AbCellera Biologics(US:ABCL)2023-02-20 16:00Financial Performance and Projections - The company expects to generate losses and negative operating cash flow in the near-to-medium term due to the cessation of royalties from its COVID-19 program, which previously drove profitability[25]. - The company has approximately $900 million in liquidity, positioning it well to continue executing its strategy despite anticipated short-term losses[24]. - The total revenue from the COVID-19 antibody program reached $994 million as of December 31, 2022[98]. - The company has generated positive operating cash flow cumulatively since its inception in 2012 and in every year since 2018[88]. - The company expects to generate losses and negative operating cash flow in the near-to-medium term due to the cessation of royalties from its COVID-19 program[88]. Research and Development - The company has invested over $500 million in its antibody discovery and development engine, which has generated over $425 million in cumulative earnings since its incorporation in 2012[24]. - The average biologic drug takes over 10 years to reach the market, with development costs exceeding $1 billion, highlighting the long timelines and high costs associated with drug development[17]. - The company aims to reduce the time from idea to antibody drug candidate ready for clinical testing from 3-5 years to under 2 years[44]. - The company has made significant investments in technology development to enhance the likelihood of success for drug candidates, particularly in high unmet medical needs areas[120]. - The company aims to reduce drug discovery and development timelines to two years or less for target nomination to IND filing[122]. Partnerships and Collaborations - As of December 31, 2022, the company had 174 programs under contract with 40 unique partners, with 149 including downstream participation in the form of milestones and royalty stakes[22]. - The company has started over 100 drug discovery programs, diversifying its portfolio to reduce risk associated with single drug development[22]. - The company has entered contracts for 174 antibody discovery and development programs as of December 31, 2022[101]. - The company has initiated 75 partner-initiated programs with downstream participation and one pre-partnered program, resulting in a mean royalty rate of 3.6% as of December 31, 2022[130]. - The company has started six partner-initiated co-development programs, enhancing the potential economics in its portfolio[106]. Market and Industry Insights - Therapeutic antibodies generated nearly $250 billion in global sales in 2022, expected to grow to over $350 billion by 2027, representing a CAGR of 9%[57]. - The biotechnology sector is expected to be a significant growth opportunity over the next 30 years, particularly in therapeutic antibodies[56]. - Over 50% of new-drug approvals in the U.S. between 2011 and 2021 originated from smaller biotechnology companies with annual revenues below $500 million[77]. - The mean peak-year sales for currently marketed monoclonal antibody drugs are estimated at approximately $3 billion[58]. - Accelerating the path to market by one year could improve the value of an average approved treatment by over $100 million in net present value[60]. Intellectual Property and Competitive Advantage - The company emphasizes the importance of intellectual property protection for its technologies, as failure to maintain such protection could impair its competitive advantage[12]. - The company has over 80 issued or allowed patents and over 80 pending patent applications worldwide as of December 31, 2022[136]. - The average negotiated royalty rate for partner-initiated programs has increased from 2.4% (2015-2019) to 4.1% (2020-2022), with a quarter of new programs achieving rates above 5%[130]. - The total hypothetical value of clinical and commercial milestone payments for the company's portfolio is estimated at $6.6 billion as of December 31, 2022[132]. - The company believes that its integrated engine improves efficiencies by prioritizing an end-to-end workflow over stand-alone tools[80]. Operational Growth and Team Development - The company has grown to a team of approximately 500 people across four countries and three continents, reflecting its expansion and investment in operational efficiency[16]. - The voluntary turnover rate for the company in 2022 was less than 4%, with a team growth of 28% from 386 to 495 full-time employees[55]. - The company’s research and development team comprised approximately 47% scientists, 36% business professionals, and 17% engineers and data scientists as of December 31, 2022[53]. - The company has active construction projects on three buildings to expand facilities by more than 500,000 square feet, supported by CAD $175.6 million in financing from the Government of Canada[43]. - The company believes it is in material compliance with applicable environmental laws, which govern the handling and disposal of hazardous substances[176]. Financial Management and Risks - As of December 31, 2022, the company had cash and cash equivalents of $386.5 million, restricted cash of $28.1 million, and marketable securities of $500.0 million[531]. - A 10% change in interest rates would not have a material effect on the fair market value of cash, cash equivalents, restricted cash, and marketable securities due to their short-term nature[531]. - The company is exposed to foreign currency risk due to fluctuations between the U.S. dollar and the Canadian dollar, with revenue earned primarily in U.S. dollars and expenses incurred in multiple currencies[533]. - Inflation may increase costs related to labor, raw materials, and equipment, potentially impacting the company's financial condition and operating goals if not managed effectively[534]. - The company has not entered into any hedging arrangements for foreign currency risk but will reassess its approach as international operations grow[533].