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AbCellera Biologics Inc.

AbCellera Biologics Inc.ABCLEarnings & Financial Report

Nasdaq · Health Care · Pharmaceutical Preparations

AbCellera Biologics Inc. is a Vancouver, British Columbia-based biotechnology company that discovers and develops antibody therapeutics. The company is best known for its leading role in the Pandemic Prevention Platform, a project of DARPA's Biological Technologies Office. AbCellera utilizes a proprietary technology platform, which they claim can develop "medical countermeasures within 60 days." Its platform for single-cell screening was initially developed at the University of British Columbia.

What changed in AbCellera Biologics Inc.'s 10-K — 2022 vs 2023

Top changes in AbCellera Biologics Inc.'s 2023 10-K

619 paragraphs added · 594 removed · 464 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

172 edited+42 added−14 removed140 unchanged
We believe that the additional insights to result from these data may also allow us to select and advance antibody candidates that are more potent or more easily manufactured. 5 Figure 2: Our integrated engine and capabilities create a virtuous cycle.
We believe that the additional insights that result from these data may also allow us to select and advance antibody candidates that are more potent or more easily manufactured. 5 Figure 2: Our integrated engine and capabilities create a virtuous cycle.
Issued patents from this family are expected to expire in July 2031, absent any disclaimers or extensions available. Another patent family is directed to transgenic mammals that express bovine-based immunoglobulins. This patent family contains one issued U.S. patent. Issued patents from this family are expected to expire in July 2031, absent any disclaimers or extensions available.
Issued patents from this family are expected to expire in July 2031, absent any disclaimers or extensions available. Another patent family is directed to transgenic mammals that express bovine-based immunoglobulins. This patent family contains one issued U.S. patent.
This patent family contains eight pending applications, including in the U.S., Australia, Canada, China, Europe, Israel, Japan, and Korea. Issued patents from this family are expected to expire in July 2039, absent any disclaimers or extensions available. Another patent family is directed to transgenic mammals that express bovine-based immunoglobulins.
Issued patents from this family are expected to expire in July 2039, absent any disclaimers or extensions available. Another patent family is directed to transgenic mammals that express bovine-based immunoglobulins. This patent family contains eight pending applications, including in the U.S., Australia, Canada, China, Europe, Israel, Japan, and Korea.
For a discussion of the risks we face relating to intellectual property, see “Risk Factors—Risks Related to our Intellectual Property—If we are unable to obtain and maintain sufficient intellectual property protection for our technology, including our platform and Celium, our proprietary antibody visualization software, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technologies or a platform similar or identical to ours, and our ability to successfully sell our data packages may be impaired.” Government Regulation Our focus is on the discovery of antibodies that our partners use to improve the speed and success of their antibody discovery efforts; however, we ourselves are not currently involved in antibody discovery, do not manufacture any products and do not conduct any clinical trials.
For a discussion of the risks we face relating to intellectual property, see “Risk Factors—Risks Related to our Intellectual Property—If we are unable to obtain and maintain sufficient intellectual property protection for our technology, including our platform and Celium, our proprietary antibody visualization software, or if the scope of the intellectual property 26 protection obtained is not sufficiently broad, our competitors could develop and commercialize technologies or a platform similar or identical to ours, and our ability to successfully sell our data packages may be impaired.” Government Regulation Our focus is on the discovery of antibodies that our partners use to improve the speed and success of their antibody discovery efforts; however, we ourselves are not currently involved in antibody discovery, do not manufacture any products and do not conduct any clinical trials.
In addition to royalty positions, we have included and expect to continue to include other downstream stakes in our agreements for programs. As is customary in our industry, because drug development and testing spans many years, we typically negotiate clinical and commercial milestone payments as deferred compensation to recognize future value inflection points arising from our work.
In addition to royalty positions, we have included and expect to continue to include other downstream stakes in our agreements for programs. 21 As is customary in our industry, because drug development and testing spans many years, we typically negotiate clinical and commercial milestone payments as deferred compensation to recognize future value inflection points arising from our work.
We believe this framework has allowed us to build an exceptional team at all levels and to develop strong leaders that drive the continued growth of our business in the long term. How we structure our pay and compensation packages We believe our long-term success depends on our ability to compete for top talent.
We believe this framework has allowed us to build an exceptional team at all levels and to develop strong leaders that drive the continued growth of our business in the long term. 8 How we structure our pay and compensation packages We believe our long-term success depends on our ability to compete for top talent.
Undisclosed Undisclosed February 2, 2016 * Effective date of agreement 11 Most of the programs with our partners will generate milestone payments to us if our partners reach certain preclinical, clinical, regulatory, and commercial milestones. In addition, programs that generate drug candidates which become commercial products may generate royalty payments to us on the net sales of those products.
Undisclosed Undisclosed February 2, 2016 * Effective date of agreement Most of the programs with our partners will generate milestone payments to us if our partners reach certain preclinical, clinical, regulatory, and commercial milestones. In addition, programs that generate drug candidates which become commercial products may generate royalty payments to us on the net sales of those products.
Issued patents from this patent family are expected to expire in May 22 2031, absent any disclaimers or extensions available. The Stanford license also includes another patent family directed toward methods of characterizing immune response and vaccine selection. This patent family includes two issued U.S. patents and one pending U.S. non-provisional patent application.
Issued patents from this patent family are expected to expire in May 2031, absent any disclaimers or extensions available. The Stanford license also includes another patent family directed toward methods of characterizing immune response and vaccine selection. This patent family includes two issued U.S. patents and one pending U.S. non-provisional patent application.
Item 1. Business. OVERVIEW We are a team of scientists, engineers, creatives, and business professionals addressing the barriers of conventional antibody drug development. Motivated by our mission to bring better antibody drugs to patients faster, we focus on solving general problems to catalyze a transformation in how antibody drugs are discovered.
Item 1. Business. OVERVIEW We are a team of scientists, engineers, creatives, and business professionals addressing the barriers of conventional antibody drug development. Motivated by our mission to bring better antibody drugs to patients faster, we focus on solving general problems to catalyze a transformation in how antibody drugs are discovered and developed.
We continue to invest in improving the efficiency of our business to increase the precision and speed by which we can bring new therapies to the clinic. We aspire to be recognized as the biotechnology industry’s most powerful engine for antibody discovery and development, spanning the path from target to the start of clinical testing.
We continue to invest in improving the efficiency of our business to increase the precision and speed by which we can bring new therapies to the clinic. We aspire to be recognized as the biotechnology industry’s most powerful engine for antibody discovery and development, spanning the path from target to clinical testing.
Under the terms of the UNC Agreement, we are required to pay UNC an annual license maintenance fee, low single-digit royalties on net sales of clinically approved and other products as well as sublicense fees. The term of the license and our obligation to pay 23 royalties runs until the last licensed patent expires.
Under the terms of the UNC Agreement, we are required to pay UNC an annual license maintenance fee, low single-digit royalties on net sales of clinically approved and other products as well as sublicense fees. The term of the license and our obligation to pay royalties runs until the last licensed patent expires.
In the healthcare sector, anti-corruption risk can also arise in the context of improper interactions with doctors, key opinion leaders and other healthcare professionals who work for state-affiliated hospitals, research institutions or other organizations. 26 Available Information Our website address is www.abcellera.com.
In the healthcare sector, anti-corruption risk can also arise in the context of improper interactions with doctors, key opinion leaders and other healthcare professionals who work for state-affiliated hospitals, research institutions or other organizations. Available Information Our website address is www.abcellera.com.
While we believe AI has tremendous potential to accelerate antibody discovery through the prediction, engineering, and potentially even de novo design of antibodies with improved therapeutic properties, it is our view that many of the claims associated with AI drug discovery are ahead of current capabilities.
While we believe AI has tremendous potential to 4 accelerate antibody discovery through the prediction, engineering, and potentially even de novo design of antibodies with improved therapeutic properties, it is our view that many of the claims associated with AI drug discovery are ahead of current capabilities.
The nature of our work in technology development and drug discovery requires a workforce that is exceptionally interdisciplinary in its scientific, engineering, and professional skills. After more than a decade of technology development at the nexus of science, engineering, and computation, we believe we are effective at assembling and integrating strong cross-functional teams.
The nature of our work in technology and drug development requires a workforce that is exceptionally interdisciplinary in its scientific, engineering, and professional skills. After more than a decade of technology development at the nexus of science, engineering, and computation, we believe we are effective at assembling and integrating strong cross-functional teams.
Issued patents from this patent family are expected to expire in May 2035, absent any disclaimers or extensions available. Lineage The Lineage patent portfolio complements our single-cell microfluidic intellectual property with downstream methods of sequencing reaction preparation, immune RepSeq and analysis.
Issued patents from this patent family are expected to expire in May 2035, absent any disclaimers or extensions available. 23 Lineage The Lineage patent portfolio complements our single-cell microfluidic intellectual property with downstream methods of sequencing reaction preparation, immune RepSeq and analysis.
Issued patents from this patent family are expected to expire in March 2034, absent any disclaimers or extensions available. Another patent family is directed toward IgG bispecific antibodies and processes for preparation. This patent family includes one issued U.S. patent, one pending U.S. non-provisional patent application, and one foreign counterpart patent application.
Issued patents from this patent family are expected to expire in March 2034, absent any disclaimers or extensions available. 24 Another patent family is directed toward IgG bispecific antibodies and processes for preparation. This patent family includes one issued U.S. patent, one pending U.S. non-provisional patent application, and one foreign counterpart patent application.
By using our engine and its differentiated capabilities to attract business from our partners across the biotechnology industry, we believe that discovery partnerships can be used to grow our portfolio without significant capital outlay apart from the investments we make in expanding the capabilities and capacity of our engine.
By using our engine and its differentiated capabilities to attract business from strategic partners across the biotechnology industry, we believe that discovery partnerships can be used to grow our portfolio without significant capital outlay apart from the investments we make in expanding the capabilities and capacity of our engine.
Single target Oncology August 3, 2021 Undisclosed biotechnology company Up to 4 targets, multi-year Undisclosed June 30, 2021 * Angios GmbH Multi-target, multi-year Ophthalmology May 6, 2021 Undisclosed biotechnology company Multi-target, multi-year Oncology May 6, 2021 * Empirico Inc. 5 targets, multi-year Undisclosed April 14, 2021 Gilead Sciences, Inc. 8 targets, multi-year Undisclosed April 1, 2021 Abdera Therapeutics Inc. 9 targets, multi-year Oncology January 14, 2021 Invetx, Inc.
Single target Oncology August 3, 2021 Undisclosed biotechnology company Up to 4 targets, multi-year Undisclosed June 30, 2021 * Angios Multi-target, multi-year Ophthalmology May 6, 2021 Undisclosed biotechnology company Multi-target, multi-year Oncology May 6, 2021 * Empirico Inc. 5 targets, multi-year Undisclosed April 14, 2021 Gilead Sciences, Inc. 8 targets, multi-year Undisclosed April 1, 2021 Abdera Therapeutics Inc. 9 targets, multi-year Oncology January 14, 2021 Invetx, Inc.
Intellectual Property We strive to protect the proprietary technologies that we believe are important to our business, including seeking and maintaining patent protection intended to cover the compositions of matter of our product candidates, their methods of use, related technology, and other inventions that are important to our business.
OTHER MATTERS Intellectual Property We strive to protect the proprietary technologies that we believe are important to our business, including seeking and maintaining patent protection intended to cover the compositions of matter of our product candidates, their methods of use, related technology, and other inventions that are important to our business.
We estimate that accelerating the path to market by one year could improve the value of an average approved treatment by more than $100 million dollars in net present value, considering only the impact of bringing cash flows forward.
We estimate that accelerating the path to market by one year could improve the value of an average approved treatment by more than $100 million in net present value, considering only the impact of bringing cash flows forward.
When partnering, we look for companies with what we believe are innovative and impactful ideas, strong leadership teams, and the 14 continued ability to raise the capital needed to support a drug candidate on its way to and through the clinic.
When partnering, we look for companies with what we believe are innovative and impactful ideas, strong leadership teams, and the continued ability to raise the capital needed to support a drug candidate on its way to and through the clinic.
We begin discovery with a 50% stake in the program and have the option to invest to retain our ownership position on a stage-by-stage basis. Some programs in this category also include equity investments in partner companies.
We each begin discovery with a 50% stake in the program and have the option to invest to retain our ownership position on a stage-by-stage basis. Some programs in this category also include equity investments in partner companies.
The level of royalties to us which our partners agree to directionally depends on: • The value we add to the program; • Our partner’s appreciation of the value we add to the program; • Our investment in the program; and 19 • The degree to which we emphasize near-term and milestone payments in the agreement structure.
The level of royalties to us which our partners agree to directionally depends on: • The value we add to the program; • Our partner’s appreciation of the value we add to the program; • Our investment in the program; and • The degree to which we emphasize near-term and milestone payments in the agreement structure.
We continuously assess new ways to improve our technology platform through license or acquisition of third-party patent portfolios, as was the case with our acquisitions of Lineage in 2017 and the OrthoMab platform from Dualogics LLC, or Dualogics, in 2020, our acquisition of Trianni, Inc., or Trianni, in 2020, our acquisition of TetraGenetics, Inc. in 2021, and our license agreements with Alloy Therapeutics LLC, or Alloy Therapeutics. 21 Our patent prosecution strategy encompasses the pursuit of protection for our discovery and development engine and tangentially related methods.
We continuously assess new ways to improve our technology platform through license or acquisition of third-party patent portfolios, as was the case with our acquisitions of Lineage in 2017 and the OrthoMab platform from Dualogics LLC, or Dualogics, in 2020, our acquisition of Trianni, Inc., or Trianni, in 2020, our acquisition of TetraGenetics, Inc. in 2021, and our license agreements with Alloy Therapeutics LLC, or Alloy Therapeutics. 22 Our patent prosecution strategy encompasses the pursuit of protection for our discovery and development engine and tangentially related methods.
For a drug development program to ultimately achieve commercial success, several conditions generally need to be met: the therapeutic hypothesis must be valid; the drug candidate must be optimal-for-purpose ( e.g. effective, safe, manufacturable); the clinical trials must be designed and run appropriately; a significant medical need must be met; regulatory, logistical, and commercial matters must be handled well; and good organizational and financial support must be established and maintained throughout.
For a drug development program to ultimately achieve commercial success, several conditions generally need to be met: the therapeutic hypothesis must be valid; the drug candidate must be optimal-for-purpose ( e.g. effective, safe, manufacturing); the clinical trials must be designed and run appropriately; a significant medical need must be met; regulatory, logistical, and commercial matters must be handled well; and good organizational and financial support must be established and maintained throughout.
Academic institutions, venture capital groups, non-government organizations, small biotechnology companies, and large biopharmaceutical companies all have a role to play in driving ideation in our industry. To us, this dynamic suggests that broad partnerships are essential for connecting with the decentralized ecosystem of ideators that are the source of ideas for new antibody drugs.
Academic institutions, venture capital groups, non-government organizations, small biotechnology companies, and large biopharmaceutical companies all have a role to play in driving ideation in our industry. To us, this dynamic suggests that partnerships are essential for connecting with the decentralized ecosystem of ideators that are the source of the best new ideas for antibody drugs.
Failure on any one factor often leads to program-failure overall. Historically, such failures have resulted in success rates for drug development programs estimated to be in the mid-single-digit percentage range. 18 Through our investments and engine-based approach, we aim to raise the probability of success of the programs in our portfolio.
Failure on any one factor often leads to program-failure overall. 19 Historically, such failures have resulted in success rates for drug development programs estimated to be in the mid-single-digit percentage range. Through our investments and engine-based approach, we aim to raise the probability of success of the programs in our portfolio.
Finally, we believe that our strategy of using technology to positively impact the lives of patients is attractive to top talent who want to spend their days well and who value challenging work with a clear sense of purpose. 7 Our discovery engine requires interdisciplinary talent Interdisciplinarity is a core feature of our business.
Finally, we believe that our strategy of using technology to positively impact the lives of patients is attractive to top talent who want to spend their days well and who value challenging work with a clear sense of purpose. Our discovery and development engine requires interdisciplinary talent Interdisciplinarity is a core feature of our business.
We believe this is the best way for us to create value, and to do so reliably. Historically, our business has been both high-growth and capital-efficient. We have generated positive operating cash flow cumulatively since our inception in 2012 and in every successive year since 2018.
We believe this is the best way for us to create value, and to do so reliably. Historically, our business has been both high-growth and capital-efficient. We have generated positive operating cash flow cumulatively since our inception in 2012 and in every successive year from 2018 to 2022.
