Absci Corporation — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited results; filing dated August 11, 2022.
Business context
Absci develops biologic drug candidates and production cell lines for partners using an integrated platform combining artificial intelligence and synthetic biology. Revenue primarily comes from partner technology-development and collaboration agreements. At June 30, the company reported 19 cumulative partners, 44 cumulative programs, and 22 Active Programs across nine current partners. Partners control whether programs advance or are licensed.
Financial performance
| Metric | Q2 2022 | Q2 2021 | First half 2022 | First half 2021 |
|---|---|---|---|---|
| Revenue | $1.0M | $0.7M | $1.8M | $1.8M |
| Operating expenses | $29.9M | $17.4M | $59.5M | $29.6M |
| Operating loss | $28.9M | $16.7M | $57.7M | $27.8M |
| Net loss | $28.7M | $41.2M | $58.2M | $52.2M |
| Basic and diluted loss per share | $0.32 | $2.39 | $0.64 | $3.13 |
Q2 revenue rose 38% year over year, while first-half revenue was nearly unchanged. Technology-development revenue was $0.6M in Q2 and $1.1M in the first half; collaboration revenue was $0.4M and $0.7M, respectively. Management attributed revenue variability to project milestones and program mix; the collaboration comparison also reflects a 2021 contract modification.
Operating expenses increased substantially, driven by research and development, headcount, lab supplies and services, public-company costs, stock-based compensation, and depreciation and amortization. Q2 net loss was lower than in 2021 largely because the prior-year period included significant fair-value charges on convertible notes and preferred-stock warrants. The operating loss nevertheless widened. No gross margin figure is presented.
Cash, debt, and liquidity
- Cash and cash equivalents were $206.0M at June 30, down from $252.6M at December 31, 2021. Restricted cash totaled $16.9M; cash, cash equivalents, and restricted cash together were $222.9M.
- Operating cash use was $43.7M in the first half, versus $21.8M in the prior-year period. Investing cash use was $18.1M, including $10.7M of property and equipment purchases and an $8.0M Totient payment.
- Financing activities provided $4.8M, including $9.4M of equipment-financing proceeds. The company repaid the remaining $2.4M under its Bridge Bank loan in June. Equipment financing debt was $9.3M; total long-term debt, net of current portion, was $7.1M.
- Management said available cash and cash equivalents should fund operating, working-capital, and capital-expenditure needs for at least 12 months after filing and into late 2025. Future needs depend on operating costs, partnerships, and partner development and commercialization outcomes.
Material developments, outlook, and risks
- In June, Absci entered a seven-program collaboration focused on antibody-drug-conjugate discovery using its non-standard amino-acid technology. Terms were not disclosed; the agreement includes upfront payment, milestones, and royalties.
- After quarter-end, Astellas and another partner notified Absci that development of certain candidates was ending, removing three Active Programs cumulatively. In August, Absci announced a reorganization to streamline scientific and technical teams and prioritize initiatives including AI drug and target discovery. The filing cautions that anticipated savings may not be fully realized and the changes may disrupt operations.
- No specific financial guidance was provided. Management expects continued significant spending; it described long-term R&D investment as likely to increase, while noting an initial reduction following the August reorganization.
- Partner concentration is substantial: the top two partners generated 95% of first-half 2022 technology-development revenue. Revenue and potential milestone and royalty income depend on partner decisions and successful development, licensing, and commercialization.
- The company reported no material litigation. A $12.75M Level 3 contingent-consideration liability related to the Totient acquisition was recorded; its $0.75M first-half fair-value increase was charged to R&D expense.
- Management concluded disclosure controls were not effective at June 30 because of an unremediated material weakness in internal control over financial reporting. Management said additional analyses and post-closing procedures supported the fair presentation of the reported statements, and remediation work was ongoing.
- COVID-related operating disruption was described as continuing but expected to have an immaterial direct financial-statement impact; broader economic effects, inflation, and possible pressure on partner R&D budgets remain risks.
Investor facts to verify
- Whether partner terminations and the August reorganization change Active Programs, costs, or the company’s stated cash runway.
- Progress on new and existing partnerships, licensing elections, milestones, and the potential for downstream royalties.
- Cash burn, equipment-financing repayments and covenants, and assumptions underlying management’s runway estimate into late 2025.
- Whether the material control weakness is remediated and disclosure controls become effective.
- How much revenue remains concentrated among the largest partners and whether that concentration changes.