UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 001-39781

AbCellera Biologics Inc.

(Exact Name of Registrant as Specified in its Charter)

British Columbia	Not Applicable
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2215 Yukon Street Vancouver, BC	V5Y 0A1
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (604) 559-9005

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares, no par value per share	ABCL	The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐    No  ☒

As of August 4, 2022, the registrant had 285,138,643 common shares, no par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 5.	Other Information	61
Item 6.	Exhibits	62
	Signatures	63

i

Summary of the Material and Other Risks Associated with Our Business

Our business is subject to numerous material and other risks and uncertainties. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this Quarterly Report, including our financial statements and related notes hereto. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects. The risks and uncertainties described below may change over time and other risks and uncertainties, including those that we do not currently consider material, may impair our business. These risks include, but are not limited to, the following:

• We have incurred losses in certain years since inception and we may not be able to generate sufficient revenue to maintain profitability.

• Our quarterly and annual operating results have fluctuated significantly in the past and may fluctuate significantly in the future, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations.

• Our commercial success depends on the quality of our antibody discovery platform and technological capabilities and their acceptance by new and existing partners in our market.

• If we cannot maintain and expand current partnerships and agreements and enter new partnership agreements that generate discovery programs for antibodies, our business could be adversely affected.

• In recent periods, we have depended on a limited number of partners for our revenue, the loss of any of which could have an adverse impact on our business.

• Development of a biologic molecule is inherently uncertain, and it is possible that none of the drug candidates discovered using our antibody discovery platform that are further developed by our partners will receive marketing approval or become viable commercial products, on a timely basis or at all.

• The failure of our partners to meet their contractual obligations to us could adversely affect our business.

• We may be unable to manage our current and future growth effectively, which could make it difficult to execute on our business strategy.

• We have invested, and expect to continue to invest, in research and development efforts that further enhance our antibody discovery platform. Such investments in technology are inherently risky and may affect our operating results. If the return on these investments is lower or develops more slowly than we expect, our revenue and operating results may suffer.

• Our partners have significant discretion in determining when and whether to make announcements, if any, about the status of our partnerships, including about clinical developments and timelines for advancing collaborative programs with the antibodies that we have discovered, and the price of our common shares may decline as a result of announcements of unexpected results or developments.

• Our partners may not achieve projected discovery and development milestones and other anticipated key events in the expected timelines or at all, which could have an adverse impact on our business and could cause the price of our common shares to decline.

• The life sciences and biotech platform technology market is highly competitive, and if we cannot compete successfully with our competitors, we may be unable to increase or sustain our revenue, or sustain profitability.

• Our business has been and may continue to be adversely affected by the COVID-19 pandemic.

• The ongoing military action between Russia and Ukraine and related sanctions could adversely affect our business, financial condition, and patent administration.

• Our success depends on our ability to protect our intellectual property.

• If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.

• Sales of a substantial number of our common shares in the public market could cause our share price to fall significantly, even if our business is doing well.

Investing in our common shares involves a high degree of risk. You should carefully consider the risks and uncertainties contained in Part II, Item 1A, Risk Factors, together with all other information in this Quarterly Report on Form 10-Q, including our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as our other filings with the Securities and Exchange Commission, or the SEC, before investing in our common stock. Any of the risk factors we describe below under Part II, Item 1A, Risk Factors, could adversely affect our business, financial condition or results of operations. The market price of our common stock could decline if one or more of these risks or uncertainties were to occur, which may cause you to lose all or part of the money you paid to buy our common shares. Additional risks that are currently unknown to us or that we currently believe to be immaterial may also impair our business. Certain statements below are forward-looking statements. See “Forward-Looking Information” in this Quarterly Report on Form 10-Q.

ii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

AbCellera Biologics Inc.

Condensed Consolidated Balance Sheets

(All figures in U.S. dollars. Amounts are expressed in thousands except share data)

(Unaudited)