They and similar tool-providers place instruments with our potential customers and with 13 CROs that compete with us for business. Such point-solution companies commonly earn revenues on the sale of machines and proprietary reagents, and in some cases also perform discovery services with fees and royalties that compete with our business.
They and similar tool-providers place instruments with our potential customers and with CROs that compete directly with us for business. Such point-solution companies commonly earn revenues on the sale of machines and proprietary reagents, and in some cases also perform discovery services with fees and royalties that compete with our business.
We do, however, recognize that our COVID-19 program was realized on a very compressed timeline (owing to the dynamics of a global pandemic) which is unlikely to be repeated by other programs. Our approach is to maximize the expected net present value of our stakes in future antibody drugs.
We recognize that our COVID-19 program was realized on a very compressed timeline (owing to the dynamics of a global pandemic) which is unlikely to be repeated by other programs. Our approach is to maximize the expected net present value of our stakes in future antibody drugs.
After completing the initial work phases (typically to identify a development candidate), we have the option – but not the obligation – to continue co-funding further development of the drug candidate in return for a maintained ownership share. As a co-owner of these programs, we have complete visibility on data and progress.
After completing the initial work phases (typically to identify a development candidate), we and our partner have the option – but not the obligation – to continue co-funding further development of the drug candidate in return for a maintained ownership share. As a co-owner of these programs, we have complete visibility on data and progress.
Precedent suggests that the important assets which we target with our pre-partnered programs can be partnered on attractive economic terms. For example, in 2020, we partnered with Lilly to develop and commercialize COVID-19 antibody assets resulting from pre-partnered work using our pandemic-response platform.
Precedent suggests that the important assets which we target with our internal programs can be partnered on attractive economic terms. For example, in 2020, we partnered with Lilly to develop and commercialize COVID-19 antibody assets resulting from internal work using our pandemic-response platform.
We believe that our ability to connect with and pursue such ideas is reflected in the growth in our cumulative number of partners and our cumulative number of program starts. We believe our ability to accelerate drug development timelines and to unlock new types of targets put us in a position to continue driving business development growth.
We believe that our ability to connect with and pursue such ideas is reflected in the growth in our cumulative number of partners and our cumulative number of program starts. We believe our ability to accelerate drug development timelines and to unlock new types of targets puts us in a position to continue driving business development growth.
Any patents that issue from this family are expected to expire in August 2035, absent any disclaimers or extensions available. Another patent family is directed to enhanced immunoglobulin diversity. This patent family includes one issued patent in the U.S. and two pending applications, including one in the U.S. and one in Europe.
Any patents that issue from this family are expected to expire in August 2036, absent any disclaimers or extensions available. Another patent family is directed to enhanced immunoglobulin diversity. This patent family includes one issued patent in the U.S. and two pending applications, including one in the U.S. and one in Europe.
Single target Neurological diseases June 12, 2018 Undisclosed mid-cap biopharmaceutical company Undisclosed Undisclosed January 25, 2018 Teva Pharmaceuticals Industries Ltd. Single target Membrane protein June 13, 2017 Pfizer Inc. Multi-target, multi-year Membrane protein January 5, 2017 Undisclosed global biotechnology company Multi-target, multi-year Undisclosed November 4, 2016 Kodiak Sciences Inc. Single target Ophthalmology August 24, 2016 Teva Pharmaceuticals Industries Ltd.
Single target Neurological diseases June 12, 2018 Undisclosed mid-cap biopharmaceutical company Undisclosed Undisclosed January 25, 2018 Teva Pharmaceutical Industries Ltd. Single target Membrane protein June 13, 2017 Pfizer Inc. Multi-target, multi-year Membrane protein January 5, 2017 Undisclosed global biotechnology company Multi-target, multi-year Undisclosed November 4, 2016 Kodiak Sciences Inc. Single target Ophthalmology August 24, 2016 12 Teva Pharmaceutical Industries Ltd.
We grant equity awards, comprising stock options and restricted stock units, to all employees. We do this because we believe that shared ownership promotes employee retention, creates alignment, and promotes a sense of shared ownership in the long-term success of our Company.
We grant equity awards, comprising of share options and restricted share units, to all employees. We do this because we believe that shared ownership promotes employee retention, creates alignment, and promotes a sense of shared ownership in the long-term success of our Company.
This approach is intended to increase our partners’ probabilities of success in developing an antibody candidate, with a commensurate improvement in their return on investment. We take the selection of our partners seriously We take a deliberate and strategic approach to selecting partners.
This approach is intended to increase our partners’ probabilities of success in developing an antibody candidate, with a commensurate improvement in their return on investment. We are strategic in the selection of our partners We take a deliberate and strategic approach to selecting partners.
For example, Twist Bioscience markets and provides antibody discovery services using the Berkeley Lights Beacon platform to its customers. OUR APPROACH TO CAPITAL ALLOCATION We think like owners when making investments and have historically been profitable Our founders, leadership team, and employees own a significant portion of the equity in our Company.
For example, Twist Bioscience markets and provides antibody discovery services using the Bruker Beacon platform to its customers. OUR APPROACH TO CAPITAL ALLOCATION We think like owners when making investments and have historically been profitable Our founders, leadership team, and employees own a significant portion of the equity in our Company.
We believe successful antibody drugs are developed in collaboration with partners who have skills and experience complementary to our own. We look for partners with innovative and impactful ideas, strong leadership teams, and the continued ability to raise the capital needed to fund the development of a product candidate.
We believe successful antibody drugs are developed in collaboration with partners who have insights, technology, skills or experience complementary to our own. We look for partners with innovative and impactful ideas, strong leadership teams, and the continued ability to raise the capital needed to fund the development of a product candidate.
We level the playing field to empower a more diverse set of innovators As our centralized infrastructure for antibody drug discovery lowers the barriers to entry in our industry, we create the conditions for smaller biotechnology companies to focus on what is unique and valuable in their businesses, and to compete on the merits of their ideas.
We empower a more diverse set of innovators As our centralized infrastructure for antibody drug discovery lowers the barriers to entry in our industry, we create the conditions for smaller biotechnology companies to focus on what is unique and valuable in their businesses, and to compete on the merits of their ideas.
Because the capabilities of our engine are broadly applicable to antibody-based drug development, we can access the full depth and breadth of programs in the biotechnology industry through our partnering approach. Our resulting portfolio of programs is well-diversified across therapeutic areas (Figure 4), modalities, and partner types.
Because the capabilities of our engine are broadly applicable to antibody-based drug development, we can access the full depth and breadth of programs in the biotechnology industry through our partnering approach. Our resulting portfolio of partner-initiated programs is well-diversified across therapeutic areas (Figure 3), modalities, and partner types.
Any patents that issue from this patent family are expected to expire in January 2036, absent any disclaimers or extensions available. The last patent family is directed toward methods for producing Fabs and IgG bispecific antibodies. This patent family includes one pending U.S. and one pending foreign counterpart patent applications.
Any patents that issue from this patent family are expected to expire in January 2036, absent any disclaimers or extensions available. The last patent family is directed toward methods for producing Fabs and IgG bispecific antibodies. This patent family includes one granted U.S. patent and one pending foreign counterpart patent application.
This patent family includes ten issued patents including in the U.S., Australia, the Russian Federation, Europe, India, Israel, Canada, China and Japan. There are two pending applications, one in the U.S. and one in Japan. Patents issuing from this family are expected to expire in July 2031, absent any disclaimers or extensions available.
This patent family includes twelve issued patents including in the U.S., Australia, the Russian Federation, Europe, India, Israel, Canada, China and Japan. There are three pending applications, two in the U.S. and one in Japan. Patents issuing from this family are expected to expire in July 2031, absent any disclaimers or extensions available.
A partner’s recognition of the value we add to their program grows with each successful demonstration of our capabilities, either when we are able to show results from our work, particularly from pre-partnered programs, or during the inaugural programs we complete with them. Our investments in programs depend on the program type.
A partner’s recognition of the value we add to their program grows with each successful demonstration of our capabilities, either when we are able to show results from our work, particularly from internal programs, or during the inaugural programs we complete with them. Our investments in programs depend on the program type.
We may terminate the agreement at any time upon at least 60 days ’ notice to UNC. Trianni Through our acquisition of Trianni, we acquired all existing intellectual property including issued patents and pending applications worldwide relating to the flagship Trianni mouse and new platforms in development.
We may terminate the agreement at any time upon at least 60 days’ notice to UNC. Trianni Through our acquisition of Trianni, we acquired all existing intellectual property including issued patents and pending applications worldwide relating to the flagship Trianni mouse and new platforms in development.
Investments are minimal in the case of partner-initiated discovery programs, where we typically cover the marginal cost of our work with near-term payments. For pre-partnered programs, the investments we make in the form of our initial technology development (and the subsequent advancement of development work for a particular program) are more substantial.
Investments are minimal in the case of partner-initiated discovery programs, where we typically cover the marginal cost of our work with near-term payments. For internal programs, the investments we make in the form of our initial technology development (and the subsequent advancement of development work for a particular program) are more substantial.
Issued patents from this family are expected to expire in July 2037, absent any disclaimers or extensions available. 24 Another patent family is directed to long germline DH gene and long HCDR3 antibodies. This patent family contains one issued patent in Europe and one pending application in the U.S.
Issued patents from this family are expected to expire in July 2038, absent any disclaimers or extensions available. Another patent family is directed to long germline DH gene and long HCDR3 antibodies. This patent family contains one issued patent in Europe and one pending application in the U.S.
Our partners are specialist scientific ideators and skilled product testers that are predominantly based in the United States and Europe. They seek increased speed and probability of success of their drug development programs. As of December 31, 2022, we had a total of 40 unique partners for whom we have conducted or are conducting antibody discovery activities.
Our partners are specialist scientific ideators and skilled product testers that are predominantly based in the United States and Europe. They seek increased speed and probability of success of their drug development programs. As of December 31, 2023, we had a total of 46 unique partners for whom we have conducted or are conducting antibody discovery activities.
Agreements may include alternative approaches to capture value, including equity in our business partner and various options for deeper investment in moving drug candidates forward. As of December 31, 2022, we had 174 partnered programs under contract that were either completed, in progress, or pending target nomination by the partner.
Agreements may include alternative approaches to capture value, including equity in our business partner and various options for deeper investment in moving drug candidates forward. As of December 31, 2023, we had 203 partnered programs under contract that were either completed, in progress, or pending target nomination by the partner.
We believe even more impactful is that our business model is designed to allow smaller companies to access specialized expertise and state-of-the-art capabilities for rapidly discovering and developing optimal clinical candidates. OUR PARTNERS We have extensive experience in forging partnerships with emerging biotechnology companies, leading pharmaceutical companies, and non-profit and government organizations.
We believe even more impactful is that our business model is designed to allow smaller companies to access specialized expertise and state-of-the-art capabilities for rapidly discovering and developing optimal clinical candidates. OUR PARTNERS We have extensive experience partnering with emerging biotechnology companies, leading pharmaceutical companies, and non-profit and government organizations.
Up to 5 targets, multi-year Undisclosed December 15, 2022 Rallybio Corporation Up to 5 targets, multi-year Rare metabolic disorder and undisclosed December 1, 2022 Atlas Ventures - stealth stage company Up to 3 targets, multi-year Undisclosed August 3, 2022 Undisclosed biotechnology company Up to 3 targets, multi-year Undisclosed June 29, 2022 * Empirico Inc. 2 additional targets Undisclosed May 3, 2022 Everest Medicines Ltd.
Up to 5 targets, multi-year Undisclosed December 15, 2022 Rallybio Corporation Up to 5 targets, multi-year Rare metabolic disorder and undisclosed December 1, 2022 Atlas' stealth stage company Up to 3 targets, multi-year Undisclosed August 3, 2022 Undisclosed biotechnology company Up to 3 targets, multi-year Undisclosed June 29, 2022 * Empirico Inc. 2 additional targets Undisclosed May 3, 2022 Everest Medicines Ltd.
As of December 31, 2022, we have entered contracts for 174 antibody discovery and development programs. The economics we earn on partnered programs scale with the value we bring to each program. Typically, these economics take the form of near-term payments, clinical and commercial milestone payments, and royalties on the net sales of a resulting therapeutic.
As of December 31, 2023, we have entered contracts for 203 antibody discovery and development programs. The economics we earn on partnered programs scale with the value we bring to each program. Typically, these economics take the form of near-term payments, clinical and commercial milestone payments, and royalties on the net sales of a resulting therapeutic.
Our code of conduct, corporate governance guidelines and the charters of our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee are available through the “Investors” portion of our website. 27
Our code of conduct, corporate governance guidelines and the charters of our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee are available through the “Investors” portion of our website. 28
We build systems to support our people We believe a strong corporate culture is essential for the recruitment, development, and retention of exceptional employees and teams. Although leaders must model corporate values and desired behaviors, we do not believe culture can be invented or enforced from above.
We build systems to support our people We believe a strong corporate culture is essential for the recruitment, development, and retention of exceptional employees and teams. Although leaders must model corporate values and desired behaviors, we do not believe culture can be invented or enforced from the top of an organization.
Today, we integrate data from the start of a program right through to comprehensive characterization of antibody candidates. We are also investing in our engine to connect program data from program launch through to manufacturing and regulatory submissions for clinical testing.
Today, we integrate data from the start of a program right through to comprehensive characterization of antibody candidates. We are also investing in our engine to connect program data from program launch through to manufacturing and clinical testing.
The following table represents the range of royalty (and equivalent) rates and the hypothetical maximum value of the milestone payments included in our partnership agreements as of December 31, 2022: Table 3: Downstream Participation Milestones (in billions) 1 Royalty on net sales, 5th to 95th percentile range 2 Preclinical $0.07 2015-2019 contracts 0-4.0% Clinical $0.96 2020-2022 contracts 2.0-8.4% Regulatory $1.26 Commercial $4.26 Other downstream participation Total $6.55 Equity/equity-like positions Options to co-invest 1 All programs under contract, not probability adjusted 2 Includes range of royalty (and equivalent) rates of each contract, considering step-downs, if any OUR INDUSTRY STRUCTURE Ideas for new antibody drugs can come from anywhere We believe that sound biological insights and new ideas for new antibody drugs are a key input of our work.
The following table represents the range of royalty (and equivalent) rates and the hypothetical maximum value of the milestone payments included in our partnership agreements as of December 31, 2023: Table 3: Downstream Participation Milestones (in billions) 1 Royalty on net sales, 5th to 95th percentile range 2 Preclinical $0.08 2015-2019 contracts 0-4.0% Clinical $1.07 2020-2023 contracts 1.5-9.0% Regulatory $1.94 Commercial $5.46 Other downstream participation Total $8.55 Equity/equity-like positions Options to co-invest 1 All programs under contract, not probability adjusted 2 Includes range of royalty (and equivalent) rates of each contract, considering step-downs, if any OUR INDUSTRY STRUCTURE Ideas for new antibody drugs can come from anywhere We believe that sound biological insights and new ideas for new antibody drugs are a key input of our work.
This patent family includes patents issued in the U.S. and Australia and granted in Europe, as well as one pending U.S. non-provisional patent application and nine pending foreign counterpart patent applications. Issued patents from this patent family are expected to expire in March 2034, absent any disclaimers or extensions available.
This patent family includes patents issued in the U.S. and Australia and granted in Europe, Japan, and Korea, as well as one pending U.S. non-provisional patent application and seven pending foreign counterpart patent applications. Issued patents from this patent family are expected to expire in March 2034, absent any disclaimers or extensions available.
We believe this dynamic has the potential to catalyze a structural change in how antibody drugs are developed. By leveling the playing field to create opportunities for a more-diverse set of innovators, we believe that our engine has the potential to expand the ecosystem and make our industry more efficient. 3.
We believe this dynamic has the potential to catalyze a structural change in how antibody drugs are developed. We create opportunities for a more-diverse set of innovators, and believe that our engine has the potential to expand the ecosystem and make our industry more efficient. 3.
After a decade of building our Company and working on over 100 drug discovery programs, we have grown from six entrepreneurial founders in a laboratory, to a high-performing team of approximately 500 people spread across four countries and three continents.
After over a decade of building our Company and working on over 100 drug discovery programs, we have grown from six entrepreneurial founders in a laboratory, to a high-performing team of approximately 600 people spread across three countries and two continents.
Issued patents from this family are expected to expire in December 2035, absent any disclaimers or extensions available. Another patent family is directed to transgenic mammals that express canine-based immunoglobulins. This patent family contains one issued U.S. patent and one pending application in the U.S.
Issued patents from this family are expected to expire in November 2036, absent any disclaimers or extensions available. Another patent family is directed to transgenic mammals that express canine-based immunoglobulins. This patent family contains one issued U.S. patent and one pending application in the U.S.
