Q1 2024 Abcellera Biologics Inc Earnings Call

Participants

Tryn Stimart; Chief Compliance Officer, Corporate Secretary, Chief Legal Officer; Abcellera Biologics Inc

Carl Hansen; Chairman of the Board, President, Chief Executive Officer, Co-Founder; Abcellera Biologics Inc

Andrew Booth; Chief Financial Officer; Abcellera Biologics Inc

Andrea Tan; Analyst; Goldman Sachs

Srikripa Devarakonda; Analyst; Truist Securities

Jacqueline Keith; Analyst; TD Cowen

Scott Shownhouse; Analyst; P-Com

Stephen Willey; Analyst; Stifel Nicolaus and Company, Incorporated

Puneet Souda; Analyst; Leerink Partners

Evan Seigerman; Analyst; BMO Capital Markets

Presentation

Operator

Good afternoon, and welcome to AbCellera's Q1 2024 business update conference call. My name is Harry, and I will facilitate the audio portion of today's interactive broadcast. (Operator Instructions)
At this time, I would like to turn the call over to Tryn Stimart, AbCellera's Chief Legal and Compliance Officer. Please go ahead.

Tryn Stimart

Good morning, good afternoon, and good evening to everyone listening around the world. Thank you for joining us for Abcellera's 2024 first-quarter earnings call. I'm Tryn Stimart, Abcellera's Chief Legal and Compliance Officer.
Joining me on today's call are Dr. Carl Hansen, Abcellera's President and CEO; and Andrew Booth, Abcellera's Chief Financial Officer. During this call, we anticipate making projections and forward-looking statements based on our current expectations and pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.
Our actual results could differ materially due to several factors set forth in our latest Form 10-K and subsequent Forms 10-Q and 8-K filed with the Securities and Exchange Commission. Abcellera does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Our presentation today, including our earnings press release issued earlier today and our SEC filings, are available on our Investor Relations website. The information we provide about our pipeline is for the benefit of the investment community and is not intended to be promotional.
As we transition to our prepared remarks, please note that all dollars referred to during the call are in US dollars. After our prepared remarks, we will open the lines for questions and answers.
Now, I'll turn the call over Carl.

Carl Hansen

Thanks, Tryn, and thank you, everyone, for joining us today. As if solar continues to evolve into a clinical biotech company, we are directing our resources towards three main priorities. Our first priority is advancing our internal pipeline, including ABCL. 65 and ABCL. five seven five. Both programs are in manufacturing and IND-enabling studies and are on track for IND submissions in 2025.
Our second priority is completing platform investments that are focused on forward integration, including establishing our clinical manufacturing capabilities. We are on track to start our first engineering runs at our facility next year.
And finally, our third priority is executing partnerships that we view as strategic to our long-term vision of becoming a scalable drug development company. This quarter, we presented new data on our CE. platform, which we view as both an important source of internal programs and as a basis for strategic partnerships, over the past two years, we have built a platform to create TCE.s a class, which we believe has potential to be one of the most important therapies for cancer for cancer and liquid tumors.
Last month, we presented four posters at the annual meeting of the American Association for Cancer Research to update our progress on this effort. A highlight of this work is that we have shown we can reproducibly generate TCE.s that show high tumor cell killing and remarkably low cytokine release. This graph shows results comparing accelerated generated TCE.s against clinical benchmarks for three different tumor targets. Psma five G. four and B. seven H. four. The top right of the graph shows that our TCE.s achieved equivalent tumor cell killing with potency that is comparable or superior to the three clinical benchmarks. The middle row shows interferon gamma secretion that in each case is below the level of the benchmarks. And the bottom row shows that the secretion of TNF-alpha, a cytokine that is perhaps the most important mediator of excessive inflammatory responses as far as TCE. show, remarkably low TNF-alpha secretion compared to the clinical benchmarks. And in the case of PSMA PNS alpha is close to zero across the entire range of antibody concentrations tested. When we started this work, it was our hypothesis that we would need a large number of anti CD threes and that it would be a combinatorial problem to find the right pair of CD. three and tumor binding arms to achieve these results. Instead what we have found is that within our panel of hundreds of CD threes, there are three small families of related CD3 binders that can be used to achieve the rare property of potent tumor cell killing with low cytokine release, and this can be done repeatedly across different tumor targets, starting with a large number of CD3 binding antibodies allowed us to identify these rare subsets we are now prioritizing in TC. development. The focus of our work is now to test if these properties translate to in vivo models and to advance a subset of programs forward in development.
From a technology development perspective, our TC platform is now nearly complete. In addition to having highly differentiated and proprietary CD. threes, we've also developed panels of antibodies that can be used to enhance T-cell activation and survival, be a signal to co-stimulation and have demonstrated the ability to target MHC peptide antigens. These results were also shared at ACR moving to strategic partnerships. This quarter, we announced a collaboration with Biogen for a novel target that enables the delivery of biotherapeutics across the blood-brain barrier. And last week, we announced a collaboration with Viking and Aramark focused on the creation of asset based companies similar to what we previously did with Versant Ventures in the formation that data. And with that, I will hand it over to Andrew to discuss our financials. Andrew?

