:ABCL) Q2 2023 Earnings Conference Call August 3, 2023 5:00 PM ET Company Participants Tryn Stimart - Chief Legal & Compliance Officer Carl Hansen - Chief Executive Officer & President Andrew Booth - Chief Financial Officer Conference Call Participants Andrea Tan - Goldman Sachs Antonia Borovina - Bloom Burton Steven Mah - Cowen Stephen Willey - Stifel Malcolm Hoffman - BMO Gaurav Goparaju - Berenberg Operator Good afternoon, and thank you, and welcome to AbCellera's Second Q ...

Q2 2023 BUSINESS UPDATE ARELLECBA AUGUST 3, 2023 © DISCLAIMER Th ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 _________________________________________________________ FORM 10-Q _________________________________________________________ (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number ...

AbCellera Biologics Inc. (NASDAQ:ABCL) Q1 2023 Results Conference Call May 4, 2023 5:00 PM ET Company Participants Tryn Stimart - Chief Legal and Compliance Officer Dr. Carl Hansen - Chairman, Chief Executive Officer, and President Andrew Booth - Chief Financial Officer Conference Call Participants Andrea Tan - Goldman Sachs Antonia Borovina - Bloom Burton Stephen Willey - Stifel Nishant Gandhi - Truist Gaurav Goparaju - Berenberg Puneet Souda - SVB Securities Malcolm Hoffman - BMO Steven Mah - Cowen Operat ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited condensed consolidated financial statements, detailing financial position and performance for Q1 2023 [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets from **$1.54 billion** at December 31, 2022, to **$1.50 billion** at March 31, 2023, primarily driven by a reduction in cash and cash equivalents Balance Sheet Summary | Metric | Dec 31, 2022 (in thousands) | Mar 31, 2023 (in thousands) | Change | | :---------------------------------- | :-------------------------- | :-------------------------- | :----- | | Total assets | $1,540,907 | $1,497,919 | $(42,988) | | Total liabilities | $307,630 | $289,419 | $(18,211) | | Total shareholders' equity | $1,233,277 | $1,208,500 | $(24,777) | | Cash and cash equivalents | $386,535 | $193,017 | $(193,518) | | Marketable securities | $499,950 | $603,478 | $103,528 | | Total cash, cash equivalents, and marketable securities | $886,485 | $796,495 | $(89,990) | [Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20%28Loss%29%20and%20Comprehensive%20Income%20%28Loss%29) The company experienced a significant shift from net earnings of **$168.57 million** in Q1 2022 to a net loss of **$40.11 million** in Q1 2023, primarily due to the absence of COVID-19 antibody royalty revenue Income Statement Summary | Metric | Three months ended Mar 31, 2022 (in thousands) | Three months ended Mar 31, 2023 (in thousands) | Change | | :---------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :----- | | Total revenue | $316,581 | $12,192 | $(304,389) | | Royalty revenue | $307,017 | $- | $(307,017) | | Research fees | $9,333 | $10,570 | $1,237 | | Milestone payments | $- | $1,250 | $1,250 | | Total operating expenses | $91,631 | $77,066 | $(14,565) | | Royalty fees (expense) | $44,637 | $- | $(44,637) | | Research and development | $26,366 | $52,647 | $26,281 | | Income (loss) from operations | $224,950 | $(64,874) | $(289,824) | | Net earnings (loss) | $168,573 | $(40,110) | $(208,683) | | Basic EPS | $0.59 | $(0.14) | $(0.73) | | Diluted EPS | $0.54 | $(0.14) | $(0.68) | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total shareholders' equity decreased from **$1.23 billion** at December 31, 2022, to **$1.21 billion** at March 31, 2023, primarily due to the net loss incurred Stockholders' Equity Summary | Metric | Dec 31, 2022 (in thousands) | Mar 31, 2023 (in thousands) | Change | | :---------------------------------- | :-------------------------- | :-------------------------- | :----- | | Total Shareholders' Equity | $1,233,277 | $1,208,500 | $(24,777) | | Shares issued and RSUs vested | 286,851,595 | 288,426,514 | 1,574,919 | | Stock-based compensation expense | - | $15,474 | $15,474 | | Net loss | - | $(40,110) | $(40,110) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow shifted from a **$100.22 million** inflow in Q1 2022 to a **$44.06 million** outflow in Q1 2023, mainly due to net loss and increased R&D Cash Flow Summary | Metric | Three months ended Mar 31, 2022 (in thousands) | Three months ended Mar 31, 2023 (in thousands) | Change | | :---------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :----- | | Net cash provided by (used in) operating activities | $100,219 | $(44,063) | $(144,282) | | Net cash used in investing activities | $(26,371) | $(149,609) | $(123,238) | | Net cash used in financing activities | $(3,131) | $(458) | $2,673 | | Net increase (decrease) in cash and cash equivalents | $70,513 | $(194,343) | $(264,856) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the condensed consolidated financial statements, covering operations, policies, and financial instruments [Note 1. Nature of operations](index=12&type=section&id=Note%201.