Because the research fees we earn on the work generally more than cover our marginal costs of running these programs, the potential return on our incremental investment in these programs is high.
Because the research fees we earn on the work under such agreements generally more than cover our marginal costs of running these programs, the potential return on our incremental investment in these programs is high.
For our portfolio of programs under contract and not adjusted for the probability of success, as of December 31, 2022, the total hypothetical value of our clinical and commercial milestone payments was $6.6 billion.
For our portfolio of programs under contract and not adjusted for the probability of success, as of December 31, 2023, the total hypothetical value of our clinical and commercial milestone payments was $8.6 billion.
Another patent family is directed to enhanced production of immunoglobulins. This patent family includes two issued patents including in the U.S. and Japan. There are seven pending applications including one in the U.S. and six in pending foreign counterparts, including Australia, Canada, Europe, Israel, Japan, and Korea.
Another patent family is directed to enhanced production of immunoglobulins. This patent family includes four issued patents including in the U.S., Israel, Australia, and Japan. There are six pending applications including one in the U.S. and five in pending foreign counterparts, including Australia, Canada, Europe, Japan, and Korea.
Historically, the time for antibody discovery projects to reach Phase 1 clinical trials from target selection has been approximately 5.5 years. On average, antibody drugs have taken between seven and ten years to reach market-authorization from the start of Phase 1 clinical trials. Each year, around 220 antibody therapeutics enter Phase 1 clinical trials.
Historically, the time for antibody discovery projects to reach Phase 1 clinical trials from target selection has been approximately 5.5 years. On average, antibody drugs have taken between seven and ten years to reach market-authorization from the start of Phase 1 clinical trials. Each year, well over 200 antibody therapeutics enter Phase 1 clinical trials.
These 76 programs have a mean royalty rate of 3.6%. The average negotiated rate for such programs has increased over time, reflecting the dynamics discussed above.
These 87 programs have a mean royalty rate of 3.3%. The average negotiated rate for such programs has increased over time, reflecting the dynamics discussed above.
However, as we do not expect to receive further royalties from our COVID-19 program, which were the driver of our recent profitability and positive operating cash flows, we expect to generate losses and negative operating cash flow in the near-to-medium term.
However, as we do not expect to receive further royalties from our COVID-19 program, which were the driver of our profitability and positive operating cash flows in recent years, we expect to generate losses and negative operating cash flow in the near-to-medium term, as was the case for 2023.
We are thus anticipating a period of continued investments in our engine ahead of revenues generated from milestone payments and royalties in the longer term. We invest with a long-term perspective We allocate capital with a long-term perspective and our largest investments are in the intellectual capital and infrastructure that comprise our engine.
We are anticipating a period of continued investments in our engine, our platforms, and our pipeline ahead of revenues generated from out-licensing, milestone payments and royalties in the longer term. We invest with a long-term perspective We allocate capital with a long-term perspective and our largest investments are in the intellectual capital and infrastructure that comprise our engine.
Assets that potentially result from our technology development-associated pre-partnered programs are wholly owned by us, and we intend to license them to partners for clinical development and commercialization.
Assets that potentially result from our technology development-associated internal programs are wholly owned by us, and we intend to license them to partners for final clinical development and commercialization.
Our average royalty rates reflect the increasing value we create for our industry The range and progression of our royalty (and equivalent) positions reflect the value that we create and our ability to capture that value. As of December 31, 2022, we had started 75 partner-initiated programs with downstream participation and partnered one pre-partnered program.
Our average royalty rates reflect the increasing value we create for our industry The range and progression of our royalty (and equivalent) positions reflect the value that we create and our ability to capture that value. As of December 31, 2023, we had started 87 partner-initiated programs with downstream participation and partnered one internal program.
With our dedication to discovery and development, we do not claim any specific expertise in ideation or selecting targets. Instead, we focus our efforts on connecting with strong partners whom we believe have compelling ideas for therapeutics and the capabilities to clinically develop the drug candidates that we discover.
With our dedication to discovery and development, we do not claim any specific expertise in ideation or selecting targets. Instead, we focus our efforts on connecting with strong partners 15 whom we believe have compelling ideas for therapeutics and the capabilities to clinically and commercially develop the drug candidates that we discover either in partnership or through our internal programs.
Drivers of value in our portfolio The value of our portfolio is driven by several factors, which we believe include: • Our number of downstream stakes in drug discovery programs (our “ program starts ”); • The probability of success of a drug discovery program; • The expected timeline for a program to proceed through development and to commercial sales; • The expected resulting commercial sales if a program is successful; • Our economic stake in a program’s commercial success (with most of the value being defined by the royalty rates associated with each program); and • The value of other downstream stakes which we may obtain as part of our agreements.
Drivers of value in our portfolio and pipeline The value of our portfolio and pipeline is driven by several factors, which we believe include: • Our number of downstream stakes in drug discovery programs (our “ program starts ”); • The probability of success of a drug discovery program; • The expected timeline for a program to proceed through development and to commercial sales; • The potential for upfront payments from out-licensing or partnering pipeline assets; • The expected resulting commercial sales if a program is successful; • Our economic stake in a program’s commercial success (with most of the value being defined by the royalty rates associated with each program); and • The value of other downstream stakes which we may obtain as part of our agreements.
Between 2020 and 2022, we negotiated an increased mean royalty rate of 4.1% across the 111 partner-initiated programs with downstream participation signed in the period and our agreement to partner our COVID-19 antibody assets to Lilly. A quarter of these programs signed in the 2020 to 2022 period can achieve royalty rates above 5%.
Between 2020 and 2023, we negotiated an increased mean royalty rate of 4.3% across the 141 partner-initiated programs with downstream participation signed in the period and our agreement to partner our COVID-19 antibody assets to Lilly. A quarter of these programs signed in the 2020 to 2023 period can achieve royalty rates above 5.0%.
We believe the current distribution of programs in our portfolio broadly reflects the overall distribution of programs in our industry. 17 Figure 4: Our large, diversified portfolio of stakes in next-generation antibody therapies.
We believe the current distribution of programs in our portfolio broadly reflects the overall distribution of programs in our industry. 18 Figure 3: Our large, diversified portfolio of stakes in next-generation antibody therapies.
Whether or not our partners obtain approval from the U.S. Food and Drug Administration, or FDA, or the European Commission for the E.U. for a product, they must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical studies or marketing of the product in those countries.
Food and Drug Administration, or FDA, or the European Commission for the E.U. for a product, they must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical studies or marketing of the product in those countries.
Multi-target, multi-year Multiple undisclosed March 16, 2020 * Invetx, Inc. Multi-target, multi-year Animal health February 23, 2020 Undisclosed Multi-target, multi-year Cell therapy September 25, 2019 * Gilead Sciences, Inc.
Up to 4 targets, multi-year Multiple undisclosed March 16, 2020 * Invetx, Inc. Multi-target, multi-year Animal health February 23, 2020 Undisclosed Multi-target, multi-year Cell therapy September 25, 2019 * Gilead Sciences, Inc.
Issued patents from this family are expected to expire in August 2039, absent any disclaimers or extensions available. Another patent family is directed to Adam6 knockin mice. This patent family contains one issued patent in Europe and one pending application in the U.S.
Issued patents from this family are expected to expire in May 2042, absent any disclaimers or extensions available. Another patent family is directed to Adam6 knock-in mice. This patent family contains one issued patent in Europe and one pending application in the U.S.
We see talent and team-development as an opportunity to build a competitive advantage that amplifies every dimension of our business. We see investments in our people as investments that are necessary for the success of our Company.
For this reason, team-building is a top priority in our business. We see talent and team-development as an opportunity to build a competitive advantage that amplifies every dimension of our business. We see investments in our people as investments that are necessary for the success of our Company.
This patent family contains eight pending PCT applications, including in the U.S., Australia, Canada, China, Europe, Israel, Japan, and Korea. Issued patents from this family are expected to expire in July 2039, absent any disclaimers or extensions available. Another patent family is directed to single chain VH and heavy chain antibodies.
Issued patents from this family are expected to expire in July 2039, absent any disclaimers or extensions available. Another patent family is directed to single chain VH and heavy chain antibodies. This patent family includes five issued patents including in the U.S., Canada, Australia, Europe, and Japan. There are three pending applications, including in the U.S., China, and Israel.
We select partners and programs to include in our portfolio based on our assessment of their likelihood of success, thereby creating a slice of the market that we believe is enriched for its best parts. We also work to expand the capabilities of our engine in areas of high value.
We strategically select partners and programs to include in our portfolio based on our assessment of their unique insights or capabilities and their likelihood of success, thereby creating a slice of the market that we believe is enriched for its best parts. We also deploy capital to expand and apply the capabilities of our engine in areas of high value.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Our technologies address antibody therapeutic discovery challenges that are addressed by other platform technologies controlled by companies that have a variety of business models, including the development of internal pipelines of therapeutics, technology licensing, and the sale of instruments and devices.
Our technologies address antibody therapeutic discovery and development challenges that are addressed by other platform technologies controlled by companies that have a variety of business models, including the development of internal pipelines of therapeutics, technology licensing, and the sale of instruments and devices.
Doing business internationally involves a number of risks including: • multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, tariffs, economic sanctions and embargoes, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • failure by us or our distributors to obtain approvals to conduct our business in various countries; • differing intellectual property rights; • complexities and difficulties in obtaining intellectual property protection, enforcing our intellectual property and defending against third party intellectual property claims; • difficulties in staffing and managing foreign operations; • logistics and regulations associated with shipping systems and parts and components for systems, consumables and reagent kits, as well as transportation delays; • travel restrictions that limit the ability of marketing, presales, sales, services and support teams to service partners; • financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our data packages, and exposure to foreign currency exchange rate fluctuations; • international trade disputes that could result in tariffs and other protective measures; 44 • natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and • regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may fall within the purview of the Canadian Corruption of Foreign Public Officials Act, or CFPOA, or U.S.
Doing business internationally involves a number of risks including: • multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, tariffs, economic sanctions and embargoes, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • failure by us or our distributors to obtain approvals to conduct our business in various countries; • differing intellectual property rights; • complexities and difficulties in obtaining intellectual property protection, enforcing our intellectual property and defending against third-party intellectual property claims; • difficulties in staffing and managing foreign operations; 50 • logistics and regulations associated with shipping systems and parts and components for systems, consumables and reagent kits, as well as transportation delays; • travel restrictions that limit the ability of marketing, presales, sales, services and support teams to service partners; • financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our data packages, and exposure to foreign currency exchange rate fluctuations; • international trade disputes that could result in tariffs and other protective measures; • natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and • regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may fall within the purview of the Canadian Corruption of Foreign Public Officials Act, or CFPOA, or U.S.
Among other things, these provisions include the following: • shareholders cannot amend our articles unless such amendment is approved by shareholders holding at least 66 2/3% of the shares entitled to vote on such approval; • our board of directors may, without shareholder approval, issue preferred shares in one or more series having any terms, conditions, rights, preferences and privileges as the board of directors may determine; and • shareholders must give advance notice to nominate directors or to submit proposals for consideration at shareholders’ meetings.
Among other things, these provisions include the following: • shareholders cannot amend our articles unless such amendment is approved by shareholders holding at least 66 2/3% of the shares entitled to vote on such approval; 71 • our board of directors may, without shareholder approval, issue preferred shares in one or more series having any terms, conditions, rights, preferences and privileges as the board of directors may determine; and • shareholders must give advance notice to nominate directors or to submit proposals for consideration at shareholders’ meetings.
It is possible that none of our pending patent applications will result in issued patents in a timely fashion or at all, and even if patents are granted, they may not provide a basis for intellectual property protection of commercially viable products or services, may not provide us with any competitive advantages, or may be challenged and invalidated by third parties.
It is possible that none of our pending patent applications will result in issued patents in a timely fashion or at all, and even if patents are granted, they may not provide a basis for intellectual property protection of commercially viable products or 55 services, may not provide us with any competitive advantages, or may be challenged and invalidated by third parties.
In addition, changes to the patent laws of the United States allow for various post-grant opposition proceedings that have not been extensively tested, and their outcome is therefore uncertain. Furthermore, if third parties bring these proceedings against our patents, we could experience significant costs and management distraction. We rely on in-licenses from third parties.
In addition, changes to the patent laws of the United States allow for various post-grant opposition 57 proceedings that have not been extensively tested, and their outcome is therefore uncertain. Furthermore, if third parties bring these proceedings against our patents, we could experience significant costs and management distraction. We rely on in-licenses from third parties.
The determination of whether we are a PFIC is a fact-intensive determination made on an annual basis applying principles and methodologies that in some circumstances are unclear and subject to varying interpretation. Accordingly, we cannot provide any assurances regarding our PFIC status for any current or future taxable years. 64 If we are classified as a PFIC, a U.S.
The determination of whether we are a PFIC is a fact-intensive determination made on an annual basis applying principles and methodologies that in some circumstances are unclear and subject to varying interpretation. Accordingly, we cannot provide any assurances regarding our PFIC status for any current or future taxable years. If we are classified as a PFIC, a U.S.
In such circumstances, we would not generate any substantial revenues from such a collaboration in the form of discovery research fees, milestone payments, royalties or otherwise. Speculation in the biotechnology industry about our existing or potential partnerships can be a catalyst for adverse speculation about us, or our data packages, which can adversely affect our reputation and our business.
In such circumstances, we 34 would not generate any substantial revenues from such a collaboration in the form of discovery research fees, milestone payments, royalties or otherwise. Speculation in the biotechnology industry about our existing or potential partnerships can be a catalyst for adverse speculation about us, or our data packages, which can adversely affect our reputation and our business.
As a result, the U.S. government may have certain rights to intellectual property embodied in our technology pursuant to the Bayh-Dole Act of 1980, or Bayh-Dole Act, and implementing regulations. These U.S. government rights in certain inventions developed under a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose.
As a result, the U.S. government may have certain rights to intellectual property embodied in our technology pursuant to the Bayh-Dole Act of 1980, or Bayh-Dole Act, and implementing regulations. These U.S. government rights in certain inventions developed under a government-funded program include a 68 non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose.
Although we devote resources to protect our information systems, we realize that cyberattacks are a threat, and there can be no assurance that our efforts will prevent information security breaches that would result in business, legal, financial, or reputational harm to us, or would have a material adverse effect on our results of operations and financial condition.
Although we devote resources to protect our information systems, we realize that cyberattacks are a threat, and there can be no assurance 46 that our efforts will prevent information security breaches that would result in business, legal, financial, or reputational harm to us, or would have a material adverse effect on our results of operations and financial condition.
For example, to the extent we fail to timely introduce new and innovative technologies or solutions, adequately predict our partners’ needs or fail to obtain desired levels of market acceptance, our business may suffer and our operating results could be adversely affected. We depend on our information technology systems, and any failure of these systems could harm our business.
For example, to the extent we fail to timely introduce new and innovative technologies or solutions, adequately predict our partners’ needs or fail to obtain desired levels of market acceptance, our business may suffer and our operating results could be adversely affected. 42 We depend on our information technology systems, and any failure of these systems could harm our business.
Information technology and telecommunications systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious software, bugs or viruses, human acts and natural disasters. Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer 38 viruses and similar disruptive problems.
Information technology and telecommunications systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious software, bugs or viruses, human acts and natural disasters. Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems.
Any failure to prevent or mitigate security breaches or improper access to, use of, or disclosure of our clinical data or 41 patients’ personal data could result in significant liability under state, federal and international law and may cause a material adverse impact to our reputation, affect our ability to conduct new studies, and potentially disrupt our business.
Any failure to prevent or mitigate security breaches or improper access to, use of, or disclosure of our clinical data or patients’ personal data could result in significant liability under state, federal and international law and may cause a material adverse impact to our reputation, affect our ability to conduct new studies, and potentially disrupt our business.
If these licenses are terminated, or if the underlying intellectual property fails to provide the intended exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, technologies identical to ours. This could have a 51 material adverse effect on our competitive position, business, financial condition, results of operations and prospects.
If these licenses are terminated, or if the underlying intellectual property fails to provide the intended exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, technologies identical to ours. This could have a material adverse effect on our competitive position, business, financial condition, results of operations and prospects.
The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made 59 to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible.
The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible.
Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third-party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same 49 evidence would be insufficient to invalidate the claim if first presented in a district court action.
Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third-party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action.
Whether or not we are successful in defending against such actions or investigations, we could incur substantial costs, including legal fees and divert the attention of management in defending ourselves against any of these claims or investigations. 66 The market price of our common shares may be volatile, and you could lose all or part of your investment.
