ABSI

Business Context and Reporting Period

Company: Absci Corp (ABSI)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and six months ended June 30, 2024
Business Overview: Absci is a data-first generative AI drug creation company utilizing an Integrated Drug Creation platform to design biologics. The company operates through partnerships for drug candidate creation and maintains an internal pipeline of wholly-owned assets.

Key Financial Metrics

Note: Long-term debt includes current portion ($3,124) and non-current portion ($3,121) as of June 30, 2024.

Material Changes vs. Prior Period

• Revenue Decline: Revenue decreased 62% year-over-year for Q2 2024 and 53% for the six-month period. This is attributed to the timing of project-based milestones and the mix of ongoing programs.
• Improved Net Loss: Net loss narrowed significantly compared to the prior year periods. Q2 2023 included a non-cash goodwill impairment charge of $21.3 million, which was not present in 2024.
• Operating Expenses: Total operating expenses decreased 40% in Q2 and 27% for the six months ended June 30, 2024, primarily due to the absence of the prior year's goodwill impairment. Excluding impairment, R&D expenses increased 26% in Q2 due to lab operations costs for IND-enabling studies.
• Capital Raise: In March 2024, the company completed a public offering of 19.2 million shares, raising net proceeds of approximately $80.8 million. This significantly bolstered liquidity compared to the prior year.
• Investment Activity: Short-term investments increased from $25.3 million to $102.3 million, reflecting the deployment of capital raised in the equity offering.

Guidance, Outlook, and Risks

• Outlook: Management expects to continue incurring significant expenses as it develops its internal pipeline and scales platform activities. The company believes current cash and investments are sufficient to fund operations for at least the next 12 months.
• Pipeline Progress:
  • ABS-101: IND-enabling studies initiated in February 2024; Phase 1 clinical studies expected in early 2025.
  • Active Programs: 16 active programs with 24 cumulative partners, including AstraZeneca, Merck, and Almirall.
• Risks and Contingencies:
  • Revenue Concentration: Two partners represented 100% of revenue for the three and six months ended June 30, 2024.
  • Capital Needs: Future success depends on securing additional partnerships or financing. Failure to raise capital could require strategy changes or asset sales.
  • Regulatory & Development: No assurance that partners will advance drug candidates or that internal candidates will succeed in clinical trials.
  • Contingent Consideration: A $12.75 million liability exists related to the Totient acquisition, payable upon specific milestones.

Investor Verification Checklist

• Liquidity Runway: Verify the sufficiency of the $145.2 million cash position against the burn rate of ~$34.7 million in operating cash outflows for the six-month period.
• Revenue Concentration: Assess the risk associated with 100% of recent revenue coming from only two partners.
• Internal Pipeline Milestones: Monitor the timeline for ABS-101 Phase 1 initiation (expected early 2025) and the success of IND-enabling studies.
• Stock-Based Compensation: Review the impact of increasing stock-based compensation ($8.9 million for 6M 2024 vs $5.7 million for 6M 2023) on future operating expenses.
• Debt Obligations: Confirm the terms and repayment schedule of the $6.2 million in equipment financing and long-term debt.