Andrew Booth

Thanks, Carl. Abcellera continues to be in a strong liquidity position with approximately 725 million in cash and equivalents and with approximately 240 million in available government funding to execute on our strategy in the first quarter of 2024, we continued to execute on our plans to complete our CMC and GMP investments and to invent advance both partner initiated an internal programs.
Looking at our key business metrics in the first quarter, we started work on three partner initiated programs, which takes us to a cumulative total of 90 per partner initiated programs with downstream participation in Q1 2024. No additional molecules advanced into the clinic and we maintain the cumulative total of 13 molecules to have reached the clinic. We'd also like to congratulate our single bio, who in April, announced the first patient dosed in a Phase one two trial for AB. 21 hundred, which is in development as a treatment for clear cell renal cell carcinoma. We view our growing list of progressing molecules in the clinic as specific examples of our near and mid-term potential revenue from downstream milestone fees and royalty payments in the longer term.
Turning to revenue and expenses, revenue in the quarter was 10 million, almost entirely driven by research fees relating to work on partner initiated programs. This compares to research fee revenue of approximately $11 million in Q1 2023 in light of our focus on select high-quality programs with increased long-term participation, particularly through co-development. This was a good quarter for program research fees.
Our research and development expenses for the quarter were approximately 39 million, roughly $13 million less than the same period of the previous year. This expense is driven by ongoing program execution, continuing platform development and our increasing investment in our internal program pipeline. The decrease compared to Q1 last year reflects the absence of approximately 20 million in one-time expenses related to co-development and internal programs that were incurred in Q1 of 2023.
In sales and marketing expenses for Q1 were about $3 million, a small reduction relative to last year. And in G&A, expenses were just over $17 million compared to roughly $50 million in Q1 of 2023.
Looking at earnings, we are reporting a net loss of roughly $41 million for the quarter compared to a loss of 40 million in the same quarter of last year. The loss reflects the continued investments in our business, particularly CMC and GMP manufacturing capabilities, platform and internal programs in terms of earnings per share this quarter result works out to a loss of $0.14 per share on a basic and diluted basis.
Looking at cash flows operating activities for Q1 used roughly $42 million, of which over $10 million were related to seasonal or transient working capital increases. As we have stated in the past we expect our operating cash flow to be irregular and often negative as we continue to invest in our strategic partnerships, our capabilities and our internal pipeline as part of our treasury strategy, we have over $570 million invested in short-term vertical marketable securities. Our investment activities for the quarter include an approximately $57 million net decrease in these holdings, all other investment activities amounted to approximately 27 million, including two, including approximately $24 million invested in property and equipment. Investments in property and equipment are of course, driven in large part by our ongoing work to establish CMC and GMP manufacturing capabilities. We expect these investments to continue at approximately the Q1 rate through 2024 and be substantially complete in early 2025. Altogether, we finished the quarter with approximately 725 million of total cash, cash equivalents and marketable securities. And as a reminder, our continuing GMP facility build-out is separately co-funded by the Government of Canada's Strategic Innovation Fund. In addition, in 2023, we secured 220 million from the governments of Canada and British Columbia. And this available capital does not show up on our balance sheet with over 700, $25 million in cash and equivalents and the unused portion of our secured government funding. We continue to have just under 1 billion in total available liquidity to execute on our strategy.
With respect to our overall operating expenditures, our are our capital needs are very manageable. We continue to believe that we have sufficient liquidity to fund well beyond the next three years of pipeline and platform investments.
And with that we'd be happy to take your questions. Operator?