Whether or not we are successful in defending against such actions or investigations, we could incur substantial costs, including legal fees and divert the attention of management in defending ourselves against any of these claims or investigations. The market price of our common shares may be volatile, and you could lose all or part of your investment.
We do not expect to generate significant recurring revenue unless and until such time as we secure additional programs under contract that, in the aggregate, result in regular and continuous execution of new partnership contracts, research discovery activities, achievement of 28 development milestones or commencement of commercial sales.
We do not expect to generate significant recurring revenue unless and until such time as we secure additional programs under contract that, in the aggregate, result in regular and continuous execution of new partnership contracts, research discovery activities, achievement of development milestones or commencement of commercial sales.
Likewise, we or our partners have to make decisions about which clinical stage and preclinical drug candidates to develop and 33 advance, and we or our partners may not have the resources to invest in all of the drug candidates that contain antibodies discovered using our discovery and development engine , or clinical data and other development considerations may not support the advancement of one or more drug candidates.
Likewise, we or our partners have to make decisions about which clinical stage and preclinical drug candidates to develop and advance, and we or our partners may not have the resources to invest in all of the drug candidates that contain antibodies discovered using our discovery and development engine, or clinical data and other development considerations may not support the advancement of one or more drug candidates.
It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. We may not have the right to control the preparation, filing and prosecution of patent 48 applications, or to maintain the rights to patents licensed to third parties.
It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. We may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the rights to patents licensed to third parties.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted 60 narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us.
The incurrence of indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to 60 acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
The incurrence of indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and prospects. If we are unable to protect the confidentiality of our information and our trade secrets, the value of our technology could be materially adversely affected and our business could be harmed.
Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and prospects. 61 If we are unable to protect the confidentiality of our information and our trade secrets, the value of our technology could be materially adversely affected and our business could be harmed.
In addition, as a public company, it may be more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
In addition, as a public company, it is more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
As the biotechnology industry expands and more patents are issued, the risk increases that our technologies may be subject to claims of infringement of the patent rights of third parties. 55 Additionally, the risks of being involved in such litigation and proceedings may increase if our technology nears commercialization.
As the biotechnology industry expands and more patents are issued, the risk increases that our technologies may be subject to claims of infringement of the patent rights of third parties. Additionally, the risks of being involved in such litigation and proceedings may increase if our technology nears commercialization.
This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, financial condition and results of operations. Requirements associated with being a public company will increase our costs significantly, as well as divert significant company resources and management attention.
This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, financial condition and results of operations. Requirements associated with being a public company could increase our costs significantly, as well as divert significant company resources and management attention.
Integration of an acquired company also may disrupt ongoing operations and require management resources that we would otherwise focus on developing our existing 42 business. We may not realize the anticipated benefits of any acquisition, technology license, strategic alliance or joint venture.
Integration of an acquired company also may disrupt ongoing operations and require management resources that we would otherwise focus on developing our existing business. We may not realize the anticipated benefits of any acquisition, technology license, strategic alliance or joint venture.
Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products and services to countries, governments, and persons targeted by U.S. 45 sanctions. If we fail to comply with export regulations and such economic sanctions, penalties could be imposed, including fines and/or denial of certain export privileges.
Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products and services to countries, governments, and persons targeted by U.S. sanctions. If we fail to comply with export regulations and such economic sanctions, penalties could be imposed, including fines and/or denial of certain export privileges.
For example, these may include: • longer operating histories; • larger customer bases; • greater brand recognition and market penetration; • greater financial resources; • greater technological and research and development resources; • better system reliability and robustness; • greater selling and marketing capabilities; and • better established, larger scale and lower cost manufacturing capabilities. 36 As a result, our competitors and potential competitors may be able to respond more quickly to changes in customer requirements, devote greater resources to the development, promotion and sale of their platforms or instruments than we can or sell their platforms or instruments, or offer solutions competitive with our discovery and development engine and solutions at prices designed to win significant levels of market share.
For example, these may include: • longer operating histories; • larger customer bases; • greater brand recognition and market penetration; • greater financial resources; • greater technological and research and development resources; • better system reliability and robustness; • greater selling and marketing capabilities; and • better established, larger scale and lower cost manufacturing capabilities. 40 As a result, our competitors and potential competitors may be able to respond more quickly to changes in customer requirements, devote greater resources to the development, promotion and sale of their platforms or instruments than we can or sell their platforms or instruments, or offer solutions competitive with our discovery and development engine and solutions at prices designed to win significant levels of market share.
Our management uses certain key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions and such metrics may not accurately reflect all of the aspects of our business needed to make such evaluations and decisions, in particular as our business continues to grow.
Our management uses certain key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions and such metrics may not 41 accurately reflect all of the aspects of our business needed to make such evaluations and decisions, in particular as our business continues to grow.
On June 4, 2021, the EC issued new forms of standard contractual clauses for data transfers from controllers or processors in the EU/EEA (or otherwise subject to the GDPR) to controllers or processors established outside the EU/EEA. The new standard contractual clauses replace the standard contractual clauses that were adopted previously under the EU Data Protection 40 Directive.
On June 4, 2021, the EC issued new forms of standard contractual clauses for data transfers from controllers or processors in the EU/EEA (or otherwise subject to the GDPR) to controllers or processors established outside the EU/EEA. The new standard contractual clauses replace the standard contractual clauses that were adopted previously under the EU Data Protection Directive.
These provisions include the establishment of a staggered 61 board of directors, which divides the board into three groups, with directors in each group serving a three-year term. The existence of a staggered board can make it more difficult for shareholders to replace or remove incumbent members of our board of directors.
These provisions include the establishment of a staggered board of directors, which divides the board into three groups, with directors in each group serving a three-year term. The existence of a staggered board can make it more difficult for shareholders to replace or remove incumbent members of our board of directors.
The number of new drug applications, or NDAs, and biologics license applications, or BLAs, approved by the FDA varies significantly over time and if there were to be an extended reduction in the number of NDAs and BLAs approved by the FDA, the biotechnology industry would contract and our business would be materially harmed.
The number of new drug applications, or NDAs, and biologics license applications, or BLAs, approved by the FDA varies significantly over time and if there were 36 to be an extended reduction in the number of NDAs and BLAs approved by the FDA, the biotechnology industry would contract and our business would be materially harmed.
A successful liability claim, or series of claims, in which judgments exceed our insurance coverage could adversely affect our business, financial condition, results of operations and prospects, including preventing or limiting the use of our discovery and development engine to discover antibodies.
A successful liability claim, or series of claims, in which judgments exceed our insurance coverage could adversely affect our 49 business, financial condition, results of operations and prospects, including preventing or limiting the use of our discovery and development engine to discover antibodies.
The existence of comprehensive privacy laws in different states in the country would make our compliance obligations more complex and costly and may increase the likelihood that we may be subject to enforcement actions or otherwise incur liability for noncompliance.
The existence of comprehensive privacy laws in different states in the country would make our 44 compliance obligations more complex and costly and may increase the likelihood that we may be subject to enforcement actions or otherwise incur liability for noncompliance.
Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor’s rights.
Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the 58 licensor’s rights.
In addition to pursuing patents on our technology, we take steps to protect our intellectual property and proprietary technology by entering into agreements, including confidentiality agreements, non-disclosure agreements and intellectual property assignment agreements, with our employees, consultants, academic institutions, corporate 53 partners and, when needed, our advisers.
In addition to pursuing patents on our technology, we take steps to protect our intellectual property and proprietary technology by entering into agreements, including confidentiality agreements, non-disclosure agreements and intellectual property assignment agreements, with our employees, consultants, academic institutions, corporate partners and, when needed, our advisers.
Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, such as the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), and regulatory penalties.
Any such access, disclosure or other loss of information could result in legal claims or 43 proceedings, liability under laws that protect the privacy of personal information, such as the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), and regulatory penalties.
Some of the policies we currently maintain include general liability, property, umbrella and directors’ and officers’ insurance. 43 Any additional insurance coverage we acquire in the future, may not be sufficient to reimburse us for any expenses or losses we may suffer.
Some of the policies we currently maintain include general liability, property, umbrella and directors’ and officers’ insurance. Any additional insurance coverage we acquire in the future, may not be sufficient to reimburse us for any expenses or losses we may suffer.
The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property.
The assignment of intellectual property rights may not be self-executing, or the assignment 62 agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property.
We are also aware of issued U.S. patents and patent applications with subject matter related to our discovery and development engine, systems, workflows and processes, and there may be other related third party patents or patent applications of which we are not aware.
We are also aware of issued U.S. patents and patent applications with subject matter related to our discovery and development engine, 64 systems, workflows and processes, and there may be other related third-party patents or patent applications of which we are not aware.
To raise capital, we may sell common shares, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common shares, convertible securities or other equity securities, investors may be materially diluted by subsequent sales.
To raise 69 capital, we may sell common shares, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common shares, convertible securities or other equity securities, investors may be materially diluted by subsequent sales.
If we are unsuccessful in achieving and maintaining market acceptance of our discovery and development engine, our business, financial condition, results of operations and prospects could be adversely affected. Failure to execute our business strategy could adversely impact our growth and profitability.
If we are unsuccessful in achieving and maintaining market acceptance of our discovery and development engine, our business, financial condition, results of operations and prospects could be adversely affected. 33 Failure to execute our business strategy could adversely impact our growth and profitability.
The life sciences and biotechnology 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. We face significant competition in the life sciences technology market.
The life sciences and biotechnology 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 achieve profitability. We face significant competition in the life sciences technology market.
We believe that 37 these metrics are representative of our current business; however, these metrics may not accurately reflect all aspects of our business and we anticipate that these metrics may change or may be substituted for additional or different metrics as our business grows and as we introduce new solutions.
We believe that these metrics are representative of our current business; however, these metrics may not accurately reflect all aspects of our business and we anticipate that these metrics may change or may be substituted for additional or different metrics as our business grows and as we introduce new solutions.
In recent periods, a limited number of partnerships accounted for a significant portion of our revenues. For example, royalty revenue for years ended December 31, 2020, 2021, and 2022, have come exclusively from our partnership with Lilly.
In recent periods, a limited number of partnerships accounted for a significant portion of our revenues. For example, royalty revenue for years ended December 31, 2021 and 2022, have come exclusively from our partnership with Lilly.
These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review and derivation proceedings.
These include allowing third-party submission of prior art to the 56 USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review and derivation proceedings.
Treasury Regulations. Recent proposed changes to PFIC regulations, if adopted, would expand the definition of “U.S. Holder” for purposes of the CFC/PFIC overlap rule and other PFIC rules, elections, and reporting requirements discussed below.
Treasury Regulations. Recent proposed changes to PFIC regulations, if adopted, 74 would expand the definition of “U.S. Holder” for purposes of the CFC/PFIC overlap rule and other PFIC rules, elections, and reporting requirements discussed below.
We could also voluntarily agree to defend or indemnify third parties in instances where we are not obligated to do so if we determine 56 it would be important to our business relationships.
We could also voluntarily agree to defend or indemnify third parties in instances where we are not obligated to do so if we determine it would be important to our business relationships.
The courts of the Province of British Columbia and the United States District Court for the District of Delaware may also reach different judgments or results than would other courts, including courts where a shareholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our shareholders. 62 Because we are a Canadian company, it may be difficult to serve legal process or enforce judgments against us.
The courts of the Province of British Columbia and the United States District Court for the District of Delaware may also reach different judgments or results than would other courts, including courts where a shareholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our shareholders. 72 Because we are a Canadian company, it may be difficult to serve legal process or enforce judgments against us.
We currently do not generate significant recurring revenue and, until such time as we establish significant recurring revenue, if at all, we will be prone to regular fluctuations in our revenue dependent on the timing of our entry into partnership agreements, our partners initiating discovery programs, and our partners achieving development milestones or commercial sales with respect to drug candidates utilizing antibodies discovered using our discovery and development engine.
We currently do not generate significant recurring revenue and, until such time as we establish significant recurring revenue, if at all, we will be prone to regular fluctuations in our revenue dependent on the timing of our entry into partnership agreements, our partners initiating discovery programs, our partners achieving development milestones or commercial sales, or the progress of our internal discovery programs, with respect to drug candidates utilizing antibodies discovered using our discovery and development engine.
An individual that is a Ten Percent Shareholder with respect to a CFC generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a Ten Percent Shareholder that is 63 a U.S. corporation.
An individual that is a Ten Percent Shareholder with respect to a CFC generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a Ten Percent Shareholder that is a U.S. corporation.
The CCPA provides for civil penalties for violations as well as a limited private right of action for data breaches, which 39 may increase the volume of data breach litigation.
The CCPA provides for civil penalties for violations as well as a limited private right of action for data breaches, which may increase the volume of data breach litigation.
If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. The increased costs will decrease our net income or increase our net loss and may require us to reduce costs in other areas of our business.
If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. These costs decrease our net income or increase our net loss and may require us to reduce costs in other areas of our business.
We expect that our operating expenses will continue to increase significantly, including as we: • invest in research and development activities to improve our discovery and development engine; • market our solutions to new and existing partners; • acquire businesses or technologies to support our business; • attract, hire and retain qualified personnel; • maintain, expand, enforce, protect and defend our intellectual property portfolio; • prosecute and defend our ongoing and any future patent litigation; • build our new GMP manufacturing facility; • create additional infrastructure to support our operations, including expanding our sales and marketing organization; • add operational, financial and management information systems and personnel to support our operations as a public company; and • experience any delays or encounter issues with any of the above.
We expect that our operating expenses will continue to increase significantly, including as we: • invest in research and development activities to improve our discovery and development engine and initiate and advance internal programs; • market our solutions to new and existing partners; • acquire businesses or technologies to support our business; • attract, hire and retain qualified personnel; • maintain, expand, enforce, protect and defend our intellectual property portfolio; • prosecute and defend our ongoing and any future patent litigation; • continue to build our new GMP manufacturing facility; • create additional infrastructure to support our operations, including expanding our sales and marketing organization; • add operational, financial and management information systems and personnel to support our operations as a public company; and • experience any delays or encounter issues with any of the above.
The industry in which we operate changes rapidly as a result of technological and drug developments, which may render our solutions less desirable. We believe that we must continue to invest a significant amount of time and resources in our discovery and development engine to maintain and improve our competitive position.
The industry in which we operate changes rapidly as a result of technological and drug developments, which may render our solutions less desirable. We believe that we must continue to invest a significant amount of time and resources in our discovery and development engine, and our internal pipeline, to maintain and improve our competitive position.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects. We are and in the future may be involved in litigation and other proceedings related to intellectual property, which could be time-intensive and costly and may adversely affect our business, financial condition, results of operations and prospects.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects. 63 We are currently, and in the future may be, involved in litigation and other proceedings related to intellectual property, which could be time-intensive and costly and may adversely affect our business, financial condition, results of operations and prospects.
Moreover, our ability to earn specific types of income that will be treated as non-passive for purposes of the PFIC rules is uncertain with respect to future years. We believe we were not classified as a PFIC during the taxable year ended December 31, 2022.
Moreover, our ability to earn specific types of income that will be treated as non-passive for purposes of the PFIC rules is uncertain with respect to future years. We believe we were not classified as a PFIC during the taxable year ended December 31, 2023.
Given our strategy and plans to invest in enhancing and scaling our business, we will need to generate significant additional revenue to achieve and sustain future profitability. Even though we have achieved profitability, we cannot be sure that we will remain profitable for any sustained period of time.
Given our strategy and plans to invest in enhancing and scaling our business, we will need to generate significant additional revenue to achieve and sustain future profitability. Even though we have achieved profitability in recent periods, we cannot be sure that we will remain profitable for any sustained period of time.
During the years ended December 31, 2020, 2021, and 2022, we received payments from our partnership contracts generated upon the satisfaction of clinical milestones, licensing revenue derived from use of the Trianni platform, research fees for research performed for our partners, and royalty payments on sales of bamlanivimab and bebtelovimab.
During the years ended December 31, 2021, 2022, and 2023, we received payments from our partnership contracts generated upon the satisfaction of clinical milestones, licensing revenue derived from use of the Trianni platform, research fees for research performed for our partners, and royalty payments on sales of bamlanivimab and bebtelovimab.
Unauthorized access, loss or dissemination could also disrupt our operations and damage our reputation, any of which could adversely affect our business. International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of Canada and the United States.
Unauthorized access, loss or dissemination could also disrupt our operations and damage our reputation, any of which could adversely affect our business. Growth of our international business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of Canada and the United States.
We may enter into engagements in the future, with other licensors under which we obtain certain intellectual property rights relating to our discovery and development engine. These engagements take the form of exclusive license or of actual ownership of intellectual property rights or technology from third parties.
