Absci Corporation (NASDAQ: ABSI) — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Unaudited; amounts below are U.S. dollars. Absci is a generative AI drug-creation company developing biologic drug candidates through its platform, partner programs and internal pipeline.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0.7m | $2.4m | $5.4m | $4.2m |
| Operating loss | $23.3m | $28.0m | $90.8m | $85.7m |
| Net loss | $22.0m | $27.3m | $87.0m | $85.4m |
| Net loss per share, basic and diluted | $0.24 | $0.30 | $0.95 | $0.94 |
| Cash used in operating activities | Not separately stated | Not separately stated | $49.7m | $62.8m |
Q3 revenue fell 69% year over year, reflecting timing of project milestones and program mix; nine-month revenue rose 28%. All nine-month 2023 revenue was technology-development revenue; the prior-year period also included $1.1m of collaboration revenue. No gross margin is presented in the filing. Research and development expense declined 25% year over year for the nine months, while total operating expenses increased 7%, largely because of the goodwill impairment.
Liquidity, debt and balance sheet
- At September 30, cash and cash equivalents were $69.7m and short-term investments were $43.7m, totaling $113.5m. Restricted cash was additional: $16.0m current and $1.1m long-term.
- Management said cash, cash equivalents and short-term investments should cover operating expenses, working capital and capital expenditures for at least the next 12 months following the filing date.
- Operating cash outflow for the first nine months was $49.7m, versus $62.8m in 2022. Investing activities provided $63.0m, primarily reflecting maturities of short-term investments, rather than operating cash generation.
- Long-term debt totaled approximately $8.8m, including current portion; equipment financing carries stated rates of 8%–10%. The company reported compliance with applicable financial covenants. Lease obligations are additional.
- Stockholders’ equity was $196.4m, down from $274.4m at year-end 2022; accumulated deficit was $383.0m.
Material changes and unusual items
- Absci recorded a $21.3m non-cash goodwill impairment in Q2 2023, fully writing off goodwill. The assessment followed a sustained share-price and market-capitalization decline. Long-lived assets passed the recoverability test, but the company noted future changes could prompt reassessment.
- In September, the company announced an organizational realignment and a 15% global workforce reduction to prioritize its internal pipeline and platform. The filing cautions that expected savings may not be fully realized and that the reduction could disrupt operations or affect retention and hiring.
- During Q3, EQRx gave notice to opt out of a discovery collaboration, reducing Active Programs to 15 from 16 at year-end 2022. Absci took ownership of one program for internal development, outside the Active Programs count.
- Cumulative partners increased to 21 from 19 and cumulative programs to 51 from 47. The 15 Active Programs spanned six partners; partner decisions and development outcomes are outside Absci’s control.
Outlook, risks and contingencies
No quantified revenue or earnings guidance is provided. Absci expects continued significant spending on platform development, partnerships and internal drug programs. Future revenue depends on new and expanded partnerships, milestone timing, partner licensing decisions, and partners’ clinical, regulatory and commercial success; the company says it cannot reliably predict potential revenue from downstream milestones and royalties.
Management identifies potential need for additional capital if execution or spending needs exceed available resources. Equity financing could dilute shareholders; debt financing may impose restrictive covenants. Other notable exposures include $12.8m of Level 3 contingent consideration related to the Totient acquisition, payable upon specified milestones, and $1.9m of letters of credit securing facility leases. The company reported no material litigation and no material change in previously disclosed market risks. Management assessed disclosure controls as effective.
Important facts for investors to verify
- Whether the stated liquidity runway remains adequate as operating cash use, internal-pipeline spending and partnership receipts develop.
- Whether the workforce realignment delivers anticipated savings without impairing technical execution or talent retention.
- Whether partners advance Active Programs, elect licenses and achieve milestones that could generate future payments or royalties.
- Whether goodwill and long-lived asset valuations remain supportable given forecast uncertainty and market conditions.
- Debt repayment requirements, covenant compliance, and the timing and likelihood of Totient-related contingent consideration payments.