	December 31, 2021		June 30, 2022
Assets
Current assets:
Cash and cash equivalents	$	476,142	$	790,615
Marketable securities		246,835		231,652
Total cash, cash equivalents, and marketable securities		722,977		1,022,267
Accounts and accrued receivable		160,576		52,797
Restricted cash		25,000		25,000
Other current assets		21,247		43,891
Total current assets		929,800		1,143,955
Long-term assets:
Property and equipment, net		111,616		149,178
Intangible assets, net		148,392		143,179
Goodwill		47,806		47,806
Investments in and loans to equity accounted investees		50,313		65,824
Other long-term assets		30,642		43,842
Total long-term assets		388,769		449,829
Total assets	$	1,318,569	$	1,593,784
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and other liabilities	$	32,017	$	24,390
Current portion of contingent consideration payable		22,934		34,252
Income taxes payable		35,683		107,322
Accrued royalties payable		22,506		50,555
Deferred revenue		7,536		4,621
Total current liabilities		120,676		221,140
Long-term liabilities:
Operating lease liability		36,413		32,759
Deferred revenue and grant funding		60,758		64,800
Contingent consideration payable		35,886		24,629
Deferred tax liability		37,370		34,616
Other long-term liabilities		1,733		2,984
Total long-term liabilities		172,160		159,788
Total liabilities		292,836		380,928
Commitments and contingencies
Shareholders' equity:
Common shares: no par value, unlimited authorized shares at December 31, 2021 and June 30, 2022: 283,257,104 and 285,052,302 shares issued and outstanding at December 31, 2021 and June 30, 2022, respectively		722,430		726,825
Additional paid-in capital		35,357		56,001
Accumulated other comprehensive income		280		576
Accumulated earnings		267,666		429,454
Total shareholders' equity		1,025,733		1,212,856
Total liabilities and shareholders' equity	$	1,318,569	$	1,593,784
Subsequent events

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

AbCellera Biologics Inc.

Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(All figures in U.S. dollars. Amounts are expressed in thousands except share and per share data)

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2021			2022			2021			2022
Revenue:
Research fees	$	5,215		$	12,538		$	9,201		$	21,871
Licensing revenue		263			147			20,522			377
Milestone payments		1,000			-			8,000			-
Royalty revenue		21,165			33,232			192,661			340,249
Total revenue		27,643			45,917			230,384			362,497
Operating expenses:
Royalty fees		3,610			5,210			23,622			49,847
Research and development(1)		15,046			26,685			27,403			53,052
Sales and marketing(1)		1,295			3,120			3,869			5,490
General and administrative(1)		11,203			14,412			17,688			28,680
Depreciation and amortization		3,522			4,886			6,827			8,875
Total operating expenses		34,676			54,313			79,409			145,944
Income (loss) from operations		(7,033	)		(8,396	)		150,975			216,553
Other (income) expense
Other (income) expense		(314	)		25			(645	)		(641	)
Grants and incentives		(4,646	)		(1,535	)		(7,794	)		(6,730	)
Total other (income)		(4,960	)		(1,510	)		(8,439	)		(7,371	)
Net earnings (loss) before income tax		(2,073	)		(6,886	)		159,414			223,924
Income tax (recovery) expense		250			(101	)		44,516			62,136
Net earnings (loss)	$	(2,323	)	$	(6,785	)	$	114,898		$	161,788
Foreign currency translation adjustment		2,152			(211	)		2,152			296
Comprehensive income (loss)	$	(171	)	$	(6,996	)	$	117,050		$	162,084
Net earnings (loss) per share attributable to common shareholders
Basic	$	(0.01	)	$	(0.02	)	$	0.42		$	0.57
Diluted	$	(0.01	)	$	(0.02	)	$	0.36		$	0.52
Weighted-average common shares outstanding
Basic		272,196,107			284,686,542			270,953,541			284,292,312
Diluted		272,196,107			284,686,542			321,555,443			313,361,183

The accompanying notes are an integral part of these condensed consolidated financial statements.

¹Exclusive of depreciation and amortization

2

AbCellera Biologics Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(All figures in U.S. dollars. Amounts are expressed in thousands except share data)

(Unaudited)

	Common Shares				Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Shareholders'
	Shares		Amount		Capital			Earnings			Income			Equity
Balances as of December 31, 2021		283,257,104	$	722,430	$	35,357		$	267,666		$	280		$	1,025,733
Shares issued and restricted stock units ("RSUs") vested under stock option plan		1,264,077		3,325		(2,922	)		-			-			403
Stock-based compensation expense		-		-		12,291			-			-			12,291
Foreign currency translation adjustment		-		-		-			-			507			507
Net earnings		-		-		-			168,573			-			168,573
Balances as of March 31, 2022		284,521,181	$	725,755	$	44,726		$	436,239		$	787		$	1,207,507
Shares issued and restricted stock units ("RSUs") vested under stock option plan		531,121		1,070		(838	)		-			-			232
Stock-based compensation expense		-		-		12,113			-			-			12,113
Foreign currency translation adjustment		-		-		-			-			(211	)		(211	)
Net loss		-		-		-			(6,785	)		-			(6,785	)
Balances as of June 30, 2022		285,052,302	$	726,825	$	56,001		$	429,454		$	576		$	1,212,856