We may enter into agreements in the future, with other licensors under which we obtain certain intellectual property rights relating to our discovery and development engine. These agreements take the form of exclusive license or of actual ownership of intellectual property rights or technology from third parties.
For example, this may include reasons such as to: • increase our sales and marketing efforts to drive market recognition of our discovery and development engine and address competitive developments; • fund development and marketing efforts of our current and future programs; • expand the capabilities of our discovery and development engine into adjacent therapeutic modalities, including vaccine development and cell therapy; • acquire, license or invest in technologies; • acquire or invest in complementary businesses or assets; and • finance capital expenditures and general and administrative expenses.
For example, this may include reasons such as to: • increase our sales and marketing efforts to drive market recognition of our discovery and development engine and address competitive developments; • fund development and marketing efforts of our current and future internal and partner programs; • expand the capabilities of our discovery and development engine into adjacent therapeutic modalities, including vaccine development and cell therapy; • acquire, license or invest in technologies; 31 • acquire or invest in complementary businesses or assets; and • finance capital expenditures and general and administrative expenses.
R esearch and development budgets fluctuate due to changes in available resources, mergers of pharmaceutical and biotechnology companies, spending priorities (including available resources of our biotechnology partners, particularly those that are cash-negative, who may be highly focused on rationing their liquid assets in a challenging funding environment), general economic conditions, institutional budgetary policies and the impact of government regulations, including potential drug pricing legislation.
Research and development budgets fluctuate due to changes in available resources, mergers of pharmaceutical and biotechnology companies, spending priorities (including available resources of our biotechnology partners, particularly those that are cash-negative, who may be highly focused on rationing their liquid assets in a challenging funding environment), general economic conditions, institutional budgetary policies and the impact of government regulations, including potential drug pricing legislation.
We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities, including the determination of contingent liabilities, that are not readily apparent from other sources.
The total purchase price pertaining to our acquisitions in recent years have been allocated to net tangible assets, identifiable intangible assets, in-process research and development and goodwill. Refer to Note 20 of our consolidated financial statements for additional information.
The total purchase price pertaining to our acquisitions in recent years have been allocated to net tangible assets, identifiable intangible assets, in-process research and development and goodwill. Refer to Note 19 of our consolidated financial statements for additional information.
We may not be able to generate sufficient revenue to sustain profitability and our recent and historical growth should not be considered indicative of our future performance. Our revenue has fluctuated from period to period, and our revenue for any historical period may not be indicative of results that may be expected for any future period.
We may not be able to generate sufficient revenue to achieve profitability and our recent and historical growth should not be considered indicative of our future performance. Our revenue has fluctuated from period to period, and our revenue for any historical period may not be indicative of results that may be expected for any future period.
In the event that Berkeley Lights were to prevail in the litigation against us, as a result of which Berkeley Lights could continue to sell its products, it could reduce our competitive advantage and differentiation in the market place, impairing our ability to bring in new business. Furthermore, Berkeley Lights may seek to invalidate the asserted patents during the litigation.
In the event that Bruker were to prevail in the litigation against us, as a result of which Bruker could continue to sell its products, it could reduce our competitive advantage and differentiation in the market place, impairing our ability to bring in new business. Furthermore, Bruker may seek to invalidate the asserted patents during the litigation.
We have systems in place to remind us to pay these fees, and we engage an outside service and rely on our outside 58 counsel to pay these fees due to non-U.S. patent agencies.
We have systems in place to remind us to pay these fees, and we engage an outside service 67 and rely on our outside counsel to pay these fees due to non-U.S. patent agencies.
Tax authorities may disagree with our positions and conclusions regarding certain tax positions, resulting in unanticipated costs, taxes or non-realization of expected benefits. A tax authority may disagree with tax positions that we have taken, which could result in increased tax liabilities. For example, the U.S.
Tax authorities may disagree with our positions and conclusions regarding certain tax positions, resulting in unanticipated costs, taxes or non-realization of expected benefits. A tax authority may disagree with tax positions that we have taken, which could result in increased tax liabilities. For example, the Canada Revenue Agency, the U.S.
If we do not achieve the benefits anticipated from these investments, if the achievement of these benefits is delayed, or if our discovery and development engine is not able to accelerate the process of antibody discovery as quickly as we anticipate, our revenue and operating results may be adversely affected.
If we do not achieve the benefits anticipated from these investments, if the achievement of these benefits is delayed, if our discovery and development engine is not able to accelerate the process of antibody discovery as quickly as we anticipate, or if our internal pipeline is not successful, our revenue and operating results may be adversely affected.
These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to: • the level of demand for our antibody discovery and development engine and solutions, which may vary significantly; • royalty payments received from our partnership with Lilly upon sales of bamlanivimab or bebtelovimab, which may vary significantly and are dependent on obtaining emergency use authorization by the FDA; • the timing and cost of, and level of investment in, research, development and commercialization activities relating to our discovery and development engine and technology, which may change from time to time; • the start and completion of programs in which our discovery and development engine is utilized; • the relative reliability and robustness of our discovery and development engine , including the data generation and computational tools within our discovery and development engine; • the introduction of new technologies, platform features or software, by us or others in our industry; • expenditures that we may incur to acquire, develop or commercialize additional technologies; • expenditures involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including costs related to our intellectual property litigation with Berkeley Lights, and the outcome of this and any other future patent litigation we may be involved in; • costs related to our civil litigation with the Estate of John Schrader, or Schrader, and the outcome of this and any other future civil litigations we may be involved in; • the degree of competition in our industry and any change in the competitive landscape of our industry, including consolidation among our competitors or future partners; • natural disasters, outbreaks of disease or public health crises, such as the ongoing COVID-19 pandemic; • the timing and nature of any future acquisitions or strategic partnerships; • future accounting pronouncements or changes in our accounting policies; and • general social, political and economic conditions and other factors, including inflationary pressures and factors unrelated to our operating performance or the operating performance of our competitors.
These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to: • the level of demand for our antibody discovery and development engine and solutions, which may vary significantly; • royalty payments received from our partnership with Lilly upon sales of bamlanivimab or bebtelovimab, which have varied significantly and were dependent on obtaining emergency use authorization by the FDA; • the timing and cost of, and level of investment in, research, development and commercialization activities relating to our discovery and development engine and initiation and advancement of internal programs, which may change from time to time; • the start and completion of programs in which our discovery and development engine is utilized; • the relative reliability and robustness of our discovery and development engine, including the data generation and computational tools within our discovery and development engine; • the introduction of new technologies, platform features or software, by us or others in our industry; • expenditures that we may incur to acquire, develop or commercialize additional technologies; • expenditures involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including costs related to our intellectual property litigation with Bruker, and the outcome of this and any other future patent litigation we may be involved in; • costs related to our civil litigation with the Estate of John Schrader, or Schrader, and the outcome of this and any other future civil litigation we may be involved in; • the degree of competition in our industry and any change in the competitive landscape of our industry, including consolidation among our competitors or future partners; • natural disasters, outbreaks of disease or public health crises, such as the COVID-19 pandemic; • the timing and nature of any future acquisitions or strategic partnerships; 30 • future accounting pronouncements or changes in our accounting policies; and • general social, political and economic conditions and other factors, including inflationary pressures and factors unrelated to our operating performance or the operating performance of our competitors.
In addition, we may receive in the future, correspondence from third parties referring to the relevance of such third parties’ intellectual property to our technology, our workflows or our advanced automated systems, and we are currently engaged in litigation with such third parties (i.e., Berkeley Lights and Schrader).
In addition, we may receive in the future, correspondence from third parties referring to the relevance of such third parties’ intellectual property to our technology, our workflows or our advanced automated systems, and we are currently engaged in litigation with such third parties (i.e., Bruker and Schrader).
Our strategy is on the development of antibody-based drugs and improving the way these drugs are discovered and developed. Our strategy assumes a certain degree of capital and capacity growth development.
Our strategy focuses on the development of antibody-based drugs and improving the way these drugs are discovered and developed. Our strategy assumes a certain degree of capital and capacity growth development.
Because a significant portion of our revenue in 2020, 2021, and 2022 was derived from sales of bamlanivimab and bebtelovimab, the reduction in sales of these compounds that we have experienced in recent periods have reduced our royalty revenues attributed to sales of this compound.
Because a significant portion of our revenue in 2021 and 2022 was derived from sales of bamlanivimab and bebtelovimab, the reduction in sales of these compounds that we have experienced in recent periods have reduced or eliminated our royalty revenues attributed to sales of this compound.
Since our inception, we have financed our operations primarily from royalty revenue, revenue from upfront payments generated through our receipt of technology access fees and discovery research fees through the performance of service contracts with our partners, payments from partners upon the satisfaction of clinical milestones, government funding and one-off government grants, the incurrence of indebtedness, and from private placements of our common and convertible preferred shares.
Since our inception, we have financed our operations primarily from royalty revenue, revenue from upfront payments generated through our receipt of technology access fees and discovery research fees through the performance of service contracts with our partners, payments from partners upon the satisfaction of clinical milestones, government funding and one-off government grants, incurring debt, and from private placements of our common and convertible preferred shares.
We are currently engaged in a lawsuit with Berkeley Lights based upon our allegations of its infringement of our intellectual property rights and we may become involved in additional lawsuits in the future. We are also engaged in a civil lawsuit with Schrader based upon allegations of, among other things, infringement of their intellectual property.
We are currently engaged in a lawsuit with Bruker based upon our allegations of its infringement of our intellectual property rights and we may become involved in additional lawsuits in the future. We are also engaged in a civil lawsuit with Schrader based upon allegations of, among other things, infringement of their intellectual property.
Our commercial success depends on the quality of our antibody discovery and development engine and technological capabilities and their acceptance by new and existing partners in our industry. We utilize our antibody discovery and development engine to identify antibodies for further development and potential commercialization by our partners.
Our commercial success depends on the quality of our antibody discovery and development engine and technological capabilities, the advancement of internal programs, and their acceptance by new and existing partners in our industry. We utilize our antibody discovery and development engine to identify antibodies for further development and potential commercialization by our partners.
Impairment charges pertaining to goodwill, identifiable intangible assets or other long-lived assets from our mergers and acquisitions could have an adverse impact on our results of operations and the market value of our common stock.
General Risk Factors Impairment charges pertaining to goodwill, identifiable intangible assets or other long-lived assets from our mergers and acquisitions could have an adverse impact on our results of operations and the market value of our common stock.
We have invested, and expect to continue to invest, in research and development efforts that further enhance our antibody discovery and development engine. 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.
We have invested, and expect to continue to invest, in research and development efforts that further enhance our technology and 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.
As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance. 29 We may need to raise additional capital to fund our existing operations, improve our discovery and development engine or expand our operations.
As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance. We may need to raise additional capital to fund our existing operations, improve our discovery and development engine, advance internal programs, or expand our operations.

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Item 2. Properties

Properties — owned and leased real estate

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In 2021, through our Dayhu and Beedie joint ventures, we began building out a new, dedicated corporate headquarters currently under construction that will provide us with 378,000 square feet of additional lab and office space under a lease expiring in 2037. AbCellera Australia Pty.
In 2021, through our Dayhu and Beedie joint ventures, we began building out a new, dedicated corporate headquarters currently under construction that will provide us with 387,000 square feet of additional lab and office space under lease which expire 80 starting in 2037 with further renewal options.
Ltd. , our wholly owned subsidiary, occupies approximately 40,000 square feet of office and laboratory space in Sydney, Australia, with a lease that expires in 2031. In 2022, we purchased land that will provide us with an additional 123,000 square feet for our GMP facility.
Further, our 123,000 square feet GMP facility is currently under construction on the land we purchased in 2022 in Vancouver. AbCellera Australia Pty. Ltd. , our wholly owned subsidiary, occupies approximately 40,000 square feet of office and laboratory space in Sydney, Australia, with a lease that expires in 2031.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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District Court for the Northern District of California. In these lawsuits, we are seeking, among other things, a judgment of infringement, a permanent injunction and damages (including lost profits, a reasonable royalty, reasonable costs and attorney’s fees and treble damages for willful infringement). In February 2021, these lawsuits were consolidated and assigned to the Honorable Judge Lucy Koh.
In these lawsuits, we are seeking, among other things, a judgment of infringement, a permanent injunction and damages (including lost profits, a reasonable royalty, reasonable costs and attorney’s fees and treble damages for willful infringement). In February 2021, these lawsuits were consolidated and assigned to the Honorable Judge Lucy Koh.
In July 2021, the Court allowed Berkeley to amend its counterclaims to add the unfair competition claims subject to our right to seek dismissal with prejudice should the counterclaims not overcome objections previously presented by us to the court. The Company is continuing to oppose the unfounded counterclaim and we intend to seek dismissal with prejudice.
In July 2021, the Court allowed Bruker Cellular Analysis to amend its counterclaims to add the unfair competition claims subject to our right to seek dismissal with prejudice should the counterclaims not overcome objections previously presented by us to the court. The Company is continuing to oppose the unfounded counterclaim and we intend to seek dismissal with prejudice.
In March 2021, the court set this matter down for a jury trial with a December 12, 2022 start date. In July 2021, Berkeley Lights filed a Petition for inter partes review of U.S. Patent No. 10,087,408 that we exclusively license from the University of British Columbia.
In March 2021, the court set this matter down for a jury trial with a December 12, 2022 start date. In July 2021, Bruker Cellular Analysis filed a Petition for inter partes review of U.S. Patent No. 10,087,408 that we exclusively license from the University of British Columbia.
In August 2020, we filed an additional related complaint against Berkeley Lights in the United States District Court for the District of Delaware, alleging that Berkeley Lights infringed and continues to infringe, directly and indirectly, U.S. Patent Nos. 10,718,768; 10,738,270; 10,746,737 and 10,753,933.
In August 2020, we filed an additional related complaint against Bruker Cellular Analysis in the United States District Court for the District of Delaware, alleging that Bruker Cellular Analysis infringed and continues to infringe, directly and indirectly, U.S. Patent Nos. 10,718,768; 10,738,270; 10,746,737 and 10,753,933.
In January 2021, the Court determined that there was no jurisdiction over AbCellera or Lineage and dismissed the unfair competition claims but ordered jurisdictional discovery on a limited basis with respect to AbCellera only regarding Berkeley Lights’ request for declaratory judgment on the ‘839 patent. In July 2021, Berkeley voluntarily dismissed this lawsuit.
In January 2021, the Court determined that there was no jurisdiction over AbCellera or Lineage and dismissed the unfair competition claims but ordered jurisdictional discovery on a limited basis with respect to AbCellera only regarding Bruker Cellular Analysis’ request for declaratory judgment on the ‘839 patent. In July 2021, Bruker Cellular Analysis voluntarily dismissed this lawsuit.
In January 2023, the PTAB issued its Final Written Decision with respect to our U.S. Patent No. 10,087,408 rejecting all of Berkeley Lights’ grounds of unpatentability and determining that none of the challenged claims are unpatentable.
In January 2023, the PTAB issued its Final Written Decision with respect to our U.S. Patent No. 10,087,408 rejecting all of Bruker Cellular Analysis’ grounds of unpatentability and determining that none of the challenged claims are unpatentable.
Patent Nos. 10,107,812; 10,274,494; 10,466,241; 10,578,618; 10,697,962; 10,087,408; 10,421,936 and 10,704,018, by making, using, offering for sale, selling and/or importing Berkeley Lights’ Beacon Optofluidic System.
Patent Nos. 10,107,812; 10,274,494; 10,466,241; 10,578,618; 10,697,962; 10,087,408; 10,421,936 and 10,704,018, by making, using, offering for sale, selling and/or importing Bruker Cellular Analysis’ Beacon Optofluidic System.
In July 2021, Berkeley Lights filed a second Petition for inter partes review of U.S. Patent No. 10,421,936 that we exclusively license from the University of British Columbia. In August 2021, Berkeley Lights filed a third Petition for inter partes review of U.S. Patent No. 10,738,270 that we exclusively license from the University of British Columbia.
In July 2021, Bruker Cellular Analysis filed a second Petition for inter partes review of U.S. Patent No. 10,421,936 that we exclusively license from the University of British Columbia. In August 2021, Bruker Cellular Analysis filed a third Petition for inter partes review of U.S. Patent No. 10,738,270 that we exclusively license from the University of British Columbia.
In August 2021, the court stayed the patent litigation against Berkeley Lights in view of the Petitions for inter partes Review filed by Berkeley Lights. In January 2022, the PTAB denied one petition and instituted one petition. In February 2022, the PTAB denied the final petition. Trial on the instituted petition occurred in November 2022.
