Absci Corporation — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Absci is a drug and target discovery company combining artificial intelligence and synthetic biology to create biologic drug candidates and production cell lines for partners.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $0.819 million | $1.063 million, down 23% |
| Operating expenses | $29.622 million | $12.211 million, up 143% |
| Operating loss | $28.803 million | $11.148 million |
| Net loss | $29.494 million | $10.962 million |
| Net loss per share | $0.33 | $0.70 |
| Cash used in operating activities | $21.149 million | $7.285 million |
| Cash used in investing activities | $6.857 million | $8.876 million |
At March 31, cash and cash equivalents were $226.0 million, versus $252.6 million at year-end; restricted cash was an additional $24.9 million. Current assets were $256.0 million and current liabilities $41.9 million. Long-term debt was $2.8 million principal, with $2.9 million shown as current and noncurrent debt on the balance sheet. The company reported an accumulated deficit of $220.5 million. Management believes cash and cash equivalents will fund operating, working capital, and capital expenditure needs for at least 12 months following the filing.
Material changes and business developments
- Technology development revenue fell 52% to $0.454 million, reflecting project progress, milestone timing, and program mix. Collaboration revenue rose to $0.365 million, largely due to the 2021 modification of the KBI agreement.
- Research and development expense increased 124% to $15.827 million, primarily from higher headcount and personnel costs, laboratory supplies and services, facility costs, and a $0.750 million increase in Totient contingent consideration.
- Selling, general and administrative expense increased 132% to $10.889 million, including higher personnel, stock compensation, public-company, and professional-service costs. Depreciation and amortization rose to $2.906 million as laboratory and facility assets and acquired intangibles contributed more expense.
- Active Programs increased to 15 from 12 at December 31, 2021; cumulative programs rose to 37 from 34, while cumulative partners remained 18. The company reported 15 active programs across eight current partners’ pipelines.
- In January, Absci announced a Merck research agreement involving non-standard amino acid technology and an option for Merck to nominate up to three drug-discovery targets. In March, it announced machine-learning antibody-design work and a research collaboration with NVIDIA. The April opening of the Absci AI Research Lab occurred after the quarter.
Outlook, risks and unusual items
- No numerical revenue or earnings guidance was provided. Absci expects significant expenses to continue and increase as it develops its platform, expands partner activity, hires staff, and operates as a public company.
- Future revenue depends on securing partnerships, completing development work, partners licensing and advancing programs, and eventual drug approvals and commercialization. Absci does not control partners’ development or commercialization decisions and has not negotiated enough milestone- and royalty-bearing licenses to forecast those revenues reliably.
- Cash needs could exceed available resources; additional financing may be required and may be unavailable or dilutive. Management said it could pursue partnerships with larger near-term payments at the cost of potential downstream revenue.
- The Totient acquisition’s contingent consideration was remeasured to $12.75 million, a $0.75 million increase recorded in research and development expense. No material litigation was reported. The company was in compliance with its lender’s financial covenant.
- COVID-19-related supply, staffing, partner-negotiation, and operating disruptions remained possible; management expected the financial-statement impact to be immaterial but noted broader economic and financing risks. Inflation could raise supply, interest, and overhead costs.
- Disclosure controls were deemed ineffective because of an unremediated material weakness in internal control over financial reporting. Management performed additional review procedures and stated the statements fairly present the company’s financial position and results; remediation was ongoing.
Key facts for investors to verify
- Whether the company’s cash balance and burn rate support its stated liquidity outlook, including the distinction between unrestricted and restricted cash.
- Progress in converting active programs into licenses, milestone payments, royalties, and partner-led clinical or commercial progress.
- Drivers and sustainability of rising operating costs, cash use, and stock-based compensation.
- Assumptions underlying the Totient contingent consideration valuation and the status of any related milestones.
- Remediation and testing of the material weakness in internal controls, and any subsequent changes in disclosure controls.