%20Nature%20of%20operations) - AbCellera's mission is to accelerate antibody drug discovery and development, partnering with companies to build a diversified portfolio of royalty stakes in future antibody drugs[22](index=22&type=chunk) [Note 2. Basis of presentation](index=12&type=section&id=Note%202.%20Basis%20of%20presentation) - The unaudited interim condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim financial information, reflecting normal recurring adjustments[23](index=23&type=chunk)[24](index=24&type=chunk) [Note 3. Significant accounting policies](index=12&type=section&id=Note%203.%20Significant%20accounting%20policies) - The preparation of financial statements requires management to make estimates and assumptions, particularly for revenue recognition, fair value of acquired intangible assets, contingent consideration payable, and stock-based compensation awards[25](index=25&type=chunk) [Note 4. Net earnings (loss) per share](index=13&type=section&id=Note%204.%20Net%20earnings%20%28loss%29%20per%20share) Net Earnings (Loss) Per Share | Metric | Three months ended Mar 31, 2022 | Three months ended Mar 31, 2023 | | :-------------------------------------------------- | :------------------------------ | :------------------------------ | | Net earnings (loss) per share attributable to common shareholders - basic | $0.59 | $(0.14) | | Net earnings (loss) per share attributable to common shareholders - diluted | $0.54 | $(0.14) | | Weighted-average common shares outstanding - basic | 283,895,020 | 287,767,136 | | Weighted-average common shares outstanding - diluted | 311,482,017 | 287,767,136 | - Potentially dilutive securities (stock options and RSUs) were excluded from diluted net loss per share for Q1 2023 because their effect would be anti-dilutive, resulting in basic and diluted EPS being the same[28](index=28&type=chunk) [Note 5. Property and equipment, net](index=13&type=section&id=Note%205.%20Property%20and%20equipment%2C%20net) Property and Equipment, Net | Category | December 31, 2022 (in thousands) | March 31, 2023 (in thousands) | | :-------------------------------- | :------------------------------- | :------------------------------ | | Property and equipment, net | $217,255 | $233,187 | | Depreciation expense (3 months) | $1,400 | $2,900 | - Leasehold improvements include tenant improvements in progress of **$38.9 million** as of March 31, 2023, which have not yet commenced depreciation[31](index=31&type=chunk) [Note 6. Intangible assets](index=14&type=section&id=Note%206.%20Intangible%20assets) Intangible Assets Net Book Value | Category | Net book value (March 31, 2023, in thousands) | | :--------- | :-------------------------------------------- | | License | $18,016 | | Technology | $46,819 | | IPR&D | $64,010 | | Total | $128,845 | Estimated Amortization Expense | Year | Estimated Amortization Expense (in thousands) | | :--- | :-------------------------------------------- | | 2024 | $10,599 | | 2025 | $4,241 | | 2026 | $4,241 | | 2027 | $4,241 | | 2028 | $4,241 | | Total | $27,563 | [Note 7. Investments in and loans to equity accounted investees, and other long-term assets](index=14&type=section&id=Note%207.%20Investments%20in%20and%20loans%20to%20equity%20accounted%20investees%2C%20and%20other%20long-term%20assets) - The company has two **50%** joint ventures, Dayhu JV and Beedie JV, for the construction of future office and laboratory headquarters[34](index=34&type=chunk) - As of March 31, 2023, the equity investment balance in Dayhu JV was **$41.3 million**, and a new loan of **$34.0 million** was issued to Dayhu in January 2023[35](index=35&type=chunk)[36](index=36&type=chunk) - As of March 31, 2023, the equity investment balance in Beedie JV was **$16.3 million**, and a land loan of **$5.5 million** was committed to Beedie[37](index=37&type=chunk)[39](index=39&type=chunk) [Note 8. Current assets and liabilities](index=16&type=section&id=Note%208.%20Current%20assets%20and%20liabilities) Current Assets and Liabilities | Category | December 31, 2022 (in thousands) | March 31, 2023 (in thousands) | | :-------------------------------- | :------------------------------- | :------------------------------ | | Other current assets | $75,413 | $99,155 | | Accounts payable and other liabilities | $33,150 | $31,814 | [Note 9. Shareholders' equity](index=16&type=section&id=Note%209.