In August 2021, the court stayed the patent litigation against Bruker Cellular Analysis in view of the Petitions for inter partes Review filed by Bruker Cellular Analysis. In January 2022, the PTAB denied one petition and instituted one petition. In February 2022, the PTAB denied the final petition. Trial on the instituted petition occurred in November 2022.
The complaint includes two counts of unfair competition and one count of non-infringement of a U.S. patent: Patent No. 10,058,839 (the “’839 patent”). Berkeley Lights is seeking, among other things, damages and a declaratory judgment of non-infringement of the ’839 patent.
The complaint includes two counts of unfair competition and one count of non-infringement of a U.S. patent: Patent No. 10,058,839 (the “’839 patent”). Bruker Cellular Analysis is seeking, among other things, damages and a declaratory judgment of non-infringement of the ’839 patent.
In February 2021, Berkeley Lights filed a motion seeking leave to amend its counterclaims to add the allegations of unfair competition (as plead in the case described below) against AbCellera only.
In February 2021, Bruker Cellular Analysis filed a motion seeking leave to amend its counterclaims to add the allegations of unfair competition (as plead in the case described below) against AbCellera only.
We are currently involved in the following litigation matters: Patent Infringement Litigation In July 2020, we filed a complaint against Berkeley Lights, in the United States District Court for the District of Delaware, alleging that Berkeley Lights infringed and continues to infringe, directly and indirectly, the following patents exclusively licensed by the Company, including U.S.
We are currently involved in the following litigation matters: Patent Infringement Litigation In July 2020, we filed a complaint against Bruker Cellular Analysis (on October 3, 2023, PhenomeX, the successor to Berkeley Lights was acquired by Bruker Cellular Analysis), in the United States District Court for the District of Delaware, alleging that Bruker Cellular Analysis infringed and continues to infringe, directly and indirectly, the following patents exclusively licensed by the Company, including U.S.
In September 2020, we filed another complaint against Berkeley Lights in the United States District Court for the District of Delaware, alleging that Berkeley Lights infringed and continues to infringe, directly and indirectly, U.S. Patent Nos. 10,775,376; 10,775,377 and 10,775,378. On December 3, 2020, the judge assigned to these three lawsuits ordered that they be transferred to the U.S.
In September 2020, we filed another complaint against Bruker Cellular Analysis in the United States District Court for the District of Delaware, alleging that Bruker Cellular Analysis infringed and continues to infringe, directly and indirectly, U.S. Patent Nos. 10,775,376; 10,775,377 and 10,775,378.
Civil Lawsuit The Company recently became aware of a civil lawsuit filed by the Estate of John Schrader and another corporate entity naming as co-defendants the Company, some of its affiliates and Dr. Carl Hansen, the Company's CEO. The lawsuit was filed October 14, 2022, in the Supreme Court of British Columbia (Vancouver).
Civil Lawsuit On October 14, 2022, the Estate of John Schrader and ImmVivos Pharmaceuticals Inc. filed a lawsuit naming as co-defendants the Company, some of its affiliates and Dr. Carl Hansen, the Company's CEO. The lawsuit was filed in the Supreme Court of British Columbia (Vancouver). The complaint alleges breach of an implied partnership or joint venture between Dr.
Because the three aforementioned inter partes review matters have been resolved, we intend to seek relief from the Court to lift the pending stay and resume our patent infringement action against Berkeley Lights. 69 Unfair Competition and Declaratory Judgment of Non-Infringement In August 2020, Berkeley Lights filed a complaint in the Northern District of California against us and our wholly-owned subsidiary Lineage Inc.
Because the three aforementioned inter partes review matters have been resolved, we intend to seek relief from the Court to lift the pending stay and resume our patent infringement action against Bruker 81 Cellular Analysis. On August 4, 2023, the District Court lifted the stay in the pending matter against Bruker Cellular Analysis. The case has since resumed.
The complaint alleges breach of an implied partnership or joint venture between Dr. John Schrader and Dr. Hansen and further alleges patent infringement of an issued Canadian patent (No. 2,655,511) . The complaint seeks financial damages as well as other declarations. The Company believes that the claim is meritless and frivolous in all respects and intends to defend itself appropriately.
John Schrader and Dr. Hansen and further alleges patent infringement of an issued Canadian patent (No. 2,655,511) . The complaint seeks financial damages as well as other declarations. The Company recently filed a Notice of Application seeking to dismiss certain Company affiliates from the matter. No hearing date has been set. All co-defendants have been served.
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Item 4. Mine Safety Disclosures. None. 70 PART II
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On December 3, 2020, the judge assigned to these three lawsuits ordered that they be transferred to the U.S. District Court for the Northern District of California.
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No trial date has been set. The Company maintains its belief in the merits of this infringement matter and will continue to enforce its intellectual property portfolio worldwide. On July 26, 2023, Bruker Cellular Analysis filed a Notice of Appeal in IPR2021-1249 matter.
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The Company believes the appeal is meritless and that the decision of the United States Patent Trial and Appeal Board will be upheld. Unfair Competition and Declaratory Judgment of Non-Infringement In August 2020, Bruker Cellular Analysis filed a complaint in the Northern District of California against us and our wholly-owned subsidiary Lineage Inc.
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The Company is proceeding to seek dismissal of certain Company affiliates for lack of jurisdiction. No other activity is occurring with respect to this matter. The Company believes that Plaintiffs’ claim is meritless and frivolous in all respects and intends to defend itself appropriately. Item 4. Mine Safety Disclosures. None. 82 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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An investment of $100 is assumed to have been made in our common share and each index on December 11, 2020 (the first day of trading of our common share) and its relative performance is tracked through December 31, 2022.
An investment of $100 is assumed to have been made in our common share and each index on December 11, 2020 (the first day of trading of our common share) and its relative performance is tracked through December 31, 2023.
Holders of Common Shares As of February 17, 2023, the latest practicable date prior to the date of this Annual Report on Form 10-K, there were approximately 71 holders of record of our common shares. Dividend Policy We have not declared nor paid any cash dividends on our share capital.
Holders of Common Shares As of February 15, 2024, the latest practicable date prior to the date of this Annual Report on Form 10-K, there were approximately 75 holders of record of our common shares. Dividend Policy We have not declared nor paid any cash dividends on our share capital.
Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant by our board of directors. 71 Recent Sales of Unregistered Equity Securities None.
Any future determination to pay dividends will be at the discretion of our 83 board of directors and will depend on our results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant by our board of directors. Recent Sales of Unregistered Equity Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Equity Compensation Plans The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference to Item 11 of Part III of this Annual Report. Item 6. Selected Financial Data. Reserved. 72
Equity Compensation Plans The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference to Item 11 of Part III of this Annual Report. Item 6. Selected Financial Data. Reserved. 84
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Use of Proceeds from Initial Public Offering On December 15, 2020, we completed the initial public offering, or IPO, of our common shares pursuant to which we issued and sold 27,772,500 common shares at a price to the public of $20.00 per share, which included the exercise in full of the underwriters’ option to purchase additional common shares.
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The offer and sale of all shares of our common shares in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1, as amended (File No. 333-250838), which was declared effective by the SEC on December 10, 2020.
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Credit Suisse Securities (USA) LLC, Stifel, Nicolaus & Company, Incorporated, Berenberg Capital Markets LLC, SVB Leerink LLC and BMO Capital Markets Corp. acted as the underwriters of our IPO. We received aggregate gross proceeds from our IPO of $555.5 million, or aggregate net proceeds of $522.8 million after deducting underwriting discounts and commissions and other offering costs.
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None of the underwriting discounts and commissions or offering expenses were incurred or paid, directly or indirectly, to any of our directors or officers or their associates or to persons owning 10% or more of our common shares or to any of our affiliates.
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Cash used since the IPO is described elsewhere in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our periodic reports filed with the SEC. There has been no material change in our planned use of the net proceeds from the IPO as described in the final prospectus for our IPO.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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General and administrative expenses primarily consist of salaries, benefits, incentive compensation and stock-based compensation costs for employees in our executive, accounting and finance, office administration, legal and human resources functions as well as professional services fees, such as consulting, audit, tax and legal fees, general corporate costs and allocated overhead expenses.
General and administrative expenses primarily consist of salaries, benefits, incentive compensation, stock-based compensation costs for employees in our executive, accounting and finance, office administration, legal and human resources functions as well as professional services fees, such as consulting, audit, tax and legal fees, general corporate costs and allocated overhead expenses.
There were no acquisitions in the period and a decrease in the total receipt of grant funding in the 2022 from the prior year due to a decrease in SIF-eligible research and development activities performed in the period.
There were no acquisitions in the period and a decrease in the total receipt of grant funding in 2022 from the prior year due to a decrease in SIF-eligible research and development activities performed in the period.
Milestone Payments. At the inception of the arrangement and at each reporting date thereafter, we evaluate whether the associated event is considered probable of achievement and estimate the amount to be included in the transaction price using the most likely amount method. Whether the criteria for achieving the milestone payments will be met in the future is highly uncertain.
At the inception of the arrangement and at each reporting date thereafter, we evaluate whether the associated event is considered probable of achievement and estimate the amount to be included in the transaction price using the most likely amount method. Whether the criteria for achieving the milestone payments will be met in the future is highly uncertain.
As part of our acquisitions of Trianni in 2020, and TetraGenetics in 2021, Goodwill, License, Technology and In-Process Research and Development Intangible (“IPR&D”) intangible assets were recognized. IPR&D is classified as indefinite-lived, is not amortized, and is evaluated for impairment on an annual basis on October 1 or more frequently if an indicator of impairment is present.
As part of our acquisitions of Trianni in 2020, and TetraGenetics in 2021, Goodwill, License, Technology and In-Process Research and Development Intangible (“IPR&D”) intangible assets were recognized. IPR&D is classified as indefinite-lived, is not amortized, and is evaluated for impairment on an annual basis on October 1 or more frequently if an 102 indicator of impairment is present.
Further, significant growth in partnered program starts and a continued increase in programs under contract contributed to an increase of $21.7 million in non-COVID discovery programs. The increase in revenue was partially offset by a decrease of $20.1 million in licensing revenue related to the Trianni platform and reduced milestone achievements within the year.
Further, significant growth in partnered program starts and a continued increase in programs under contract contributed to an increase of $21.7 million in non-COVID discovery programs. The increase in 96 revenue was partially offset by a decrease of $20.1 million in licensing revenue related to the Trianni platform and reduced milestone achievements within the year.
Single target Oncology August 3, 2021 Undisclosed biotechnology company Up to 4 targets, multi-year Undisclosed June 30, 2021 * Angios GmbH Multi-target, multi-year Ophthalmology May 6, 2021 Undisclosed biotechnology company Multi-target, multi-year Oncology May 6, 2021 * Empirico Inc. 5 targets, multi-year Undisclosed April 14, 2021 Gilead Sciences, Inc. 8 targets, multi-year Undisclosed April 1, 2021 Abdera Therapeutics Inc. 9 targets, multi-year Oncology January 14, 2021 Invetx, Inc.
Single target Oncology August 3, 2021 Undisclosed biotechnology company Up to 4 targets, multi-year Undisclosed June 30, 2021 * Angios Multi-target, multi-year Ophthalmology May 6, 2021 Undisclosed biotechnology company Multi-target, multi-year Oncology May 6, 2021 * Empirico Inc. 5 targets, multi-year Undisclosed April 14, 2021 Gilead Sciences, Inc. 8 targets, multi-year Undisclosed April 1, 2021 Abdera Therapeutics Inc. 9 targets, multi-year Oncology January 14, 2021 Invetx, Inc.
For the year ended December 31, 2022, our provision for income taxes is $80.6 million primarily relating to current net earnings and partly offset by deferred income taxes due to timing of differences between accounting net income and taxable income.
For the year ended December 31, 2022, our provision for income taxes is $80.6 million 98 primarily relating to current net earnings and partly offset by deferred income taxes due to timing of differences between accounting net income and taxable income.
Research fees consist primarily of technology access fees, which are generally generated upon execution of our 78 partnership agreements, and discovery research fees, which are generated through our performance of antibody discovery research for our partners. Licensing revenue is primarily from our licensing of our humanized rodent platform, Trianni ™.
Research fees consist primarily of technology access fees, which are generally generated upon execution of our partnership agreements, and discovery research fees, which are generated through our performance of antibody discovery research for our partners. Licensing revenue is primarily from our licensing of our humanized rodent platform, Trianni™.
Results of Operations Comparison of the Years Ended December 31, 2021 and 2022 Revenue Year Ended December 31, Change 2021 2022 Amount % Revenue Research fees $ 19,076 $ 40,802 $ 21,726 114 % Licensing revenue 20,778 696 (20,082 ) (97 )% Milestone payments 8,000 900 (7,100 ) (89 )% Royalty revenue 327,349 443,026 115,677 35 % Total revenue $ 375,203 $ 485,424 $ 110,221 29 % Revenue increased by $110.2 million from the year ended December 31, 2021, compared to the year ended December 31, 2022.
Comparison of the Years Ended December 31, 2021 and 2022 Revenue Year Ended December 31, Change 2021 2022 Amount % Revenue Research fees $ 19,076 $ 40,802 $ 21,726 114 % Licensing revenue 20,778 696 (20,082) (97) % Milestone payments 8,000 900 (7,100) (89) % Royalty revenue 327,349 443,026 115,677 35 % Total revenue $ 375,203 $ 485,424 $ 110,221 29 % Revenue increased by $110.2 million from the year ended December 31, 2021, compared to the year ended December 31, 2022.
Grants and Incentives Year Ended December 31, Change 2021 2022 Amount % Grants and incentives $ (17,486 ) $ (10,554 ) $ 6,932 (40 )% Grants and incentives decreased by $6.9 million, or 40%, from the year ended December 31, 2021, compared to the year ended December 31, 2022.
Grants and Incentives (Income) Year Ended December 31, Change 2021 2022 Amount % Grants and incentives $ (17,486) $ (10,554) $ 6,932 (40) % Grants and incentives decreased by $6.9 million, or 40%, from the year ended December 31, 2021, compared to the year ended December 31, 2022.
Up to 10 targets, multi-year Oncology and undisclosed September 22, 2021 Moderna, Inc. Up to 6 targets, multi-year RNA-encoded antibodies September 15, 2021 EQRx, Inc. Multi-target, multi-year Oncology and immunology (initially) August 4, 2021 Tachyon Inc.
Up to 10 targets, multi-year Oncology and undisclosed September 22, 2021 91 Moderna, Inc. Up to 6 targets, multi-year RNA-encoded antibodies September 15, 2021 EQRx, Inc. Multi-target, multi-year Oncology and immunology (initially) August 4, 2021 Tachyon Inc.
Research and Development Year Ended December 31, Change 2021 2022 Amount % Research and development $ 62,062 $ 107,879 $ 45,817 74 % Research and development expenses increased by $45.8 million, or 74%, from the year ended December 31, 2021, compared to the year ended December 31, 2022, reflecting continuing strong investments in the capacity and capabilities of AbCellera’s discovery and development engine. $17.0 million of the increase is due to the increase in compensation expense consistent with increased 80 headcount and $ 8.8 million of the increase relates to stock-based compensation expense . $ 2 0.0 million of the increase is attributed to an increase in research materials, supplies , software, facilities, and services used to execute on our research and development activities and strengthen our discovery and development engine .
Research and Development Year Ended December 31, Change 2021 2022 Amount % Research and development $ 62,062 $ 107,879 $ 45,817 74 % Research and development expenses increased by $45.8 million, or 74%, from the year ended December 31, 2021, compared to the year ended December 31, 2022, reflecting continuing strong investments in the capacity and capabilities of AbCellera’s discovery and development engine. $17.0 million of the increase is due to the increase in compensation expense consistent with increased headcount and $8.8 million of the increase relates to stock-based compensation expense. $20.0 million of the increase is attributed to an increase in research materials, supplies, software, facilities, and services used to execute on our research and development activities and strengthen our discovery and development engine.
Based on our qualitative assessment, other than for an impairment associated to one of our IPR&D assets as described in the notes to the consolidated financial statements, we determined there were no potential indicators of impairment of our remaining indefinite-lived intangible assets as of October 1, 2022 and during the remainder of 2022.
Based on our qualitative assessment, other than for an impairment associated to one of our IPR&D assets as described in the notes to the consolidated financial statements, we determined there were no potential indicators of impairment of our remaining indefinite-lived intangible assets as of October 1, 2023 and during the remainder of 2023.
We estimate that, based on the terms of our existing contracts and estimates of historical rates of success of antibody drug development, the vast majority of the potential value for each program under contract is represented by potential future milestone payments and royalties rather than research fees.