	Common Shares				Additional Paid-in			Accumulated			Accumulated Other Comprehensive		Total Shareholders'
	Shares		Amount		Capital			Earnings			Income		Equity
Balances as of December 31, 2020		269,497,768	$	710,387	$	5,919		$	114,202		$	-	$	830,508
Shares issued under stock option plan		1,428,162		752		(579	)		-			-		173
Stock-based compensation expense		-		-		4,021			-			-		4,021
Reclassification of liability classified options		-		-		5,201			-			-		5,201
Net earnings		-		-		-			117,221			-		117,221
Balances as of March 31, 2021		270,925,930	$	711,139	$	14,562		$	231,423		$	-	$	957,124
Shares issued under stock option plan		6,056,748		3,619		(1,840	)		-			-		1,779
Share-based compensation expense		-		-		8,473			-			-		8,473
Reclassification of liability classified options		-		-		474			-			-		474
Foreign currency translation adjustment		-		-		-			-			2,152		2,152
Net loss		-		-		-			(2,323	)		-		(2,323	)
Balances as of June 30, 2021		276,982,678	$	714,758	$	21,669		$	229,100		$	2,152	$	967,679

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

AbCellera Biologics Inc.

Condensed Consolidated Statements of Cash Flows

(Expressed in thousands of U.S. dollars)

(Unaudited)

	Six months ended June 30,
	2021			2022
Cash flows from operating activities:
Net income	$	114,898		$	161,788
Cash flows from operating activities:
Depreciation of property and equipment		1,897			3,681
Amortization of intangible assets		4,930			5,213
Amortization of operating lease right-of-use assets		1,354			2,120
Stock-based compensation		13,900			24,404
Other		337			(298	)
Changes in operating assets and liabilities:
Accounts and accrued research fees receivable		(28,339	)		(6,963	)
Accrued royalties receivable		172,768			106,583
Income taxes payable		(30,330	)		52,251
Accounts payable and accrued liabilities		(3,640	)		(1,882	)
Deferred revenue		4,848			(2,979	)
Accrued royalties payable		(3,623	)		28,049
Deferred grant revenue		22,349			5,406
Other assets		(4,121	)		(4,139	)
Net cash provided by operating activities		267,228			373,234
Cash flows from investing activities:
Purchases of property and equipment		(40,448	)		(45,817	)
Purchase of marketable securities		-			(134,306	)
Proceeds from marketable securities		-			145,808
Receipt of grant funding		4,520			8,098
Long-term investments and other assets		(5,034	)		(11,657	)
Investment in and loans to equity accounted investees		(20,510	)		(15,694	)
Net cash used in investing activities		(61,472	)		(53,568	)
Cash flows from financing activities:
Repayment of long-term debt and contingent consideration		(4,373	)		(73	)
Proceeds from debt and exercise of stock options		2,755			2,175
Payment of liability for in-licensing agreement		(5,000	)		(4,060	)
Net cash used in financing activities		(6,618	)		(1,958	)
Effect of exchange rate changes on cash and cash equivalents		(683	)		(1,411	)
Increase in cash and cash equivalents		198,455			316,297
Cash and cash equivalents and restricted cash, beginning of period		594,116			501,142
Cash and cash equivalents and restricted cash, end of period	$	792,571		$	817,439
Restricted cash included in other assets		-			(1,824	)
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	792,571		$	815,615
Supplemental disclosure of non-cash investing and financing activities
Property plant and equipment in accounts payable		-			2,146
Right-of-use assets obtained in exchange for operating lease obligation		29,573			(796	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

AbCellera Biologics Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(All figures in U.S. dollars. Amounts are expressed in thousands except share data)

(Unaudited)

1. Nature of operations

AbCellera Biologics Inc.’s (the “Company”) mission is to improve health with technologies that transform the way that antibody-based therapies are discovered. The Company aims to become the centralized operating system for next generation antibody discovery. The Company’s full-stack, AI-powered antibody discovery platform searches and analyzes the database of natural immune systems to find antibodies that can be developed as drugs. The Company believes its technology increases the speed and the probability of success of therapeutic antibody discovery, including enabling discovery against targets that may otherwise be intractable. The Company forges partnerships with drug developers of all sizes, from large cap pharmaceutical to small biotechnology companies. 

2. Basis of presentation

The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC for interim financial information. Accordingly, these financial statements do not include all the information and footnotes required for complete financial statements and should be read in conjunction with the audited consolidated financial statements of the Company and the accompanying notes thereto for the year ended December 31, 2021.

These unaudited interim condensed consolidated financial statements reflect all adjustments, consisting solely of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods presented. The results of operations for the three and six months ended June 30, 2021 and 2022 are not necessarily indicative of results that can be expected for a full year. These unaudited interim condensed consolidated financial statements follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company for the year ended December 31, 2021.

All amounts expressed in these condensed consolidated financial statements of the Company and the accompanying notes thereto are expressed in thousands of U.S. dollars, except for share data and where otherwise indicated. References to “$” are to U.S. dollars and references to “C$” and “CAD” are to Canadian dollars.

3. Significant accounting policies

Use of estimates