%20Shareholders%27%20equity) Stock Option Activity (Pre-IPO Plan) | Stock Option Activity (Pre-IPO Plan) | Dec 31, 2022 | Mar 31, 2023 | | :----------------------------------- | :----------- | :----------- | | Outstanding Shares | 33,694,150 | 32,606,979 | | Weighted-Average Exercise Price | $0.90 | $0.91 | Stock Option Activity (2020 Plan) | Stock Option Activity (2020 Plan) | Dec 31, 2022 | Mar 31, 2023 | | :-------------------------------- | :----------- | :----------- | | Outstanding Shares | 12,322,933 | 13,804,391 | | Weighted-Average Exercise Price | $14.81 | $14.33 | RSU Activity (2020 Plan) | RSU Activity (2020 Plan) | Dec 31, 2022 | Mar 31, 2023 | | :----------------------- | :----------- | :----------- | | Outstanding Shares | 3,946,985 | 4,433,055 | | Weighted-Average Grant Fair Value | $13.71 | $12.87 | Stock-based Compensation Expense | Stock-based Compensation Expense (in thousands) | Three months ended Mar 31, 2022 | Three months ended Mar 31, 2023 | | :---------------------------------------------- | :------------------------------ | :------------------------------ | | Research and development | $5,937 | $7,496 | | Sales and marketing | $994 | $1,271 | | General and administrative | $5,360 | $6,707 | | Total | $12,291 | $15,474 | [Note 10. Revenue](index=17&type=section&id=Note%2010.%20Revenue) Deferred Revenue | Deferred Revenue (in thousands) | Dec 31, 2021 | Mar 31, 2022 | Dec 31, 2022 | Mar 31, 2023 | | :------------------------------ | :----------- | :----------- | :----------- | :----------- | | Deferred revenue | $34,954 | $35,861 | $41,128 | $37,223 | - The company recognized **$4.8 million** of revenue in Q1 2023 that had been included in deferred revenue from the previous year, an increase from **$2.7 million** in Q1 2022[52](index=52&type=chunk) [Note 11. Financial instruments](index=18&type=section&id=Note%2011.%20Financial%20instruments) - The company categorizes financial assets and liabilities measured at fair value into a three-level hierarchy, with most approximating fair value and classified as Level 2[53](index=53&type=chunk)[54](index=54&type=chunk) Marketable Securities | Marketable Securities (March 31, 2023, in thousands) | Level 1 | Level 2 | Level 3 | Total | | :----------------------------------- | :------ | :------ | :------ | :------ | | U.S. government agencies | $108,117 | $- | $- | $108,117 | | Certificate of deposit | $- | $260,756 | $- | $260,756 | | Commercial paper | $- | $68,129 | $- | $68,129 | | Corporate bonds | $- | $144,526 | $- | $144,526 | | Asset backed securities | $- | $21,950 | $- | $21,950 | | Total | $108,117 | $495,361 | $- | $603,478 | Contingent Consideration | Contingent Consideration (in thousands) | Liability at beginning of period (Dec 31, 2022) | Increase (decrease) in fair value | Liability at end of period (Mar 31, 2023) | | :------------------------------------ | :---------------------------------------------- | :-------------------------------- | :------------------------------------------ | | Trianni | $23,505 | $(2,602) | $20,903 | | TetraGenetics | $36,760 | $946 | $37,706 | [Note 12. Commitments and contingencies](index=19&type=section&id=Note%2012.%20Commitments%20and%20contingencies) - Royalty fees expensed decreased from **$44.6 million** in Q1 2022 to nil in Q1 2023[61](index=61&type=chunk) - Accrued royalties payable decreased from **$19.3 million** at December 31, 2022, to **$3.1 million** at March 31, 2023[61](index=61&type=chunk) - No amounts have been accrued related to the repayment terms of the Canadian government's Strategic Innovation Fund (SIF) Phase 2 funding, as conditions are estimated to be non-probable as of March 31, 2023[62](index=62&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial condition and operations, highlighting decreased revenue, net loss, and R&D investments [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=20&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) - The report contains forward-looking statements regarding plans, objectives, future revenue, performance, and capital expenditures, which are subject to risks and uncertainties[64](index=64&type=chunk) - Actual results may differ materially from expectations due to factors like market acceptance, competition, partner success, R&D investments, and global economic conditions[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) [Overview](index=21&type=section&id=Overview) - AbCellera's mission is to bring better antibody drugs to patients faster by building an integrated engine for antibody drug discovery and development[71](index=71&type=chunk) - Partnership agreements include near-term payments (technology access, research fees) and downstream payments (clinical/commercial milestones, royalties on net sales)[72](index=72&type=chunk) - The company plans significant investments in R&D to enhance its engine, including building new headquarters and a small-scale manufacturing facility, and expanding operations[72](index=72&type=chunk) - As of March 31, 2023, AbCellera had **177** discovery programs under contract with **41** partners, adding **three** new programs and advancing **one** molecule into the clinic in Q1 2023[73](index=73&type=chunk) [Results of operations (Summary Table)](index=23&type=section&id=Results%20of%20operations%20%28Summary%20Table%29) Results of Operations Summary | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | Change % | | :---------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :------- | | Total Revenue | $316,581 | $12,192 | $(304,389) | (96)% | | Total Operating Expenses | $91,631 | $77,066 | $(14,565) | (16)% | | Income (loss) from operations | $224,950 | $(64,874) | $(289,824) | (129)% | | Net earnings (loss) | $168,573 | $(40,110) | $(208,683) | (124)% | | Basic EPS | $0.59 | $(0.14) | $(0.73) | (124)% | | Diluted EPS | $0.54 | $(0.14) | $(0.68) | (126)% | [Key Factors Affecting Our Results of Operations and Future Performance](index=24&type=section&id=Key%20Factors%20Affecting%20Our%20Results%20of%20Operations%20and%20Future%20Performance) - Future revenue growth is dependent on securing additional programs under contract and partners successfully developing and commercializing discovered antibodies[77](index=77&type=chunk) - The majority of potential value for each program is in future milestone payments and royalties, making partner success critical[77](index=77&type=chunk) - Significant investments in R&D are expected to enhance the discovery and development engine, impacting financial performance[77](index=77&type=chunk) - Operational scaling, including new facilities and increased headcount, will lead to increased operating expenses[77](index=77&type=chunk) [Key Business Metrics](index=24&type=section&id=Key%20Business%20Metrics) Cumulative Business Metrics | Cumulative Metrics | March 31, 2022 | March 31, 2023 | Change % | | :------------------------- | :------------- | :------------- | :------- | | Number of discovery partners | 36 | 41 | 14 % | | Programs under contract | 158 | 177 | 12 % | | Partnered program starts | 84 | 101 | 20 % | | Molecules in the clinic | 6 | 9 | 50 % | - Molecules in the clinic include Bamlanivimab and Bebtelovimab (Marketed, EUA for COVID-19), TAK920/DNL919 (Phase 1 for Alzheimer's), and NBL-012/NBL-015/FL-301/NBL-020 (Phase 1/IND/CTA authorized for various indications)[80](index=80&type=chunk) [Summary partnership agreements with pharmaceutical and biotechnology companies that include downstream participation](index=26&type=section&id=Summary%20partnership%20agreements%20with%20pharmaceutical%20and%20biotechnology%20companies%20that%20include%20downstream%20participation) - The company has numerous partnership agreements with pharmaceutical and biotechnology companies, including recent agreements with RQ Biotechnology Ltd., AbbVie Inc., and Rallybio Corporation in 2022-2023[85](index=85&type=chunk) - These partnerships cover a range of therapeutic indications and modalities, from infectious disease to oncology and neurology, with varying numbers of targets and multi-year durations[85](index=85&type=chunk) [Results of Operations (Detailed Comparison)](index=27&type=section&id=Results%20of%20Operations%20%28Detailed%20Comparison%29) [Revenue](index=27&type=section&id=MD%26A%20-%20Results%20of%20Operations%20-%20Revenue) Revenue by Type | Revenue Type | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | Change % | | :------------------ | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :------- | | Research fees | $9,333 | $10,570 | $1,237 | 13 % | | Licensing revenue | $231 | $372 | $141 | 61 % | | Milestone payments | $- | $1,250 | $1,250 | 100 % | | Royalty revenue | $307,017 | $- | $(307,017) | (100)% | | Total revenue | $316,581 | $12,192 | $(304,389) | (96)% | - The **96%** decrease in total revenue was primarily due to the absence of royalty revenue from bebtelovimab, which was no longer authorized for emergency use in the U.S. in Q4 2022[88](index=88&type=chunk) [Operating Expenses](index=27&type=section&id=MD%26A%20-%20Results%20of%20Operations%20-%20Operating%20Expenses) [Royalty Fees](index=27&type=section&id=MD%26A%20-%20Results%20of%20Operations%20-%20Royalty%20Fees) Royalty Fees | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2023 | Change | | :------------- | :-------------------------------- | :-------------------------------- | :----- | | Royalty fees | $44,637 | $- | $(44,637) | - Royalty fees decreased by **100%** due to the cessation of royalty revenues from Eli Lilly's sales of bamlanivimab and bebtelovimab[89](index=89&type=chunk) [Research and Development](index=27&type=section&id=MD%26A%20-%20Results%20of%20Operations%20-%20Research%20and%20Development) Research and Development Expenses | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2023 | Change | | :------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Research and development | $26,366 | $52,647 | $26,281 | - R&D expenses increased by **100%**, reflecting continued growth in program execution, platform development, forward integration, and specific one-time investments in co-development and pre-partnered programs[90](index=90&type=chunk) [Sales and Marketing](index=28&type=section&id=MD%26A%20-%20Results%20of%20Operations%20-%20Sales%20and%20Marketing) Sales and Marketing Expenses | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2023 | Change | | :---------------- | :-------------------------------- | :-------------------------------- | :----- | | Sales and marketing | $2,370 | $3,771 | $1,401 | - Sales and marketing expenses increased by **59%**, driven by business development activity, consulting fees, and compensation costs[91](index=91&type=chunk) [General and Administrative](index=28&type=section&id=MD%26A%20-%20Results%20of%20Operations%20-%20General%20and%20Administrative) General and Administrative Expenses | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2023 | Change | | :--------------------------- | :-------------------------------- | :-------------------------------- | :----- | | General and administrative | $14,268 | $15,134 | $866 | - General and administrative expenses increased by **6%**, primarily due to compensation-related expenses from increased headcount and higher software, licensing, and facility expenses[92](index=92&type=chunk) [Depreciation and Amortization](index=28&type=section&id=MD%26A%20-%20Results%20of%20Operations%20-%20Depreciation%20and%20Amortization) Depreciation and Amortization Expenses | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2023 | Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Depreciation and amortization | $3,990 | $5,514 | $1,524 | - Depreciation and amortization expenses increased by **38%** due to the depreciation of equipment and facilities related to capital equipment purchases[93](index=93&type=chunk) [Interest (Income)](index=28&type=section&id=MD%26A%20-%20Results%20of%20Operations%20-%20Interest%20%28Income%29) Interest (Income) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2023 | Change | | :------------------ | :-------------------------------- | :-------------------------------- | :----- | | Interest (income) | $(665) | $(9,759) | $(9,094) | - Interest income increased by **1368%**, primarily driven by higher interest rates on cash, cash equivalents, and marketable securities[94](index=94&type=chunk) [Grants and incentives](index=28&type=section&id=MD%26A%20-%20Results%20of%20Operations%20-%20Grants%20and%20incentives) Grants and Incentives | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2023 | Change | | :------------------------ | :-------------------------------- | :-------------------------------- | :----- | | Grants and incentives | $(5,194) | $(3,374) | $1,820 | - Grants and incentives decreased by **35%**, mainly due to reduced activity related to eligible R&D expenditures for the SIF project[95](index=95&type=chunk) [Other](index=29&type=section&id=MD%26A%20-%20Results%20of%20Operations%20-%20Other) Other Income/Expense | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2023 | Change | | :------ | :-------------------------------- | :-------------------------------- | :----- | | Other | $- | $(3,593) | $(3,593) | - Other income increased by **$3.6 million**, driven by a **$3.5 million** gain on fair value adjustments related to held-for-trading marketable securities and contingent consideration[96](index=96&type=chunk) [Income Tax (Recovery) Expense](index=29&type=section&id=MD%26A%20-%20Results%20of%20Operations%20-%20Income%20Tax%20%28Recovery%29%20Expense) Income Tax (Recovery) Expense | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2023 | Change | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Income tax (recovery) expense | $62,236 | $(8,038) | $(70,274) | - Income tax expense decreased by **$70.3 million**, shifting to a recovery, primarily due to the net loss incurred and changes in effective income tax rates[97](index=97&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) - As of March 31, 2023, the company had **$796.5 million** in cash, cash equivalents, and marketable securities, a decrease of **$90.0 million** since December 31, 2022[98](index=98&type=chunk) - The decrease was primarily due to increased research and development activity and continued investment in the company's discovery and development engine[98](index=98&type=chunk) - Management believes existing capital and anticipated cash flows will be sufficient for at least the next **36 months**, despite expecting operating losses from significant investments[99](index=99&type=chunk) [Cash Flows](index=29&type=section&id=Cash%20Flows) Cash Flow Summary | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | | :---------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | | Operating activities | $100,219 | $(44,063) | $(144,282) | | Investing activities | $(26,371) | $(149,609) | $(123,238) | | Financing activities | $(3,131) | $(458) | $2,673 | | Net increase (decrease) in cash and cash equivalents | $70,513 | $(194,343) | $(264,856) | [Operating activities](index=29&type=section&id=MD%26A%20-%20Cash%20Flows%20-%20Operating%20activities) - Net cash provided by operating activities decreased from a **$100.2 million** inflow in Q1 2022 to a **$44.1 million** outflow in Q1 2023[102](index=102&type=chunk) - The decrease is attributable to the absence of royalty revenue and a reduction in royalty-related payments, coupled with increased expenditures in R&D and company growth[103](index=103&type=chunk) [Investing