We estimate that, based on the terms of our existing contracts and estimates of historical rates of success of antibody drug development, the vast majority of the potential value for each program is represented by potential future milestone payments and royalties rather than research fees.
Single target Neurological diseases June 12, 2018 Undisclosed mid-cap biopharmaceutical company Undisclosed Undisclosed January 25, 2018 Teva Pharmaceuticals Industries Ltd. Single target Membrane protein June 13, 2017 Pfizer Inc. Multi-target, multi-year Membrane protein January 5, 2017 Undisclosed global biotechnology company Multi-target, multi-year Undisclosed November 4, 2016 Kodiak Sciences Inc. Single target Ophthalmology August 24, 2016 Teva Pharmaceuticals Industries Ltd.
Single target Neurological diseases June 12, 2018 Undisclosed mid-cap biopharmaceutical company Undisclosed Undisclosed January 25, 2018 Teva Pharmaceutical Industries Ltd. Single target Membrane protein June 13, 2017 Pfizer Inc. Multi-target, multi-year Membrane protein January 5, 2017 Undisclosed global biotechnology company Multi-target, multi-year Undisclosed November 4, 2016 Kodiak Sciences Inc. Single target Ophthalmology August 24, 2016 Teva Pharmaceutical Industries Ltd.
At October 1, 2022, we performed a qualitative assessment for our annual impairment test of goodwill after concluding that it was not more likely than not that the fair value of the reporting unit was less than its carrying value. Consequently, the quantitative impairment test was not required.
At October 1, 2023, we performed a qualitative assessment for our annual impairment test of goodwill after concluding that it was not more likely than not that the fair value of the reporting unit was less than its carrying value. Consequently, the quantitative impairment test was not required.
Once programs are secured under contract, partners must select targets and agree on a detailed statement of work before we commence discovery research on any antibodies. The rate and timing of such selection and initiation differs from partner to partner.
Once programs are secured under contract, partners must propose targets and agree on a detailed statement of work before we commence discovery research on any antibodies. The rate and timing of such selection and initiation differs from partner to partner.
We have successfully executed and will continue to look for strategic technology acquisitions to improve, broaden and deepen our capabilities and expertise in antibody discovery and development, or those that offer opportunities to expand our partnership business into adjacent therapeutic modalities.
We have also successfully executed and will continue to look for strategic technology acquisitions to improve, broaden and deepen our capabilities and expertise in antibody discovery and development, or those that offer opportunities to expand our business into adjacent therapeutic modalities.
Royalty fees consist of certain contractual royalty payments to our strategic partners upon receipt of royalty revenue based on our customers third-party net sales. Royalty fees are not included in every program.
Operating Expenses Royalty fees. Royalty fees consist of certain contractual royalty payments to our strategic partners upon receipt of royalty revenue based on our customers third-party net sales. Royalty fees are not included in every program.
We expect our sales and marketing expenses to increase in absolute dollars as we expand our commercial sales, marketing and business development teams; increase our presence globally; and increase marketing activities to drive awareness and adoption of our discovery and development engine.
We expect our sales and marketing expenses to increase in absolute dollars as we expand our commercial sales, increase our presence globally, and increase marketing activities to drive awareness and adoption of our discovery and development engine.
Up to 5 targets, multi-year Undisclosed December 15, 2022 Rallybio Corporation Up to 5 targets, multi-year Rare metabolic disorder and undisclosed December 1, 2022 Atlas Ventures - stealth stage company Up to 3 targets, multi-year Undisclosed August 3, 2022 Undisclosed biotechnology company Up to 3 targets, multi-year Undisclosed June 29, 2022 * Empirico Inc. 2 additional targets Undisclosed May 3, 2022 Everest Medicines Ltd.
Up to 5 targets, multi-year Undisclosed December 15, 2022 Rallybio Corporation Up to 5 targets, multi-year Rare metabolic disorder and undisclosed December 1, 2022 Atlas' stealth stage company Up to 3 targets, multi-year Undisclosed August 3, 2022 Undisclosed biotechnology company Up to 3 targets, multi-year Undisclosed June 29, 2022 * Empirico Inc. 2 additional targets Undisclosed May 3, 2022 Everest Medicines Ltd.
Molecules in the clinic represent the count of unique molecules for which an Investigational New Drug, or IND, New Animal Drug, or equivalent under other regulatory regimes, application has been approved based on an antibody that was discovered either by us or by a partner using licensed AbCellera technology.
Molecules in the clinic represent the count of unique molecules for which an Investigational New Drug, or IND, New Animal Drug, or equivalent under other regulatory regimes, application has reached "open" status or has otherwise been approved based on an antibody that was discovered either by us or by a partner using licensed AbCellera technology.
These payments are not included in the table above as the amount and timing of such payments are not known as of December 31, 2022.
These payments are not included in the table above as the amount and timing of such payments are not known as of December 31, 2023.
We will continue to invest in research and development efforts towards expanding our capabilities and expertise along our discovery and development engine , the building of our business development team and marketing our solutions to new and existing partners, and the expansion of our future office headquarters, and related infrastructure, including execution of long-term office-lease arrangements.
We will continue to invest in research and development efforts towards expanding our capabilities and expertise along our discovery and development engine, continued investments in partnered and internal programs, the building of our business development team and marketing our solutions to new and existing partners, and the expansion of our future office headquarters, and related infrastructure, including execution of long-term office-lease arrangements.
Amortization expense and impairment includes the amortization of intangible assets over their respective useful lives and impairment of certain IPR&D as further described in our notes to the consolidated financial statements. Other (Income) Expense Interest income. Interest income consists primarily of interest earned on cash, cash equivalent, and marketable securities balances. 79 Interest and o ther.
Amortization expense and impairment includes the amortization of intangible assets over their respective useful lives and impairment of certain IPR&D as further described in our notes to the consolidated financial statements. Other (Income) Expense Interest income. Interest income consists primarily of interest earned on cash, cash equivalent, and marketable securities balances. Grants and incentives.
Berkeley Lights Litigation See Item 3 “Legal Proceedings” for detailed information. The timing of the incurrence of legal expenses relating to pending litigation is difficult to predict and the outcome of litigation is inherently uncertain. Related costs and outcomes could materially affect our financial condition and operating results in future periods.
Bruker Cellular Analysis Litigation See Item 3 “Legal Proceedings” for detailed information. The timing of the incurrence of legal expenses relating to pending litigation is difficult to predict and the outcome of litigation is inherently uncertain. Related costs and outcomes could materially affect our financial condition and operating results in future periods.
As of December 31, 2021, and 2022, there were no liability classified options outstanding. Stock-based compensation expense is classified in our consolidated statements of income and comprehensive income based on the function to which the related services are provided. We recognize stock-based compensation expense for the portion of awards that have vested. Forfeitures are accounted for as they occur.
As of December 31, 2021, 2022, and 2023, there were no liability classified options outstanding. Stock-based compensation expense is classified in our consolidated statements of income (loss) and comprehensive income (loss) based on the function to which the related services are provided. We recognize stock-based compensation expense for the portion of awards that have vested.
Interest and other consists primarily of financing fees , fair value adjustments of contingent consideration and marketable securities , and includes foreign exchange gains or losses due to fluctuations in exchange rates from the jurisdictions that we operate in against the U.S. dollar . Grants and incentives.
Other consists primarily of fair value adjustments of contingent consideration and marketable securities, and includes foreign exchange gains or losses due to fluctuations in exchange rates from the jurisdictions that we operate in against the U.S. dollar.
We expect that our overall revenue will fluctuate from period to period due to the timing of securing additional programs under contract, the inherently uncertain nature of the timing of milestone achievement, our dependence on the program decisions of our partners and uncertainty in sales of our antibodies by our partners that generate royalty revenue. Operating Expenses Royalty fees.
We expect that our overall revenue will fluctuate from period to period due to the timing of securing additional programs under contract and the progress of our internal programs, the inherently 92 uncertain nature of the timing of milestone achievement, our dependence on the program decisions of our partners, and uncertainty in sales of our antibodies by our partners that generate royalty revenue.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected share price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and our expected dividend yield.
Forfeitures are accounted for as they occur. 103 The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected share price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and our expected dividend yield.
In connection with our acquisition of Trianni, we may be required to make future payments to former shareholders of Trianni upon the achievement of certain earn-out provisions related to a specific customer license ending on April 9, 2024.
In connection with our acquisition of Trianni, we may be required to make future payments to former shareholders of Trianni upon the achievement of certain earn-out provisions related to a specific customer license.
Multi-target, multi-year Multiple undisclosed March 16, 2020 * Invetx, Inc. Multi-target, multi-year Animal health February 23, 2020 Undisclosed Multi-target, multi-year Cell therapy September 25, 2019 * Gilead Sciences, Inc.
Up to 4 targets, multi-year Multiple undisclosed March 16, 2020 * Invetx, Inc. Multi-target, multi-year Animal health February 23, 2020 Undisclosed Multi-target, multi-year Cell therapy September 25, 2019 * Gilead Sciences, Inc.
The Company applied ASC 606 to all arrangements to date. We recognize revenue when we satisfy the performance obligations under the terms of a contract and control of our services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those services.
We recognize revenue when we satisfy the performance obligations under the terms of a contract and control of our services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those services.
Longer-term we are eligible to receive additional payments upon satisfaction of clinical and commercial milestones, which we refer to as milestone payments, as well as royalties on sales of approved products derived from antibodies that we discover for our partners. Our discovery partnerships generally include royalty payments on net sales in the single-digit to low-double digit range.
Longer-term, we are eligible to receive additional payments upon satisfaction of clinical and commercial milestones, which we refer to as milestone payments, as well as royalties on sales of approved products derived from antibodies that we discover for our partners. Our partnerships generally include royalty payments (or equivalents) on net sales.
Contingent consideration payable is a 88 financial liability and measured at its fair value at each reporting period, with any changes in fair value from the previous reporting period recorded in the statement s of income and comprehensive incom e .
Contingent consideration payable is a financial liability and measured at its fair value at each reporting period, with any changes in fair value from the previous reporting period recorded in the statements of income (loss) and comprehensive income (loss).
See Note 11 to our consolidated financial statements concerning additional stock-based compensation expense and certain specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted in the years ended December 31, 2020, 2021 and 2022.
See Note 10 to our consolidated financial statements for additional information regarding stock-based compensation expense and the assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted in the years ended December 31, 2021, 2022, and 2023.
A 10% change in these key assumptions associated with the recognition of intangible assets and contingent consideration would not have a material impact on the amounts recognized. See Note 20 to our consolidated financial statements for further information related to the accounting for the above acquisitions.
A 10% change in these key assumptions associated with the recognition of intangible assets and contingent consideration would not have a material impact on the amounts recognized. See Note 15 and 19 to our consolidated financial statements for further information related to the contingent considerations and Tetragenetics acquisition, respectively.
Non-refundable tax credits are recognized as a reduction to income tax expense in the year they are earned and are included in a note in the consolidated financial statements. We expect to continue to benefit from these tax programs in the future.
Non-refundable tax credits are recognized as a reduction to income tax expense in the year they are earned. We expect to continue to benefit from these tax programs in the future. Other.
These factors also pose important 75 challenges that we must successfully address to sustain our growth and improve our results of operations. Our ability to successfully address these challenges is subject to various risks and uncertainties, including those described in Part I, Item 1A, Risk Factors. • Securing additional programs under contract.
These factors also pose important challenges that we must successfully address to sustain our growth and improve our results of operations. Our ability to successfully address these challenges is subject to various risks and uncertainties, including those described in Part I, Item 1A, Risk Factors. • Engaging with strategic partners.
Research and development expenses primarily consist of salaries, benefits, incentive compensation, stock-based compensation, laboratory supplies and materials expenses for employees and contractors engaged in research and product development. These expenses are exclusive of depreciation, amortization, and impairment. Research and development activities consist of discovery research for partners as well as internal development of our discovery and development engine.
Research and development expenses primarily consist of salaries, benefits, incentive compensation, stock-based compensation, laboratory supplies and materials expenses for employees and contractors engaged in research and product development. These expenses are exclusive of depreciation, amortization, and impairment.
The increase was primarily driven by a larger average cash and cash equivalents balances maintained in the year ended December 31, 2021 compared to the prior period.
The increase was primarily driven by an increase in interest rates, a larger average cash and cash equivalents and marketable securities balances maintained in the year ended December 31, 2022, compared to the prior period.
We believe investments in technology will improve the quality, speed, and success of drug development and that long-term value creation begins with building a great company that can create multiple products, repeatedly and successfully. We focus on the development of antibody-based drugs and are committed to improving discovery and development.
We believe investments in technology will improve the quality, speed, and success of drug development and that long-term value creation begins with building a great company that can create multiple products, repeatedly and successfully.
Net cash provided by operating activities increased from $22.7 million in the year ended December 31, 2020, to $244.6 million in the year ended December 31, 2021.
Net cash provided by operating activities increased from $244.6 million in the year ended December 31, 2021, to $277.4 million in the year ended December 31, 2022.
Lilly and its authorized distributors have paused commercial distribution until further notice by the FDA. Key Factors Affecting Our Results of Operations and Future Performance We believe that our financial performance has been, and in the foreseeable future will continue to be, primarily driven by multiple factors as described below, each of which presents growth opportunities for our business.
Key Factors Affecting Our Results of Operations and Future Performance We believe that our financial performance has been, and in the foreseeable future will continue to be, primarily driven by multiple factors as described below, each of which presents growth opportunities for our business.
Prior to our IPO, as there was no public market for our common shares, we determined the volatility for awards granted with reference to an analysis of reported data for a group of guideline companies that issued options with substantially similar terms.
With no public market for our common shares prior to our IPO and limited historical data since, we determine the volatility for awards granted with reference to an analysis of reported data for a group of biotechnology companies that issued options with substantially similar terms.
We focus a substantial portion of our resources on research and development efforts towards strengthening our discovery and development engine and we expect to continue to make significant investments in this area for the foreseeable future.
We focus a substantial portion of our resources on research and development efforts towards strengthening our discovery and development engine and developing a pipeline of internal and co-development programs. We expect to continue to make significant investments in this area for the foreseeable future, over time shifting effort from engine development towards engine application.
In connection with our acquisition of TetraGenetics, contingent consideration payable at December 31, 2022, is $36.8 million, of which $31.3 million is a short-term liability and $5.5 million is a long-term liability on our consolidated balance sheets.
In connection with our acquisition of TetraGenetics, the contingent consideration payable at December 31, 2023 is $36.7 million , of which $31.8 million is a short-term liability and $4.9 million is a long-term liability on our consolidated balance sheet.
(3) Excludes financial arrangements disclosed in Note 9 and Note 13 to our audited consolidated financial statements. 86 The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts.
The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts.
The $1.9 million decrease was attributed to a decrease in other expenses and an increase in other income. F oreign exchange gains due to fluctuations in the Canadian and U.S. dollar exchange rate was offset by fair value adjustments related to contingent consideration and held-for-trading marketable securities due to an increase in interest rates in the period.
Foreign exchange gains due to fluctuations in the Canadian and U.S. dollar exchange rate was offset by fair value adjustments related to contingent consideration and held-for-trading marketable securities due to an increase in interest rates in the period.
We aim to be the best in the world in bringing antibody therapeutics from target to target to the start of clinical testing by combining expertise, technologies, and infrastructure to build an integrated engine for antibody drug discovery and development .
We aim to build a competitive advantage in bringing antibody therapeutics from target into clinical testing by combining expertise, technologies, and infrastructure to build an integrated engine for antibody drug discovery and development .
Revenue is recognized based on the amount of the transaction price that is allocated to each respective performance obligation when or as the performance obligation is satisfied by transferring a promised good and/or service to the customer.
Revenue is recognized based on the amount of the transaction price that is allocated to each respective performance obligation when or as the performance obligation is satisfied by transferring a promised good and/or service to the customer. We allocate the transaction price to each distinct performance obligation identified in the contract based on relative observable standalone selling prices. Licensing Revenue.
It is also an indication of the selection and initiation of discovery projects by our partners and the resulting potential for near-term payments. Cumulatively, partnered program starts with downstream participation indicate our total opportunities to earn downstream revenue from milestone fees and royalties in the mid- to long-term .
We view this metric as an indication of the selection and initiation of projects by our partners and the resulting potential for near-term payments. Cumulatively, partner-initiated program starts with downstream participation indicate our total opportunities to earn downstream revenue from milestone fees and royalties (or royalty equivalents) in the mid- to long-term.
The Company concluded that there were no impairment indicators related to goodwill during the remainder of 2022. As part of our ongoing planned research and development and execution of our programs under contract, changes to our plans due to internal and external factors out of our control could impact the amount and timing of projected future cash flows.