Question and Answer Session

Operator

(Operator Instructions) Andrea Tan, Goldman Sachs.

Andrea Tan

Good afternoon. Thanks for taking our question. And Carl, maybe on the back of your data presentations at ACR, how are you thinking about what additional data need to be generated to spur strategic interest in the transaction? And then just curious when you've spoken in the past about doing a deal that captures the value of the platform. Can you just remind us again what that would entail or how would you assess the merits of such a deal? Thanks.

Carl Hansen

Thanks, Andrea, and happy to take that on. So first, let me say that we've been working on the platform and in the area of PCs now for roughly 2.5 years. Over that time, we have made terrific progress on building the platform, which provides the building blocks to create TCRs that we believe can have highly differentiated capabilities as demonstrated in vitro. That's really the punch line from the data that we showed at ACR. The focus now, of course, is on being able to take that data and show that it translates into in vivo models and then ultimately to the clinic and ultimately that it makes a difference for patients.
In terms of deal-making, we remain optimistic that we'll be able to make a deal for access to the platform.
When I look across other platforms in the industry, I do believe that we have something that is differentiated and can solve problems that others cannot. And we continue to engage in conversations. And I'd say that the response broadly is the appreciation of the science and the toolkit that's there so that that is something we're actively working on. And I wouldn't I wouldn't speculate on what the timing of that would be. And in the meantime, we are also moving these forward on the translational side, as I said, towards in vivo models towards the clinic, and we see that as being a major value driver. So one of the overarching realities of the field is that people are very excited about this class. People that are working in the class are starting to see that there's data coming in on solid tumors That's encouraging. And broadly speaking, I think there's a consensus that this will be a very important class of immunotherapies at the same time, no one knows exactly how to crack solid tumors. And so there's going to need to be work done in models and that in the clinic, we're going to do some of that here to accelerate, but we're also going to need to engage with partners.

Andrea Tan

I have to make sure that platform is used broadly and that currently is the focus kind of is there a scenario where you would consider advancing one of these maybe independently, and this would become a third, Tom internally developed program.

Carl Hansen

Yes, absolutely. So I'm we as I said in my prepared remarks, we see the platform is highly differentiated and we see it as an important, an important basis or foundation on which to make strategic partnerships in the area of PCs, both in oncology and also in autoimmunity, but we also see it as an important source of internal programs. And one of the things that is probably most exciting about TCE.s is that once you have the platform in place. Once you really start to understand the science behind it and you crack that open, there are numerous opportunities that can then be prosecuted with. I wouldn't say little lift, but with a with higher probability of success because we expect there will be some transfer from one program to the other. So we're quite excited about that. And we definitely do see this as one of the sources of internal programs that we would be willing to take forward in the clinic ourselves.

Andrea Tan

Thanks.

Operator

Srikripa Devarakonda, Truist.

Srikripa Devarakonda

Hey, guys. Thank you so much for taking my question and a follow-up question on the TC. platform wins, where do you think beyond discovery? What do you think you add greater value to the broader PC space in general? And do you think that that is currently being recognized by strategics and more broadly. And I know this I'll ask a question about a follow-up to one of the prior questions in a different way in the slides that you presented, you have shown multiple different TCRs targeting PSMA ADC for B7-H4. And you mentioned that all of them are differentiated from clinical benchmarks. How will you decide if you were to develop one internally, which ones to develop? Or is it how unique it is first in class or is it now you improving on the competitive landscape? Thank you.

