Absci Corporation — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Unaudited results; comparisons are with the corresponding 2021 periods. Absci develops biologics using an integrated artificial-intelligence and synthetic-biology platform.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $2.4 million | $1.5 million | $4.2 million | $3.3 million |
| Operating expenses | $30.3 million | $22.7 million | $89.8 million | $52.3 million |
| Operating loss | $(28.0) million | $(21.1) million | $(85.7) million | $(49.0) million |
| Net loss | $(27.3) million | $(23.6) million | $(85.4) million | $(75.8) million |
| Net loss per share, basic and diluted | $(0.30) | $(0.33) | $(0.94) | $(2.16) |
- Q3 revenue rose 54%; nine-month revenue rose 26%. Technology-development revenue growth reflected program progress, milestone timing and mix, including Merck work involving non-standard amino acids. Collaboration revenue increases reflected a September 2021 contract modification.
- Nine-month research and development expense increased 65% to $47.6 million; selling, general and administrative expense increased 67% to $32.8 million. Higher personnel, laboratory activity, platform development and public-company costs were cited. Depreciation and amortization rose 143% to $9.5 million, including effects of lab investment and acquired intangibles.
- Gross profit and gross margin are not separately reported; the filing does not provide a clear value for either.
- Cash and cash equivalents were $107.3 million and short-term investments were $74.0 million at quarter-end, or $181.3 million combined. Restricted cash was reported separately. Current assets were $201.4 million and current liabilities $30.0 million.
- Nine-month operating cash use was $62.8 million, versus $43.5 million in 2021. Investing cash use was $96.8 million, including $73.9 million of short-term investment purchases, $15.6 million of property and equipment purchases and an $8.0 million Totient payment. Financing provided $3.8 million.
- Equipment-financing debt was $8.9 million at quarter-end, with stated rates of 8%–10%; the prior Bridge Bank loan was paid off in June. Total liabilities were $46.4 million. The company also had operating and finance lease obligations.
Material changes and business developments
- Active Programs increased to 17 from 12 at December 31, 2021; cumulative programs increased to 44 from 34, and cumulative partners to 19 from 18. Active Programs do not guarantee partner licensing or further development.
- In August 2022, Absci announced a reorganization to streamline scientific and technical teams and prioritize initiatives including AI drug and target discovery. Management said research and development spending was expected to increase over the long term after an initial reduction.
- PhaseBio filed for Chapter 11 bankruptcy in October 2022. Absci reported that its related program remained active as of the filing date.
- In August, Absci filed a $250 million shelf registration statement, effective September 2; it had not issued securities under it or received proceeds as of the filing.
Outlook, risks and unusual items
- Management said existing cash, cash equivalents and short-term investments were expected to fund operating, working-capital and capital needs for at least the next 12 months and into late 2025. Future funding needs depend on spending, partnerships and partners’ progress; additional financing may be needed and could be dilutive or unavailable on acceptable terms.
- Revenue depends on partner agreements, milestone timing, licensing decisions and partners’ clinical development and commercialization. The company does not control those downstream activities and has not negotiated enough royalty- and milestone-bearing licenses to forecast revenue reliably.
- Partner concentration is significant: the top partner represented 82% of nine-month 2022 technology-development revenue; the top two represented 97% in Q3. The corresponding 2021 figures were 79% for the top two over nine months and 73% for the top two in Q3.
- The company cited risks from partner dependence, economic conditions, inflation, COVID-19-related disruption, and the execution and savings of its reorganization. It said inflation had not materially affected results to date but could raise costs and cash use.
- A $12.75 million Level 3 contingent-consideration liability related to the Totient acquisition was recorded at quarter-end; its fair value increased $0.75 million during 2022, with the change included in research and development expense.
- Disclosure controls were not effective at September 30 due to an unremediated material weakness in internal control over financial reporting. Management said additional review procedures supported the fair presentation of the interim statements and remediation was ongoing.
- No material legal proceedings were reported. The filing reported no material impairment of goodwill.
Important facts for investors to verify
- Whether active programs convert to licenses, milestones or royalties, and whether the concentrated partner revenue base persists.
- Whether the PhaseBio program remains active and whether its bankruptcy affects expected payments or development.
- Actual cash consumption versus management’s stated funding horizon, including the effect of operating costs, capital spending and inflation.
- Whether the reorganization delivers expected savings without disrupting key technical work or staffing.
- Progress and testing of remediation of the material weakness in financial reporting controls.
- Terms and potential dilution of any future financing under the effective shelf registration statement.