activities](index=30&type=section&id=MD%26A%20-%20Cash%20Flows%20-%20Investing%20activities) - Net cash used in investing activities increased from **$26.4 million** in Q1 2022 to **$149.6 million** in Q1 2023[104](index=104&type=chunk) - This increase was primarily due to purchases of property and equipment, long-term investments, and marketable securities[104](index=104&type=chunk) [Financing activities](index=30&type=section&id=MD%26A%20-%20Cash%20Flows%20-%20Financing%20activities) - Net cash used in financing activities decreased from **$3.1 million** in Q1 2022 to **$0.5 million** in Q1 2023[105](index=105&type=chunk) - The decrease was due to lower contingent consideration payments, partly offset by proceeds from the exercise of stock options[105](index=105&type=chunk) [Critical Accounting Policies and Significant Judgements and Estimates](index=30&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgements%20and%20Estimates) - There have been no significant changes to the company's critical accounting policies and estimates during the three months ended March 31, 2023[106](index=106&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's exposure to market risk has not materially changed since the annual report on Form 10-K for December 31, 2022 - No material change in market risk exposure since December 31, 2022[107](index=107&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) CEO and CFO concluded disclosure controls were effective as of March 31, 2023, with no material changes in internal control - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2023[108](index=108&type=chunk) - There were no material changes in internal control over financial reporting during the period covered by this Quarterly Report[109](index=109&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ongoing patent infringement and civil lawsuits, with no material changes since the last annual report - The Patent Trial & Appeals Board (PTAB) upheld the validity of all challenged claims of U.S. Patent No. 10,087,408 in the Inter Partes Review against Berkeley Lights, Inc[111](index=111&type=chunk) - A decision on the company's motion to lift the stay in the patent litigation against Berkeley Lights is pending[111](index=111&type=chunk) - The company is defending against a civil lawsuit by the Estate of John William Schrader et al., alleging breach of implied partnership and patent infringement, which it believes is meritless[112](index=112&type=chunk) [Item 1A. Risk Factors](index=32&type=page&id=Item%201A.%20Risk%20Factors) This section details risks including historical losses, revenue fluctuations, R&D investments, competition, and intellectual property [Risks Related to Our Business and Strategy](index=32&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Strategy) - The company has incurred losses and anticipates significant future losses due to substantial investments in R&D, marketing, acquisitions, and infrastructure[114](index=114&type=chunk)[115](index=115&type=chunk) - Revenue has fluctuated significantly, with Q1 2023 showing no royalty revenue from COVID-19 antibodies, which previously accounted for a large portion of revenue[117](index=117&type=chunk)[118](index=118&type=chunk) - The company may need to raise additional capital for expansion, strategic investments, and operations, which could lead to dilution or restrictive debt covenants[122](index=122&type=chunk)[123](index=123&type=chunk)[125](index=125&type=chunk) - Commercial success depends on the quality and acceptance of its antibody discovery and development engine by new and existing partners, requiring continuous innovation and R&D investment[128](index=128&type=chunk)[129](index=129&type=chunk) - Rapid growth requires effective management of headcount, facility expansion (e.g., new GMP facility), and operational systems, posing risks of delays, increased costs, and quality issues[146](index=146&type=chunk)[148](index=148&type=chunk) - Reliance on a limited number of suppliers for laboratory equipment and materials creates vulnerability to shortages, price fluctuations, and delays[211](index=211&type=chunk)[214](index=214&type=chunk) - Recent acquisitions (Trianni, TetraGenetics) involve integration challenges, potential unknown liabilities, and uncertainties regarding the realization of anticipated benefits[221](index=221&type=chunk)[222](index=222&type=chunk)[224](index=224&type=chunk) [Risks Related to Our Intellectual Property](index=55&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) - Inability to obtain and maintain sufficient patent, trademark, copyright, and trade secret protection could allow competitors to develop similar technologies, impairing sales and competitive advantage[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) - Issued patents may be found invalid or unenforceable if challenged, leading to loss of exclusivity or narrowed claims[237](index=237&type=chunk) - Reliance on in-licenses