AbCellera Biologics Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Unless otherwise noted, financial figures below are in U.S. dollars and millions. The company’s AI-enabled antibody-discovery platform works through partnerships with drug developers; revenue includes research fees, licensing, milestones and royalties.
Financial results and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $5.5 | $9.4 | $235.9 | $25.2 |
| Operating income (loss) | $(28.1) | $(1.8) | $122.9 | $(4.7) |
| Net earnings (loss) | $(21.4) | $(2.7) | $93.5 | $1.9 |
| Operating cash flow | Not separately provided | Not separately provided | $261.3 | $21.4 |
| Cash, equivalents and marketable securities | $753.5 at September 30, 2021 | $594.1 at December 31, 2020 |
- Q3 revenue fell 41% year over year, mainly because the prior-year quarter included a $5.0 million milestone payment; research fees increased to $5.1 million. Q3 2021 also included $0.2 million each of licensing and royalty revenue.
- Nine-month revenue rose 834%. It included $192.9 million of royalties tied to Eli Lilly’s bamlanivimab sales, $20.7 million in Trianni licensing revenue, $14.3 million in research fees and $8.0 million in milestone payments. Royalty revenue was concentrated in one partner and product.
- Q3 operating expenses increased to $33.6 million from $11.1 million, including higher R&D, G&A and depreciation and amortization. Nine-month expenses were $113.0 million, including $23.6 million in royalty fees associated with bamlanivimab royalties.
- Nine-month net earnings included $40.9 million of income tax expense; Q3 recorded a $3.6 million tax recovery. No operating or net margin guidance was provided.
- At September 30, total assets were $1,172.7 million, total liabilities $219.3 million and shareholders’ equity $953.4 million. Long-term debt carrying value was $1.7 million. Current liabilities were $49.5 million; deferred revenue and grant funding, contingent consideration and lease liabilities made up material portions of longer-term obligations.
- Nine-month investing cash outflow was $331.1 million, primarily reflecting purchases of marketable securities, property and equipment, and investments and loans to equity-accounted investees. Financing cash outflow was $5.7 million. Cash and cash equivalents ended at $517.7 million, excluding $235.8 million of marketable securities.
Material changes and business developments
- Revenue and earnings were highly uneven between the quarter and year to date: the nine-month profit was driven chiefly by bamlanivimab royalties and Trianni licensing, while Q3 reported a loss and only $0.2 million in royalties.
- Discovery partners increased from 26 to 35 year over year; cumulative programs under contract rose from 94 to 155, and program starts from 51 to 69. The company reported five molecules in the clinic, versus one a year earlier.
- In September, AbCellera acquired TetraGenetics for approximately $12.9 million in upfront closing consideration, plus contingent consideration initially valued at $35.1 million. The purchase-price allocation was preliminary; acquired intangibles were valued at $41.1 million and goodwill at $18.0 million.
- The company announced multi-year collaborations with Moderna and Everest Medicines and continued investment in new office, laboratory and manufacturing capacity. Nine-month property and equipment purchases were $49.0 million.
Outlook, risks and unusual items
- Management said existing cash, cash equivalents and anticipated operating cash flows should fund working capital and capital expenditure needs for at least 24 months from the report date. No specific revenue or earnings forecast was provided; the company expects significant investment and expenses to continue increasing.
- Management highlighted dependence on partner decisions and development outcomes, uncertain timing of research starts and milestones, and the risk that a small number of partners or programs account for a large share of revenue. Most potential partnership value is downstream milestones and royalties, which are uncertain and outside the company’s control.
- Bamlanivimab-related sales and royalties were exposed to regulatory and variant-related changes. The FDA revoked the EUA for bamlanivimab alone in April 2021; distribution of the combination with etesevimab was paused in the U.S. in June and resumed in September. The filing also described a temporary Hawaii distribution pause after quarter-end.
- AbCellera’s Berkeley Lights patent litigation was stayed while inter partes review petitions proceeded; the filing reported a December 2022 trial date and expected decisions on the petitions by February 2022. The company also noted potential intellectual-property, partner concentration, clinical-development, competition, growth-execution and COVID-19 risks.
- Disclosure controls were assessed as not effective at September 30 because of a previously identified material weakness in internal control over financial reporting, related to lease accounting and other adjustments. Management reported remediation steps underway, no material interim financial-statement adjustments due to the weakness, and expected remediation by fiscal year-end.
- Marketable securities were held for trading and reported at fair value. Contingent consideration included $35.1 million for TetraGenetics; its valuation depends on milestone assumptions. The filing reported no material change in legal proceedings apart from the described patent litigation.
Important facts for investors to verify
- How much future revenue depends on bamlanivimab and other Eli Lilly programs, and how variant prevalence, regulatory decisions and product demand affect royalties.
- Whether the 155 contracted programs convert into starts, clinical progress, milestones and recurring commercial royalties.
- Final TetraGenetics purchase-price allocation, technical milestone outcomes and integration progress.
- Capital spending, lease and joint-venture commitments for the planned facilities, and progress toward the stated 24-month liquidity outlook.
- Whether internal-control remediation is completed and tested, and developments in the Berkeley Lights litigation and patent-review proceedings.