AbCellera Biologics(US:ABCL)2024-05-07 20:47PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited Q1 2024 consolidated financial statements reflect total assets at $1.46 billion, a net loss of $40.6 million, and $41.7 million cash used in operations Condensed Consolidated Balance Sheets As of March 31, 2024, total assets decreased to $1.46 billion, driven by a reduction in cash and marketable securities, while liabilities remained stable and equity declined Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 (in thousands) | Mar 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total cash, cash equivalents, and marketable securities | $760,585 | $698,023 | | Total current assets | $871,985 | $813,948 | | Total assets | $1,488,094 | $1,463,096 | | Total current liabilities | $119,013 | $104,883 | | Total liabilities | $335,776 | $333,183 | | Total shareholders' equity | $1,152,318 | $1,129,913 | Condensed Consolidated Statements of Loss and Comprehensive Loss Q1 2024 total revenue decreased to $10.0 million due to no milestone payments, while operating expenses fell to $64.8 million, resulting in a net loss of $40.6 million Statement of Loss Highlights (in thousands, except per share data) | Metric | Q1 2023 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $12,192 | $9,954 | | Research fees | $10,570 | $9,774 | | Milestone payments | $1,250 | $0 | | Total Operating Expenses | $77,066 | $64,848 | | Research and development | $52,647 | $39,287 | | Loss from Operations | ($64,874) | ($54,894) | | Net Loss | ($40,110) | ($40,610) | | Net Loss Per Share (Basic & Diluted) | ($0.14) | ($0.14) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $41.7 million in Q1 2024, while investing activities provided $29.9 million, leading to a $9.7 million decrease in cash Cash Flow Summary (in thousands) | Activity | Q1 2023 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | ($44,063) | ($41,708) | | Net cash provided by (used in) investing activities | ($149,609) | $29,910 | | Net cash provided by (used in) financing activities | ($458) | $2,831 | | Decrease in cash and cash equivalents | ($194,343) | ($9,748) | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies, including CAD $475.6 million in government contributions, a decrease in deferred revenue to $19.1 million, and $17.4 million in stock-based compensation expense - Stock-based compensation expense for Q1 2024 was $17.4 million, an increase from $15.5 million in Q1 202346 - Deferred revenue decreased to $19.1 million as of March 31, 2024, from $27.2 million at the end of 2023, with $8.6 million recognized as revenue in Q1 202447 - The company has received significant funding commitments from the Government of Canada and the Government of British Columbia, totaling up to CAD $475.6 million for R&D and manufacturing infrastructure, with varying repayment terms606162 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 revenue decline due to milestone absence, reduced R&D expenses, and continued investment, while highlighting growth in key business metrics and sufficient liquidity for 36 months Overview AbCellera's strategy focuses on building an integrated antibody drug discovery engine through partnerships for royalty stakes and developing its own internal pipeline - The company's business model focuses on both partnering to build a portfolio of royalty stakes and developing its own pipeline of antibody drugs7374 - Partnership agreements are structured with near-term payments (technology access, research fees) and long-term downstream payments (milestones, royalties), with royalties typically in the single-digit to low-double-digit range76 - The company has started a cumulative total of 90 partner-initiated programs with downstream participation and has seen 13 molecules advance into the clinic78 Key Business Metrics Key business metrics show 90 cumulative partner-initiated programs and 13 molecules in the clinic as of March 31, 2024, indicating growing potential for future milestone and royalty revenues Cumulative Key Business Metrics | Metric | Mar 31, 2023 | Mar 31, 2024 | Change % | | :--- | :--- | :--- | :--- | | Partner-initiated program starts with downstreams | 75 | 90 | 20% | | Molecules in the clinic | 9 | 13 | 44% | - The company has recently signed or expanded multi-target partnership agreements with firms including Viking Global Investors, Biogen, Regeneron, and AbbVie9596 Results of Operations Q1 2024 total revenue decreased 18% to $10.0 million due to no milestone payments, while R&D expenses fell 25% to $39.3 million, and G&A expenses rose 15% to $17.4 million Revenue Comparison (in thousands) | Revenue Source | Q1 2023 (in thousands) | Q1 2024 (in thousands) | Change (in thousands) | Change % | | :--- | :--- | :--- | :--- | :--- | | Research fees | $10,570 | $9,774 | ($796) | (8)% | | Milestone payments | $1,250 | $0 | ($1,250) | (100)% | | Total revenue | $12,192 | $9,954 | ($2,238) | (18)% | Operating Expense Comparison (in thousands) | Expense Category | Q1 2023 (in thousands) | Q1 2024 (in thousands) | Change (in thousands) | Change % | | :--- | :--- | :--- | :--- | :--- | | Research and development | $52,647 | $39,287 | ($13,360) | (25)% | | Sales and marketing | $3,771 | $3,365 | ($406) | (11)% | | General and administrative | $15,134 | $17,352 | $2,218 | 15% | - The decrease in R&D expenses is mainly due to specific one-time investments of approximately $20.0 million in co-development and internal programs made in Q1 2023100 Liquidity and Capital Resources As of March 31, 2024, AbCellera held $698.0 million in cash and marketable securities, deemed sufficient for at least 36 months of operations and capital expenditures - The company had $698.0 million in cash, cash equivalents, and marketable securities as of March 31, 2024108 - Management believes existing liquidity is sufficient to fund operations and capital expenditures for at least the next 36 months without needing external funding109 - Net cash used in operating activities was $41.7 million in Q1 2024, while net cash from investing activities was $29.9 million, a reversal from the prior year due to proceeds from marketable securities112113115 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risk exposure since the disclosures in its December 31, 2023 Annual Report on Form 10-K - There have been no material changes to the company's market risk exposure since the end of 2023118 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2024119 - No material changes to internal control over financial reporting occurred during the first quarter of 2024120 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports no material changes to legal proceedings, with the patent infringement case against Bruker Cellular Analysis resuming and efforts to dismiss affiliates from the John Schrader lawsuit - The patent infringement lawsuit against Bruker Cellular Analysis has resumed, and the company remains confident in its case122 - In the lawsuit brought by the estate of John Schrader, the company is seeking dismissal of certain affiliates for lack of jurisdiction and believes the claim is meritless123 Item 1A. Risk Factors The company details risks across business strategy, intellectual property, and share ownership, including historical losses, revenue volatility, IP litigation, and potential shareholder dilution Risks Related to Our Business and Strategy Business risks include a history of losses, fluctuating revenue highly dependent on partner success, intense competition, and challenges in managing rapid growth and platform investments - The company has incurred losses in certain years, including a net loss of $146.4 million in 2023, and may incur significant losses in the foreseeable future due to continued investment in R&D, facilities, and personnel125 - Revenue has fluctuated significantly and is not recurring, as it depends on the timing of partnership agreements, research activities, and partner-driven clinical milestones, with no expectation of continued royalty revenue from COVID-19 antibodies127128 - The company's success is highly reliant on partners advancing discovered antibodies through clinical trials and commercialization, a long and uncertain process over which AbCellera has no control155156 Risks Related to Our Intellectual Property IP risks include challenges in obtaining and maintaining patent protection, costly ongoing litigation with Bruker Cellular Analysis and the John Schrader estate, and reliance on in-licensed third-party technologies - The company relies on a combination of patents, trade secrets, and contractual restrictions to protect its technology, but these may not provide adequate protection against competitors253254 - The company is engaged in ongoing, time-intensive, and costly litigation related to intellectual property with Bruker Cellular Analysis and the estate of John Schrader, which could adversely affect the business regardless of the outcome297307309 - The company relies on in-licensed technologies from third parties, such as the University of British Columbia and Stanford University, and loss of these rights or disputes over them could materially harm the business270271 Risks Related to Ownership of Our Common Shares Share ownership risks include potential dilution from future equity issuances, no dividend payments, significant influence by major shareholders, share price volatility, and complex U.S. tax implications like CFC or PFIC classification - Future sales of common shares to raise capital or under employee incentive plans could result in significant dilution to existing shareholders327328 - Executive officers, directors, and 5% shareholders own over 20% of common shares, enabling them to exert significant influence over matters requiring shareholder approval332 - There are potentially adverse U.S. federal income tax consequences for certain U.S. shareholders if the company or its non-U.S. subsidiaries are classified as a Controlled Foreign Corporation (CFC) or a Passive Foreign Investment Company (PFIC)350356 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None375 Item 5. Other Information No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during Q1 2024 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading plan in Q1 2024375 Item 6. Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including officer certifications and XBRL data files - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, and Inline XBRL documents378