As part of our ongoing planned research and development and execution of our programs under contract and internal programs, changes to our plans due to internal and external factors out of our control could impact the amount and timing of projected future cash flows.
Grants and incentives include cost recovery on activities that qualified for approved projects supported by grant funding or tax credits. Grants primarily include the benefit from programs administered by the Canadian government’s Ministry of Innovation, Science and Economic Development, and Strategic Innovation Fund.
Grants and incentives include cost recovery on activities that qualified for approved projects supported by grant funding or tax credits. Grants primarily include the benefit from programs administered by the Canadian federal and provincial governments.
Research fees that we recognize under our partnerships depend on our delivery of antibodies for development by our partners and delays by our partners in selecting targets and agreeing on statements of work will impact revenue recognition. • Investing in enhancements to our discovery and development engine.
Research fees that we recognize under our partnerships depend on our delivery of antibodies for development by our partners and delays by our partners in selecting targets and agreeing on statements of work will impact revenue recognition. • Successfully out-licensing drug candidates from our internal programs.
The discovery effort commences on the later of (i) the day on which we receive sufficient reagents to start discovery of antibodies against a target and (ii) the day on which the kick-off meeting for the program is held. We view this metric as an indication of our operational capacity to execute on programs under contract.
The discovery effort commences on the later of (i) the day on which we receive sufficient reagents to start discovery of antibodies against a target and (ii) the day on which the kick-off meeting for the program is held.
Depreciation, Amortization, and Impairment Year Ended December 31, Change 2021 2022 Amount % Depreciation, amortization, and impairment $ 14,451 $ 27,843 $ 13,392 93 % Depreciation, amortization, and impairment expense increased by $13.4 million, or 93%, from the year ended December 31, 2021, compared to the year ended December 31, 2022.
The increase was partially offset by a decrease of $3.4 million in legal and accounting fees. 97 Depreciation, Amortization, and Impairment Year Ended December 31, Change 2021 2022 Amount % Depreciation, amortization, and impairment $ 14,451 $ 27,843 $ 13,392 93 % Depreciation, amortization, and impairment expense increased by $13.4 million, or 93%, from the year ended December 31, 2021, compared to the year ended December 31, 2022.
To the extent that grant funding covers capital expenditures, a deferred credit is recorded on the balance sheet and recognized ratably over the benefit period of the related expenditure for which the grant was intended to compensate.
To the extent that grant funding covers capital expenditures, a deferred credit is recorded on the balance sheet and recognized ratably over the benefit period of the related expenditure for which the grant was intended to compensate. 93 Tax credits primarily include benefits from the Canadian and Australian federal and local research and development programs and are non-refundable.
The increase was primarily driven by an increase in activity relating to research and development expenditures that are eligible for the SIF project.
This increase was primarily driven by activity relating to research and development expenditures that are eligible for reimbursement under government programs for the period.
As of December 31, 2022, the contingent consideration payable had an estimated fair value of approximately $23.5 million, of which $12.9 million is a short-term liability and 10.6 million is a long-term liability on our consolidated balance sheets.
As of December 31, 2023, the contingent consideration payable had an estimated fair value of approximately $18.7 million , all of which is a short-term liability on our consolidated balance sheet.
(2) As of December 31, 2022, the contingent consideration payable had an estimated fair value of approximately $60.3 million, which has been included as a liability on our consolidated balance sheets.
(2) As of December 31, 2023, the contingent consideration payable had an estimated fair value of approximately $55.4 million, which has been included as a liability on our consolidated balance sheets. (3) Excludes financial arrangements disclosed in Note 8 and Note 12 to our audited consolidated financial statements.
Financing Activities Net cash used in financing activities decreased from $3.9 million for the year ended December 31, 2021, to net cash used in financing activities of $1.6 million for the year ended December 31, 2022. This was primarily due to no contingent consideration payments made or long-term debt repaid in 2022.
Net cash used in financing activities decreased from $3.9 million for the year ended December 31, 2021, to net cash used in financing activities of $1.6 million for the year ended December 31, 2022.
We derive improvements to our discovery and development engine from both types of activities. We have not historically tracked our research and development expenses on a partner-by-partner basis or on a product candidate-by-product candidate basis. We expect to continue to incur substantial research and development expenses as we conduct discovery research for our partners and our internal programs.
Research and development activities consist of discovery research for partners, investments made in co-development and internal programs, and internal development of our discovery and development engine. We have not historically tracked our research and development expenses on a partner-by-partner basis or on a product candidate-by-product candidate basis.
Our ability to maintain and expand our partnerships is dependent on the advantages our discovery and development engine delivers to our partners. We intend to maintain our leading position through investments in research and development to refine and add capabilities in areas such as computation, protein engineering, immunization technologies, genetically engineered rodents and cell line selection.
We intend to maintain our leading position through investments in research and development to refine and add capabilities in areas such as computation, protein engineering, immunization technologies, genetically engineered rodents and cell line selection. Specifically, we are currently completing our investments in integrated preclinical development and antibody manufacturing.
Investing Activities Net cash used in investing activities increased from $332.2 million in the year ended December 31, 2021, to $352.6 million in the year ended December 31, 2022.
The decrease in investing activities for the twelve months ended December 31, 2023 was primarily due to the purchase of and proceeds from marketable securities. Net cash used in investing activities increased from $332.2 million in the year ended December 31, 2021, to $352.6 million in the year ended December 31, 2022.
The increase was primarily driven by an increase in interest rates, a larger average cash and cash equivalents and marketable securities balances maintained in the year ended December 31, 2022, compared to the prior period. 81 Interest and Other Year Ended December 31, Change 2021 2022 Amount % Interest and other $ 6,080 $ 4,045 $ (2,035 ) (33 )% Interest and other decreased by $2.0 million, or 33% from the year ended December 31, 2021, compared to the year ended December 31, 2022.
Other (Income) Year Ended December 31, Change 2021 2022 Amount % Other $ 6,080 $ 4,045 $ (2,035) (33) % Other decreased by $2.0 million, or 33% from the year ended December 31, 2021, compared to the year ended December 31, 2022. The $1.9 million decrease was attributed to a decrease in other expenses and an increase in other income.
A target is any relevant antigen for which a partner seeks our support in developing binding antibodies. We view this metric as an indication of commercial success and technological competitiveness. It further relates to revenue from access fees.
A program under contract is counted when a contract is executed with a partner under which we commit to discover or deliver antibodies against one selected target. A target is any relevant antigen for which a partner seeks our support in developing binding antibodies. We view this metric as an indication of commercial success and technological competitiveness.
For example, in November 2022, the FDA announced bebtelovimab is no longer authorized for emergency use in the U.S. Lilly and its authorized distributors have paused commercial distribution until further notice by the FDA.
For example, in November 2022, the FDA announced bebtelovimab is no longer authorized for emergency use in the U.S.
Liquidity and Capital Resources As of December 31, 2022, we had $886.5 million of cash, cash equivalents, and marketable securities, comprised of $386.5 million in cash and cash equivalents and $500.0 million in marketable securities.
Liquidity and Capital Resources As of December 31, 2023, we had $760.6 million of cash, cash equivalents, and marketable securities, comprised of $133.3 million in cash and cash equivalents and $627.3 million in marketable securities.
Royalty fees are directly attributable to the royalty revenues received by the Company from sales of bamlanivimab by Lilly due to AbCellera’s collaborators in pandemic response.
Royalty fees in 2022 were attributable to the royalty revenues received by the Company from sales of bamlanivimab and bebtelovimab by Lilly.
The cumulative number of programs under contract with downstream participation is related to our ability to generate future revenue from milestone payments and royalties. Partnered program starts represent the number of unique programs under contract for which we have commenced the discovery effort.
It further relates to revenue from access fees. The cumulative number of programs under contract with downstream participation is related to our ability to generate future revenue from milestone payments and royalties.
We partner with companies of all sizes and government organizations to propel programs to the clinic, together. We enable discovery against targets that have traditionally been intractable, and we accelerate programs against less difficult targets. Our deals emphasize participation in the success and upside of future antibody therapeutic candidates.
We deliberately partner with companies of all sizes to propel programs pursuing the best ideas for new antibody-based drugs to the clinic, together. We enable discovery against targets that have traditionally been intractable, and we accelerate programs against less difficult targets.
Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2020 2021 2022 Net cash provided by (used in): Operating activities $ 22,690 $ 244,584 $ 277,360 Investing activities (119,780 ) (332,247 ) (352,625 ) Financing activities 683,653 (3,886 ) (1,628 ) Effect of exchange rate changes on cash and cash equivalents — (1,425 ) (9,599 ) Net increase (decrease) in cash and cash equivalents, and restricted cash $ 586,563 $ (92,974 ) $ (86,492 ) 85 Operating Activities Net cash provided by operating activities increased from $244.6 million in the year ended December 31, 2021, to $277.4 million in the year ended December 31, 2022.
Further information with respect to these contributions are outlined in Note 12 to the consolidated financial statements. 99 Cash Flows The following table summarizes our cash flows for the periods presented: December 31, 2021 2022 2023 Net cash provided by (used in): Operating activities $ 244,584 $ 277,360 $ (43,877) Investing activities (332,247) (352,625) (221,108) Financing activities (3,886) (1,628) 10,356 Effect of exchange rate fluctuations on cash and cash equivalents (1,425) (9,599) 589 Net decrease in cash and cash equivalents $ (92,974) $ (86,492) $ (254,040) Operating Activities Net cash provided by operating activities decreased from $277.4 million generated in the year ended December 31, 2022, to $43.9 million cash used by operating activities in the year ended December 31, 2023.
Where the date of such application approval is not known to us, the date of the first public announcement of a clinical trial will be used for the purpose of this metric.
Where the date of such application approval is not known to us, the date of the first public announcement of a clinical trial will be used for the purpose of this metric. We view this metric as an indication of our near- and mid-term potential revenue from milestone fees and potential royalty payments in the long term.
Year Ended December 31, Change Cumulative Metrics 2021 2022 % Number of discovery partners 36 40 11 % Programs under contract 156 174 12 % Partnered program starts 78 101 29 % Molecules in the clinic 5 8 60 % 76 The table below outlines the details of molecules in the clinic as of December 31, 2022: Molecule Most advanced stage Partner Therapy areas Program type Bamlanivimab (LY-CoV555) Marketed, EUA Eli Lilly and Company Infectious disease – COVID-19 AbCellera Pre-partnered Program - Partnered Bebtelovimab (LY-CoV1404) Marketed, EUA Eli Lilly and Company Infectious disease – COVID-19 AbCellera Pre-partnered Program - Partnered TAK-920/DNL919 Phase 1 Denali Therapeutics Inc.
If we had reported on our original metric of cumulative partnered program starts, the number would have been 101 for December 31, 2022. 90 The table below outlines the details of molecules in the clinic as of December 31, 2023: Molecule Most advanced stage Partner Therapy areas Program type Bamlanivimab (LY-CoV555) Marketed, EUA* Eli Lilly and Company Infectious disease – COVID-19 AbCellera-initiated; partner-led Bebtelovimab (LY-CoV1404) Marketed, EUA* Eli Lilly and Company Infectious disease – COVID-19 AbCellera-initiated; partner-led TAK-920/DNL919 Phase 1* Denali Therapeutics Inc.
Key Business Metrics We regularly review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe that the following metrics are important to understand our current business. These metrics may change or may be substituted for additional or different metrics as our business develops.
The investments in each program are undertaken at risk and may ultimately not yield a return. 88 Key Business Metrics We regularly review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe that the following metrics are important to understand our current business.
While our significant accounting policies are described in more detail in Note 3 to our audited consolidated financial statements, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements.
While our significant accounting policies are described in more detail in Note 3 to our audited consolidated financial statements, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements. 101 Revenue Recognition Our revenue primarily consists of research fees, licensing revenue, milestone payments and royalty revenue, which are generated through our performance of antibody discovery research for our partners, and licensing revenue, which we generated from our Trianni humanized rodent platform.
We expect to continue to incur significant expenses, and we expect such expenses to increase substantially in connection with our ongoing activities, including as we: • invest in research and development activities to improve our antibody discovery and development engine including investments in building our new headquarters through our joint ventures and building a new small-scale manufacturing facility; • market and sell our solutions to existing and new partners; • expand and enhance operations to deliver programs, including investments in manufacturing; • acquire businesses or technologies to support the growth of our business; • attract, hire and retain qualified personnel; and • continue to establish, protect and defend our intellectual property and patent portfolio, including our ongoing litigation 2022 Highlights $485 million $159 million $0.56 & $0.50 $886 million Total Revenue Net Income Basic & Diluted EPS Cash, cash equivalents, and marketable securities 73 To date, we have financed our operations primarily from revenue from our antibody discovery partnerships in the form of royalty revenue, government funding from grants, and from the issuance and sale of convertible preferred shares and notes, and common shares.
We expect to continue to incur significant expenses in connection with our ongoing activities, including as we: • invest in research and development activities to improve our antibody discovery and development engine including investments in completing the construction of our small-scale manufacturing facility and our new headquarters through our joint ventures; • pursue internal and co-development programs in preclinical and eventually clinical development; • market and sell our solutions to existing and new strategic partners; • expand and enhance operations to deliver programs, including investments in manufacturing; 85 • acquire businesses or technologies to support the growth of our business; • attract, hire and retain qualified personnel; and • continue to establish, protect and defend our intellectual property and patent portfolio, including our ongoing litigation .
We allocate the transaction price to each distinct performance obligation identified in the contract based on relative observable standalone selling prices. 87 Licensing Revenue. For the licenses of our intellectual property the Company recognizes revenue from non-refundable, upfront fees when the license is transferred to the customer and the customer is able to use and benefit from the license.
For the licenses of our intellectual property the Company recognizes revenue from non-refundable, upfront fees when the license is transferred to the customer and the customer is able to use and benefit from the license. Milestone Payments.
Animal health AbCellera Partner-initiated Discovery Number of discovery partners represents the unique number of partners with whom we have executed partnership contracts. We view this metric as an indication of the competitiveness of our engine and our level of market penetration. The metric also relates to our opportunities to secure programs under contract .
We view this metric as an indication of the competitiveness of our engine and our level of market penetration. The metric also relates to our opportunities to secure programs under contract. Programs under contract represent the number of antibody development programs that are under contract for delivery of discovery research activities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Our interest rate risk is affected by changes in the general level of interest rates, particularly because the majority our investments are short-term in nature.
Our interest rate risk is affected by changes in the general level of interest rates, particularly because the majority of our investments are short-term in nature.
If inflationary conditions continue to persist, our inability or failure to manage our costs could harm our business, financial condition, results of operations and cash flows. To the extent possible, we mitigate some inflation risk by negotiating longer-term agreements with our suppliers and contractors.
If inflationary conditions continue to persist, our inability or failure to manage our costs could harm our business, financial condition, results of operations and cash flows. To the extent possible, we mitigate some inflation risk by negotiating longer-term agreements with our suppliers and contractors. Item 8. Financial Statements and Supplementary Data.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk As of December 31, 2022, we had cash and cash equivalents of $386.5 million, restricted cash of $28.1 million, and marketable securities of $500.0 million, a majority of which was maintained in high credit quality and liquid held for trading marketable securities, bank accounts and term deposits.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk As of December 31, 2023, we had cash and cash equivalents of $133.3 million , restricted cash of $27.3 million , and marketable securities of $627.3 million , a majority of which was maintained in high credit quality and liquid held-for-trading marketable securities, term deposits, and bank accounts.
As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency exchange rates. Inflation Risk Inflation generally affects us by increasing our cost of labor, raw materials and supplies, and costs associated with the construction and purchases of equipment for our research and development facilities.
Inflation Risk Inflation generally affects us by increasing our cost of labor, raw materials and supplies, and costs associated with the construction and purchases of equipment for our research and development facilities.
In the normal course of business, we earn revenue denominated in U.S. dollars and we incur expenses primarily in Canadian denominated, U.S. denominated and Australian denominated dollars. Our reporting currency is the U.S. dollar. We hold a majority of our cash in U.S. dollars. To date, we have not entered into any hedging arrangements with respect to foreign currency risk.
In the normal course of business, we earn revenue denominated in U.S. dollars and we incur expenses primarily in Canadian denominated, U.S. denominated, and Australian denominated dollars. Further, our government contributions and amounts repayable are in Canadian dollars. Our reporting currency is the U.S. dollar. We hold a majority of our cash in U.S. dollars.
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To date, we have not entered into any hedging arrangements with respect to foreign currency risk. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency exchange rates.
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The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found in Item 15. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None. 105

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