Carl Hansen

That's a great question. So first, I think you asked what do we bring outside of discovery? And the short answer is that at this point, we have put in place a platform which is a toolkit for making theses. And what we have shown is that we can bring those forward to create molecules. I would characterize that as discovery. So at this point, we haven't shown value outside of discovery that happens when you move into translational models and then move into the clinic. And that will take time. And that is something that we're pushing forward.
Now what we think is different in the platform is that the broad diversity of CD. threes has allowed us to better understand how to engage CD3 on T cells and how that interplay between how you engage CD3 and how you engage a tumor antigen can control the response of T cells in the examples that are shown on the graph the objective was to get high potency of killing with a minimal cytokine release to address one of the problems in TCs, which has been dose-limiting toxicity associated with CRS. And so some of those examples in PSMA., I highlighted specifically you could not have you know, you could not have imagined a more compelling example of being able to completely decouple potent cell killing from cytokine release. That's an astonishing result and it's one that we're excited about. But we have not yet shown, as I said, that it will translate into animal models and in the clinic, and that's the next step. So that's part of it.
The other part, of course, in discovery is that a seller has for 10 years been making a living working with some of the best in the world, solving some very difficult discovery problems. And when you think about not just CD. three, but the other side of engaging the tumor. There are multiple targets where even finding a good binder or certainly a diversity of binders can be difficult. And so that coupled with the bispecific engineering provides a complete solution to this problem that we intend to show will be a validated solution in the clinic. Of course, that's going to take some time.

Srikripa Devarakonda

Now your other question was of the programs that you've shown, how are you going to decide which ones to bring forward?

Carl Hansen

I mean, the short answer is that it's a combination of commercial and commercial considerations meaning competition as well as primarily the science. So we have to date started five different programs in oncology. We've also started a program in autoimmunity, no, at this point, there's two of the programs in oncology that we're not going to be bringing forward. The other ones we are bringing forward into animal studies and now we're going to need to make a decision based on the results we have based on the data based on what's happening out in the field and based what we think the biggest opportunity is. And then of course, weighing that up again, some of the other programs that we have coming from other platforms such as GPCR an ion channel platform.

Srikripa Devarakonda

Great. Thank you.

Operator

Jacqueline Keith, TD Securities.

Jacqueline Keith

This is Jacqueline pizza on for Steven Mah. Thanks so much for taking the questions. Just to start on the Viking Aramark NewCo structure. Do you maintain any equity ownership? And could you describe what happens at the NewCo acquired?

Carl Hansen

Yes, it is. Andrew?

Andrew Booth

Happy to take that Jeff. And so the the partnership we have with Aramark is at first the discovery partnership where we will work with them in order to find the antibodies against targets that they elect they would then go into NewCo where we would have founding equity in those companies. And then we would Aramark and Viking would fund raise independently around those in order to advance them further towards the clinic. And we would then be a regular equity holder. And it's in a very similar fashion that we have done the deal with Adira.
I also would note that Viking was one of the equity participants in the transaction, the Series B announced value of Daré. So it's a very similar structure to that deal.

Jacqueline Keith

Great. Thank you.
And then just with regards to your GMP biologic manufacturing facility, are there any changes to the timing of that development and has that downstream capability and that's been created impacted Europe partnership discussions?

Andrew Booth

Yes, I think the there have been no recent changes to the timing there. Just as we said at the full year earnings call a few months ago, we're expecting our first engineering batches in 2025. And Carl reiterated that today in the prepared remarks.
And with regards to the interest from partners, I think certainly in our co-development programs of the transaction and partnership you just mentioned mentioned there are, of course, interest in those capabilities and those capabilities would be on time online in around the right time for when those molecules might be advancing through the IND-enabling studies. So I think that that does really marry up very well with each other.

Jacqueline Keith

Excellent. And then if I could just sneak one more in just on your Biogen partnership. Are you getting any more traction with the candidate antibodies? And how does that interest compare to the other offerings that you have?

Carl Hansen

Carl here. So I'm not sure exactly what you're referring to in the can with antibodies from the Biogen deal. So the Biogen deal is exciting for two reasons. One, we have an opportunity to work with a new partner that's one of the heavyweights in the space. And so we're excited about that as the start of relationship that we hope will be able to grow over time. And secondly, and the program is focused on being able to solve what is one of the really huge problems in biologics, which is being able to efficiently transport antibodies and other types of biologics across the blood-brain barrier. So we're going at that based on a lot of ground work by Biogen. And we think it's an exciting program it's at the very early stages. But if successful, we think that that could make a big difference, not just for Myogen but for the field.

Jacqueline Keith

Thank you. Appreciate it.