from third parties means loss of these rights or disputes could materially impact business and development capabilities[241](index=241&type=chunk)[242](index=242&type=chunk) - Protecting intellectual property worldwide is expensive and challenging, with varying levels of protection and enforcement in different countries[251](index=251&type=chunk)[252](index=252&type=chunk) - Difficulty in protecting the confidentiality of unpatented know-how and trade secrets could harm competitive position if disclosed or independently developed[256](index=256&type=chunk)[258](index=258&type=chunk) - Involvement in intellectual property litigation (e.g., with Berkeley Lights, Schrader) is time-intensive, costly, and can divert management attention, potentially leading to adverse outcomes like damages or injunctions[267](index=267&type=chunk)[274](index=274&type=chunk)[277](index=277&type=chunk)[282](index=282&type=chunk) - Intellectual property developed with U.S. government funding may be subject to "march-in" rights and manufacturing preferences, limiting exclusive rights[291](index=291&type=chunk) [Risks Related to Ownership of Our Common Shares](index=69&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Shares) - Failure to maintain proper and effective internal control over financial reporting could harm operating results and business operations[292](index=292&type=chunk)[293](index=293&type=chunk) - Future sales of common shares or equity awards could result in dilution for existing shareholders[294](index=294&type=chunk)[295](index=295&type=chunk) - The company does not intend to pay dividends, so returns are limited to share price appreciation[297](index=297&type=chunk) - Principal shareholders and management own a significant percentage, allowing them to exert influence over shareholder approval matters[298](index=298&type=chunk) - Potential adverse U.S. federal income tax consequences for U.S. Holders if the company or its non-U.S. subsidiaries are classified as Controlled Foreign Corporations (CFCs) or Passive Foreign Investment Companies (PFICs)[314](index=314&type=chunk)[319](index=319&type=chunk) - Changes in tax law or interpretations could increase tax liabilities or compliance costs[322](index=322&type=chunk)[323](index=323&type=chunk) [General Risk Factors](index=76&type=section&id=General%20Risk%20Factors) - The ongoing COVID-19 pandemic has caused and may continue to cause delays, disruptions, and increased costs, impacting R&D, operations, and sales[326](index=326&type=chunk)[327](index=327&type=chunk)[328](index=328&type=chunk) - The ongoing military action between Russia and Ukraine and related sanctions could adversely affect the business, financial condition, and patent administration[329](index=329&type=chunk)[330](index=330&type=chunk) - Potential impairment charges for goodwill, identifiable intangible assets, or other long-lived assets from acquisitions could impact results and stock value[331](index=331&type=chunk) - The market price of common shares is highly volatile due to various factors, including financial results, competition, and general economic conditions[334](index=334&type=chunk)[337](index=337&type=chunk) - Adverse developments in the financial services industry (e.g., bank failures) could impact liquidity, access to funds, and the ability to meet obligations[341](index=341&type=chunk)[342](index=342&type=chunk)[344](index=344&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=80&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[346](index=346&type=chunk) [Item 5. Other Information](index=80&type=section&id=Item%205.%20Other%20Information) No other information to report for the period - No other information to report[346](index=346&type=chunk) [Item 6. Exhibits](index=81&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with this Quarterly Report on Form 10-Q, including certifications and XBRL documents - Includes certifications of Principal Executive Officer and Principal Financial Officer (Exhibits **31.1**, **31.2**, **32.1**, **32.2**)[348](index=348&type=chunk) - Includes Inline XBRL Instance Document and Taxonomy Extension Documents (Exhibits **101.INS**, **101.SCH**, **101.CAL**, **101.DEF**, **101.LAB**, **101.PRE**)[348](index=348&type=chunk) [Signatures](index=82&type=section&id=Signatures) The report was duly signed on May 4, 2023, by the CEO and CFO of AbCellera Biologics Inc - The report was signed by Carl L.G. Hansen, Ph.D., Chief Executive Officer, and Andrew Booth, Chief Financial Officer, on May 4, 2023[350](index=350&type=chunk)

AbCellera FULL YEAR 2022 BUSINESS UPDATE FEBRUARY 21, 2023 DISCLAIMER ULL YEAR 2022 BUSINESS UPDAT This presentation contains forward-looking statements, including statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on management's beliefs and assumptions and on information currently available to management. All statements contained in this presentation other than statements of historical fact are forward-lo ...

