AbCellera Biologics Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Unless stated otherwise, amounts are U.S. dollars; financial figures below are in millions. The company discovers antibodies for partners and may receive research fees, milestone payments, and royalties on resulting products.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $12.2 | $316.6 |
| Operating income (loss) | $(64.9) | $225.0 |
| Net income (loss) | $(40.1) | $168.6 |
| Operating cash flow | $(44.1) | $100.2 |
| Investing cash flow | $(149.6) | $(26.4) |
- Revenue included $10.6 million of research fees, $0.4 million of licensing revenue, and $1.3 million of milestone payments; there was no royalty revenue.
- Research and development expense rose 100% to $52.6 million. Management attributed approximately $20 million to one-time investments in co-development and pre-partnered programs.
- Cash, cash equivalents, and marketable securities totaled $796.5 million at quarter-end, down $90.0 million from December 31, 2022. This comprised $193.0 million cash and equivalents and $603.5 million marketable securities.
- Total liabilities were $289.4 million, including $77.3 million of operating lease liabilities and $58.6 million of contingent consideration payable, current and long-term combined. The filing does not provide a clear total for conventional debt.
- Management cited increased R&D and ongoing investment in capacity and capabilities as factors in cash use. Interest income was $9.8 million, versus $0.7 million in Q1 2022.
Changes and business developments
- Revenue fell 96% year over year, principally because COVID-19 antibody royalties ceased. The FDA had announced in Q4 2022 that bebtelovimab was no longer authorized for emergency use in any U.S. region.
- Royalty fees also fell to zero from $44.6 million in Q1 2022. Despite higher R&D and other operating costs, total operating expenses declined to $77.1 million from $91.6 million, mainly reflecting the absence of royalty fees.
- Operating cash flow shifted from $100.2 million provided to $44.1 million used. Investing cash outflow included $360.8 million of marketable-security purchases, partly offset by $262.6 million of proceeds; these are investment portfolio flows, not solely operating spending.
- At March 31, the company reported 177 discovery programs and 41 partners, compared with 158 programs and 36 partners a year earlier. It added three programs under contract in Q1 and reported one molecule advancing into the clinic. Molecules in the clinic rose to nine from six.
Outlook, risks, and contingencies
- Management expects continued significant investment in R&D, business development, facilities, and manufacturing capabilities, and said new facilities under development are scheduled for occupancy in 2024.
- Based on its current business plan, management expects existing cash, marketable securities, and anticipated operating cash flows to cover working capital and capital expenditures for at least 36 months after the report date, with no external funding anticipated during that period. This is a forward-looking estimate, not a guarantee.
- The company’s revenue remains exposed to timing of partner research starts and milestones, partner development and commercialization decisions, and royalties from products. Management cautioned that results may fluctuate substantially; partners control development and commercialization, and the company may not receive significant recurring revenue.
- Potential repayment of Phase 2 Strategic Innovation Fund support is conditional on revenue thresholds. No repayment liability was accrued because management assessed the conditions as non-probable at quarter-end.
- In Berkeley Lights patent litigation, the PTAB upheld all challenged claims of the ’408 patent in January 2023; the company’s motion to lift the court stay remained pending. The company also described a civil suit involving the Estate of John Schrader and said it intends to defend itself. No litigation contingency reserve was established.
- Other stated risks include partner concentration, drug-development uncertainty, competition, execution and facility expansion, intellectual-property protection and litigation, cybersecurity, foreign exchange, and financial-institution exposure. Management reported disclosure controls were effective as of March 31, 2023, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether research fees, new program starts, and milestone payments can offset the loss of COVID-19 royalties, and how concentrated revenue remains among partners.
- Whether R&D spending and facility investments stay within available liquidity, and whether management’s 36-month funding assessment remains valid.
- Progress of the 177-program portfolio, including partner target selection, clinical advancement, and any milestones or commercial royalties actually earned.
- Construction and occupancy timing for planned facilities, including the new manufacturing capability and associated capital commitments.
- Developments in the Berkeley Lights and Schrader matters, contingent consideration, and any potential SIF repayment obligations.