Operator

Scott Shownhouse, P-Com.

Scott Shownhouse

I team most of my questions have been asked, but just wanted to touch on the three additional partner initiated programs. I'm keen to give us more color on the partners themselves, kind of therapies you're engaging with on these new programs. Just broad color if you could provide it? That's my first question. Thanks.

Carl Hansen

Hey, Scott. I think the three we don't normally disclose the details about the programs. That's a partner initiation, but what we do is on an annual basis and you can find it in our in our full year results show kind of a broadly across the number of programs we started how they're distributed through different therapeutic areas. And so what we started in the first quarter is really it tracks very closely to what we have seen in the past.

Scott Shownhouse

Okay, great. I know hard. It's hard to give specifics on that.
I guess my follow-up question would be on the internal molecule, the ABCL. six 35, do you still plan to take that through Phase two on on its own on and that's it. That's it for me. Thanks.

Carl Hansen

Thanks, Scott. Carl here. I'll take that one. So 65, just remind everyone is an internal program against the GPCR ion channel target for an indication in metabolic and endocrine disorders. It's one that we believe has the potential to be a first-in-class therapy and a program for which we are very excited for strategic reasons. We have not disclosed anymore than I just recount recounted here in terms of our plans for clinical development at this point, we're focused on getting this one to the start line in clinical development. We do believe that the nature of this program means that we'll get a lot of information in terms of proof of concept and safety from from the early trials. And if those if those look good, then I think there's a real path for us taking this molecule further but we're not committing to that until we see the data and we see where we are as a company at that point.

Scott Shownhouse

Thank you.

Operator

Stephen Willey, Stifel.

Stephen Willey

Yes, good afternoon. Thanks for taking the questions. Maybe Justin follow up on the TCE. line of questioning. So I know you Boke about having optimism regarding being able to make so that provides access to the platform. But it also sounds like on such deal probably require you to carve out some targets for internal development. So on the translational work that you're hoping to complete the in vivo work, is that rate-limiting at all to your ability, get a broader portfolio AutoPulse?

Carl Hansen

Yes, Steve, Carl here. So I don't think that our work on the programs we've initiated is a bottleneck to doing a platform deal of significance with a partner, and we're engaged in discussions all the time on that front.
You're asking you're asking a reasonable question in that we have started some work internally and it could well be that there's a partner that's interested in programs that are already in flight at Acceleron. That for me is not a problem. We disclose the programs that we started when we engage in these conversations if there's interest than we can always have a business discussion about it. And if we believe that there is a deal that makes sense from both sides, that's a positive thing, if not the TC. space in oncology and autoimmunity has a very large number of potential opportunities. And I'm I'm not at all worried that we'd find that a conflict is something we're working on with a partner would get in the way of coming together to this. See this platform do it. It really can't.

Stephen Willey

Okay. And on the CD28 co-stim side, I'm guessing the objective there is to leverage CDS. three and CD. 28 engagement on the on the same scaffold, is that correct?

Carl Hansen

That's another good question. So we have we have generated binders for a couple of targets for co-stimulation, recognizing that T cell exhaustion and T cell survival is another important problem that needs to be solved if you want to bring TCs to solid tumors. So we're running experiments internally with those right now and starting to understand how that science plays out at this point we haven't made a decision as to what the best format would be. And of course, as you know, Steve, there are leaders in the field that are approaching trispecific with dual engagement. There are some that are looking at two antibodies delivered together. I think both of those have merit, and we're obviously watching that closely, but we're also doing work internally to see what what then looks best in our hands.

Stephen Willey

Okay. Then maybe just one financial question. So Andrew, I know you mentioned kind of the year of the year impact on R&D spend with respect to the $20 million one-time 43, but just curious about the sequential step-down from 4Q. And I know that there was restructuring that was announced and I'm not sure how far along that is in terms of completion, but just wondering if kind of sequential downstroke in R & D spend is kind of indicative of maybe what a treat what the trajectory should look like for the remainder of the year?
You?
Yes.