AbCellera Biologics Inc. (NASDAQ:ABCL) Q4 2022 Earnings Conference Call February 21, 2023 5:00 PM ET Company Participants Tryn Stimart - Chief Legal and Compliance Officer Carl Hansen - Chairman, Chief Executive Officer, and President Andrew Booth - Chief Financial Officer Conference Call Participants Tiago Fauth - Credit Suisse Andrea Tan - Goldman Sachs Gary Nachman - BMO Robyn Karnauskas - Truist Gaurav Goparaju - Berenberg Antonia Borovina - Bloom Burton Operator Good afternoon. And welcome to AbCellera ...

lll UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-39781 AbCellera Biologics Inc. (Exact name of Registrant as specified in its Charter) British Columbia Not Applicable (State or o ...

Financial Data and Key Metrics Changes - Revenue for Q3 2022 was approximately $101 million, driven largely by $93 million in royalties from bebtelovimab shipments [16][20] - The company reported a net profit of approximately $27 million, compared to a loss of roughly $21 million in Q3 2021 [20] - Operating cash flows for the first nine months of 2022 contributed $246 million to cash, with over $850 million in cash equivalents and marketable securities at the end of the quarter [20][21] Business Line Data and Key Metrics Changes - The company started work on four new discovery programs in Q3 2022, bringing the cumulative total to 92 program starts [14] - The total number of molecules in the clinic increased to seven, with one new molecule entering clinical trials for Alzheimer's disease [15] - The company ended Q3 2022 with 164 programs under contract with 38 unique partners [14] Market Data and Key Metrics Changes - The company noted that bebtelovimab was the only authorized monoclonal antibody effective against all variants of concern for much of Q3 [13] - Recent variants BQ1 and BQ1.1 are likely resistant to bebtelovimab, prompting the identification of a new lead antibody candidate [13] Company Strategy and Development Direction - The company's strategy focuses on being the best in the world at bringing antibody therapies from target to clinic and building a diversified portfolio of stakes in future antibody drugs [9] - The company aims to smooth out the binary risk of biotech investing by providing access to a curated slice of the market enriched for its best parts [9] - The company is investing in co-development partnerships to enhance potential economics and has initiated seven programs under this structure with four different partners [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's competitive position and ability to address difficult targets, particularly in the GPCR and Ion Channel spaces [10][13] - The company anticipates sharing data on clinical candidates from ongoing technology development efforts in 2023 [13] - Management believes they have sufficient liquidity to fund growth and investments well beyond the next three years [21] Other Important Information - The company has nearly $900 million in total cash equivalents and marketable securities, providing a solid foundation for future innovation [8] - The company is on track to have its GMP facility operational by the end of 2024, with commercial batches expected to begin in 2025 [31] Q&A Session Summary Question: Can you discuss the discovery process for GPCR targets? - Management explained that GPCRs and Ion Channels are challenging due to poor immunogenicity and small epitopes, requiring a latticework of technologies for successful discovery [22][23] Question: Is there any impact on program starts due to increased caution in capital spending by Biopharma? - Management noted that while there is macroeconomic caution, they are prioritizing high-value deals and expect to see fewer but more valuable programs [28] Question: Can we expect similar announcements for future programs entering preclinical studies? - Management indicated that they typically do not announce preclinical advancements unless significant progress is made, as seen with the Regeneron program [30] Question: What is the timeline for the new COVID Mab? - Management expects the timeline for the new antibody candidate to be similar to previous COVID-19 developments, pending a clear regulatory path [27] Question: Can you provide updates on the GMP facility? - Management confirmed that the GMP facility is on track for completion by the end of 2024, with commercial batches expected in 2025 [31] Question: What is the key selling point for the Regeneron deal? - Management stated that the partnership leverages their capabilities to move stuck programs forward, particularly in challenging target classes like GPCRs [46]