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 September 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 November 3, 2022, the registrant had 286,100,427 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	24
Item 4.	Controls and Procedures	24
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 5.	Other Information	63
Item 6.	Exhibits	64
	Signatures	65

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 ongoing 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 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		September 30, 2022
Assets
Current assets:
Cash and cash equivalents	$	476,142	$	371,973
Marketable securities		246,835		496,233
Total cash, cash equivalents, and marketable securities		722,977		868,206
Accounts and accrued receivable		160,576		105,964
Restricted cash		25,000		25,000
Other current assets		21,247		46,499
Total current assets		929,800		1,045,669
Long-term assets:
Property and equipment, net		111,616		200,602
Intangible assets, net		148,392		142,548
Goodwill		47,806		47,806
Investments in and loans to equity accounted investees		50,313		66,718
Other long-term assets		30,642		49,066
Total long-term assets		388,769		506,740
Total assets	$	1,318,569	$	1,552,409
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and other liabilities	$	32,017	$	25,866
Current portion of contingent consideration payable		22,934		32,531
Income taxes payable		35,683		23,018
Accrued royalties payable		22,506		17,822
Deferred revenue		7,536		6,815
Total current liabilities		120,676		106,052
Long-term liabilities:
Operating lease liability		36,413		71,591
Deferred revenue and grant funding		60,758		62,202
Contingent consideration payable		35,886		25,392
Deferred tax liability		37,370		34,143
Other long-term liabilities		1,733		2,857
Total long-term liabilities		172,160		196,185
Total liabilities		292,836		302,237
Commitments and contingencies
Shareholders' equity:
Common shares: no par value, unlimited authorized shares at December 31, 2021 and September 30, 2022: 283,257,104 and 285,761,492 shares issued and outstanding at December 31, 2021 and September 30, 2022, respectively		722,430		730,427
Additional paid-in capital		35,357		64,384
Accumulated other comprehensive income (loss)		280		(717	)
Accumulated earnings		267,666		456,078
Total shareholders' equity		1,025,733		1,250,172
Total liabilities and shareholders' equity	$	1,318,569	$	1,552,409

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 September 30,						Nine months ended September 30,
	2021			2022			2021			2022
Revenue:
Research fees	$	5,128		$	7,508		$	14,330		$	29,378
Licensing revenue		190			154			20,692			531
Milestone payments		-			400			8,000			400
Royalty revenue		190			93,321			192,850			433,570
Total revenue		5,508			101,383			235,872			463,879
Operating expenses:
Royalty fees		-			15,035			23,622			64,882
Research and development(1)		17,450			26,582			44,853			79,634
Sales and marketing(1)		1,217			3,089			5,086			8,579
General and administrative(1)		11,271			13,792			28,958			42,470
Depreciation and amortization		3,666			5,150			10,493			14,025
Total operating expenses		33,604			63,648			113,012			209,590
Income (loss) from operations		(28,096	)		37,735			122,860			254,289
Other (income) expense
Other (income) expense		1,256			(6,702	)		595			(7,343	)
Grants and incentives		(4,380	)		(2,150	)		(12,174	)		(8,879	)
Total other (income)		(3,124	)		(8,852	)		(11,579	)		(16,222	)
Net earnings (loss) before income tax		(24,972	)		46,587			134,439			270,511
Income tax (recovery) expense		(3,592	)		19,963			40,923			82,099
Net earnings (loss)	$	(21,380	)	$	26,624		$	93,516		$	188,412
Foreign currency translation adjustment		(1,508	)		(1,293	)		644			(997	)
Comprehensive income (loss)	$	(22,888	)	$	25,331		$	94,160		$	187,415
Net earnings (loss) per share attributable to common shareholders
Basic	$	(0.08	)	$	0.09		$	0.34		$	0.66
Diluted	$	(0.08	)	$	0.08		$	0.29		$	0.60
Weighted-average common shares outstanding
Basic		278,933,760			285,322,719			273,642,542			284,639,599
Diluted		278,933,760			315,818,163			323,323,053			314,183,994

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 (loss)			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
Shares issued and restricted stock units ("RSUs") vested under stock option plan		709,190		3,602		(3,371	)		-			-			231
Stock-based compensation expense		-		-		11,754			-			-			11,754
Foreign currency translation adjustment		-		-		-			-			(1,293	)		(1,293	)
Net earnings		-		-		-			26,624			-			26,624
Balances as of September 30, 2022		285,761,492	$	730,427	$	64,384		$	456,078		$	(717	)	$	1,250,172

	Common Shares				Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Shareholders'
	Shares		Amount		Capital			Earnings			Income (loss)			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
Shares issued under stock option plan		4,169,199		3,330		(2,431	)		-			-			899
Share-based compensation expense		-		-		7,707			-			-			7,707
Foreign currency translation adjustment		-		-		-			-			(1,508	)		(1,508	)
Net Loss		-		-		-			(21,380	)		-			(21,380	)
Balances as of September 30, 2021		281,151,877	$	718,088	$	26,945		$	207,720		$	644		$	953,397

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)

	Nine months ended September 30,
	2021			2022
Cash flows from operating activities:
Net income	$	93,516		$	188,412
Cash flows from operating activities:
Depreciation of property and equipment		3,060			6,212
Amortization of intangible assets		7,432			7,844
Amortization of operating lease right-of-use assets		1,895			3,686
Stock-based compensation		21,608			36,158
Other		(2,379	)		3,304
Changes in operating assets and liabilities:
Accounts and accrued research fees receivable		(34,329	)		(3,675	)