AbCellera Biologics Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparative period is Q1 2020. Amounts are in U.S. dollars. Unless noted, financial figures below are in millions.
Business context
AbCellera uses an AI-enabled antibody-discovery platform and partners with drug developers rather than advancing its own clinical pipeline. At quarter-end, it reported 119 cumulative discovery programs completed, in progress, or under contract with 29 partners, compared with 73 programs and 24 partners a year earlier. One program was in the clinic, versus none a year earlier.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $202.7 | $4.7 |
| Operating expenses | $44.7 | $6.8 |
| Operating income (loss) | $158.1 | $(2.1) |
| Net earnings (loss) | $117.2 | $(2.1) |
| Basic / diluted earnings (loss) per share | $0.43 / $0.37 | $(0.01) / $(0.01) |
| Cash from operating activities | $109.5 | $(0.8) |
- Revenue comprised $4.0 million in research fees, $20.3 million in licensing revenue, $7.0 million in milestone payments, and $171.5 million in royalties. The royalty and milestone revenue arose from the Lilly collaboration; the license revenue related to the Trianni platform.
- Royalty fees of $20.0 million were recorded against the Lilly royalties. Research and development expense was $12.4 million; sales and marketing $2.6 million; general and administrative $6.4 million; and depreciation and amortization $3.3 million.
- Cash and cash equivalents were $685.8 million at March 31, up from $594.1 million at December 31, 2020. Investing activities used $15.8 million, mainly for real estate, facilities, and equipment; financing activities used $1.5 million, primarily for debt repayment.
- Total assets were $1,128.5 million and total liabilities $171.4 million. The balance sheet reported no significant debt balance: long-term debt was $0.9 million carrying value, included in other long-term liabilities. Current assets were $908.0 million versus current liabilities of $88.4 million.
- Accumulated earnings were $231.4 million. Weighted-average diluted shares were 320.3 million; 270.9 million common shares were reported outstanding at March 31.
Material changes and management commentary
- Revenue increased $198.1 million year over year, driven by Lilly bamlanivimab royalties and milestone revenue, plus Trianni licensing revenue. Research fees fell $0.7 million despite growth in contracted programs, primarily due to reduced revenue from the DARPA COVID-19 antibody discovery program.
- Operating costs rose substantially alongside growth and public-company expenses: R&D increased 200%, sales and marketing 490%, and general and administrative expense 289%. Stock-based compensation was $5.4 million, versus $1.2 million in Q1 2020.
- Management expects significant ongoing investment in R&D, business development, operations, facilities, and personnel, and cautions that expenses may increase and operating losses may occur in future periods. It believes cash, cash equivalents, and anticipated operating cash flows will meet working-capital and capital expenditure needs for at least 24 months from the report date. No numerical revenue or earnings guidance is provided.
- The company reported 119 cumulative programs under contract, but only 54 had started by quarter-end. Management notes that revenue timing depends on partner target selection and program starts, and downstream milestone and royalty opportunities depend on partners advancing and commercializing discovered antibodies.
Risks, contingencies, and unusual items
- Revenue was highly concentrated: Lilly alone generated $173.8 million in milestone and royalty revenue cited in the market-risk discussion. AbCellera stated that it had received milestone and royalty payments from only one program to date and had not yet had a program receive marketing approval.
- In April 2021, the FDA revoked the EUA for bamlanivimab used alone, while retaining authorization for bamlanivimab with etesevimab. The filing warns that regulatory or market developments could affect future payments. Lilly said the change reflected COVID-19 variant developments and availability of the combination, not a new safety concern.
- AbCellera entered a Sydney office and laboratory lease, recognizing a $13.9 million lease liability in Q1. It also disclosed substantial prospective Vancouver facility lease payments through a joint venture; the related liability was not yet recognized because the lease had not commenced. The company committed up to C$82.7 million ($61.5 million) to fund construction through a loan to the Dayhu joint venture; $1.2 million was outstanding at quarter-end.
- The company disclosed ongoing intellectual-property litigation with Berkeley Lights as a risk, but reported no material change in legal proceedings from its 2020 Form 10-K. No litigation contingency reserve was recorded.
- Disclosure controls were not effective at March 31 because a previously disclosed material weakness in internal control over financial reporting had not been fully remediated. Management expected remediation by fiscal year-end 2021 and said additional post-closing procedures supported the fair presentation of the Q1 statements.
- COVID-19 had not required a shutdown of laboratory or research activity, but the company cautioned that pandemic-related disruption could adversely affect its business and results.
Key investor verification points
- Confirm the durability and timing of Lilly-related royalties and milestones following the bamlanivimab monotherapy EUA revocation, and the commercial outlook for the combination therapy.
- Assess how much of the exceptional Q1 revenue is non-recurring versus repeatable research, licensing, milestone, and royalty revenue; verify the concentration of revenue among partners.
- Track program starts against cumulative contracted programs, partner target-selection timing, and the progression of additional antibodies into clinical development.
- Review the scale, timing, and funding terms of the Vancouver and Sydney facilities, including joint-venture commitments and future lease obligations.
- Monitor remediation and independent assessment of the disclosed material weakness in internal controls.
- Reconcile reported cash movements: the cash flow statement shows a $91.7 million increase including exchange-rate effects, while the MD&A cash-flow summary reports $92.2 million.