Andrew Booth

Hey, Steve, Enders here on. Yes, absolutely. The the restructuring, first of all is completely done. So we would have been taken care of in the Q4 numbers on the and I think that two, I think your real question there is the Q1 number, a good indication of what the go-forward R & D expenses going to be. And I would say, yes, it is a good, a good indication. And yes, it's quite a difference from Q1 of 2023 because of that $20 million one-time, which we called out at the time as well. If you remember this time last year, we did indicate there was a 20 million one-time expense related to co-development in internal programs. So we thought it was just prudent to I'd point that out again and why there is that reduction.

Stephen Willey

Got it.

Operator

Puneet Souda, Leerink.

Puneet Souda

Yes, Michael on for Puneet. Tom, my first question has to do with the deal that you closed with spiking Aramark, I was curious. And so I know you mentioned a couple of years ago, you did a deal with Atlas ventures and Versant has the structure of these new partnerships evolved any meaningful way relative to the prior deal? And kind of your platform itself has also been evolving.

Carl Hansen

Hi, I'm Michael Carroll here. So I'll take that one. I don't know if we've disclosed the details of the structures of previous deals and this opportunity to sum it up is based on relationship with both Viking and Aramark and having having gotten to know both teams and have a lot of respect for what they bring to the table in terms of target ideas and in terms of the ability to bring capital and teams it together around assets to form companies. The structure here is that those two groups will bring forward ideas for first-in-class antibody therapeutics. We vet these and we come together in a work plan at Aramark and Viking fund the R&D to take that concept through to development candidate. And if successful, that development candidate creates the basis for NewCo, as Andrew mentioned on a previous previous question, we obtain an equity stake in that New Co Company, and we also maintain a downstream stake in the molecules through milestones and royalties that are comparable and on the healthy side of what we've done traditionally in the partnership business. So that's that's not dissimilar from certainly the deal that we did with the with Versant integration of Idera. We like that do a lot. And it's one of the things that we have called out previously as being squarely in the bucket of strategic partnerships.

Puneet Souda

Okay, got it. And then my next question has to do with the recent uptick in biotech funding. I know you've been mostly focusing on strategic partnerships and your internal pipeline. But I was curious if you do you think it's just funding where sustain, if there'd be any sort of impact and other parts of the business or maybe even with the more VC firm type deal that that would potentially, I guess, grow the number of potential new codes?

Andrew Booth

It's Andrew here. Yes, I think that's a it's possible, though. It's great to have a bit of a rebound in the biotech funding environment. And I think that can only provide a bit of a tailwind for our own business. But our real focus here is on advancing our own internal programs, building out and completing the platform and then our strategic partnerships. Now if ideas are funded and we believe that they're good ideas and partners come to us with the with an interesting opportunity. I mean, absolutely, we take a look at that and are certainly open in the co-development as well as the Company creation kind of deal structures that we have recently.

Puneet Souda

Great. Thank you.

Operator

(Operator Instructions) Evan Seigerman, BMO.

Evan Seigerman

And this is Connor on for Evan. Thanks for taking our question. I just have one follow-up on the how you're thinking about phasing of OpEx as you look to bring assets into clinic, is there a sweet spot of how many assets you might look to have in the clinic at any given time and then sort of partner out there, any additional assets beyond that? Or and I'm just curious how you're thinking about that thinking either.

Andrew Booth

Conor, Andrew, here yes, good question. Of course, every program has its own nuances and it's difficult to predict because it's going to be driven by the scientific data and the clinical data about how many will advance at the moment. As you know, we have them. We have a two development candidates in IND-enabling studies with the objective of having both of those at IND. And starting in phase one in 2025. We do have some funding available through this strategic innovation fund and the government of British Columbia that we announced last year that broaden that essentially, we're co-funding for a number of molecules through to the clinic over like an eight year period, but that the rate at which they go in is very much going to depend on how good are the programs, what does the data look like and and what the timing is as we bring them through, do it through IND-enabling studies so it's very difficult to trying to predict any sort of regular pace.

Evan Seigerman

Thank you.

Operator

And I'm showing no further questions at this time. So I'd like to hand back over to Carl Hansen. So any closing remarks?

Carl Hansen

Just thank you, everyone, for joining us today. This remains an exciting time at the company, and we're looking forward to keeping you updated on future calls.

Operator

This concludes today's conference call. Thank you all for joining. You may now disconnect your lines.