AbCellera Biologics(ABCL) Seeking Alpha·2024-08-23 08:43Core Viewpoint - AbCellera's stock has dropped significantly, with a 47% decline since September, attributed to falling revenues and increased R&D expenditures, leading to a cautious investment recommendation of "hold" for prospective investors [1][15]. Financial Performance - In Q2 2023, AbCellera's revenue fell to 45.9 million in Q2 2022, with a net loss of 7.3 million, while operating expenses increased, resulting in a net loss of 133.32 million in cash and cash equivalents and 627.265 million in marketable securities as of June 30, 2024, indicating a strong balance sheet despite ongoing losses [11]. Research and Development - The number of molecules in clinical trials increased from nine to 14 over the past year, reflecting progress in the pipeline [5]. - R&D expenses rose to 40.9 million in Q2 2024, contributing to the widening net loss [5]. - AbCellera has expanded its partnership with Eli Lilly to discover therapeutic antibodies across various clinical areas, which may enhance its pipeline [7]. Market Challenges - The company faces skepticism from the market due to fiscal inefficiencies and the diminishing impact of COVID-19 related revenues [1]. - The nature of drug development poses significant risks, with many drugs in the pipeline still in early stages and unlikely to reach market [9][14]. - Historical data suggests that only about 5% of Phase 1 oncology drugs make it to market, indicating a challenging environment for AbCellera's drug candidates [10]. Investment Outlook - The stock is expected to remain volatile, with speculative valuation until one or two drugs achieve market visibility [12]. - The cash runway extends beyond 2026 based on current cash burn rates, providing some financial stability in the near term [11]. - A cautious "hold" recommendation is advised, with existing investors encouraged to maintain their positions while prospective investors should consider waiting [15].