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What changed in Absci Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Absci Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+629 added−514 removedSource: 10-K (2024-03-21) vs 10-K (2023-03-30)

Top changes in Absci Corp's 2023 10-K

629 paragraphs added · 514 removed · 357 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

72 edited+134 added−72 removed64 unchanged
Biggest changeWe are aware of potential competitors addressing certain steps in the target identification, biologic drug discovery, and cell line development processes or adjacent aspects of the broad process, including: • in the field of novel target identification, we may face competition from academic, pharmaceutical, and biotechnology research initiatives, as well as companies focused on novel methods for target identification, including Insitro, Inc., TScan Therapeutics, Inc., and 3T Biosciences, Inc.; • in the field of AI-guided drug design and discovery, we may face competition from companies designing novel proteins such as Generate Biomedicines, Inc., as well as adjacent technology companies pursuing small molecule design such as Schrodinger, Inc., Recursion Pharmaceuticals, Inc., Relay Therapeutics, Inc., Atomwise Inc., Valo Health, Inc., and Exscientia Limited; 15 Table of Contents • in the field of scaffold design and drug platform development, we may face competition from pharmaceutical and biotechnology companies developing novel biologic modalities including Amgen Inc., Crescendo Biologics Limited and Harpoon Therapeutics, Inc., among others; • in the field of novel human/humanized antibody discovery, we may face competition from companies such as AbCellera Biologics Inc., Adimab LLC, and Alloy Therapeutics, Inc.; • in the field of non-standard amino acid protein engineering, we may face competition from companies such as Ambrx Inc. and Sutro Biopharma, Inc.
Biggest changeThe market for technologies that enable biopharmaceutical research and development, such as ours, includes multiple categories of pharmaceutical and biotechnology industries where competitors are similarly working to address certain steps in target identification, biologic drug discovery, or adjacent aspects of the broad process, including: • in the field of AI-guided drug design and discovery, we may face competition from companies attempting to use AI to design novel biologic drugs such as Generate Biomedicines, Inc., and Exscientia Limited, among others.
We believe the flexibility of our platform enables us to address specific challenges with existing targets or product candidates and open up opportunities to create new modalities and generate lead drug candidates that previously had not been possible.
We believe the flexibility of our platform enables us to address specific challenges with existing targets or product candidates and open up opportunities to create new modalities and generate lead drug candidates that we believe previously had not been possible.
The process required by the FDA before biologics may be marketed in the United States generally involves the following: • completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s applicable good laboratory practices regulations (GLP); • submission to the FDA of an application for an IND, which must become effective before clinical trials may begin; • approval of the protocol and related documentation by an independent institutional review board (IRB), or ethics committee at each clinical site before each trial may be initiated; • performance of adequate and well-controlled human clinical trials according to the FDA’s regulations commonly referred to as good clinical practices (GCPs), and any additional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of the proposed biological product for its intended use; • preparation of and submission to the FDA of a biologics license application (BLA), for marketing approval that includes sufficient evidence of establishing the safety, purity, and potency of the proposed biological product for its intended indication, including from results of nonclinical testing and clinical trials; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced to assess compliance with cGMPs, to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength, quality and purity; • potential FDA audit of the nonclinical study and clinical trial sites that generated the data in support of the BLA; • review of the product candidate by an FDA advisory committee, where appropriate and if applicable; • payment of user fees for FDA review of the BLA (unless a fee waiver applies); and • FDA review and approval of the BLA, resulting in the licensure of the biological product for commercial marketing.
The process required by the FDA before biologics may be marketed in the United States generally involves the following: • completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s applicable good laboratory practices regulations (GLP); • submission to the FDA of an application for an IND, which must become effective before clinical trials may begin; • approval of the protocol and related documentation by an independent institutional review board (IRB), or ethics committee at each clinical site before each trial may be initiated; • performance of adequate and well-controlled human clinical trials according to the FDA’s regulations commonly referred to as good clinical practices (GCPs), and any additional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of the proposed biological product for its intended use; • preparation of and submission to the FDA of a biologics license application (BLA), for marketing approval that includes sufficient evidence of establishing the safety, purity, and potency of the proposed biological product for its intended indication, including from results of nonclinical testing and clinical trials; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced to assess compliance with cGMPs, to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength, quality and purity; 17 Table of Contents • potential FDA audit of the nonclinical study and clinical trial sites that generated the data in support of the BLA; • review of the product candidate by an FDA advisory committee, where appropriate and if applicable; • payment of user fees for FDA review of the BLA (unless a fee waiver applies); and • FDA review and approval of the BLA, resulting in the licensure of the biological product for commercial marketing.
Our partners must obtain the requisite approvals from the applicable regulatory authority prior to the commencement of clinical studies or marketing of a biological product in those countries. The requirements and process governing the conduct of clinical trials, product licensing, coverage, pricing and reimbursement vary from country to country.
We or our partners must obtain the requisite approvals from the applicable regulatory authority prior to the commencement of clinical studies or marketing of a biological product in those countries. The requirements and process governing the conduct of clinical trials, product licensing, coverage, pricing and reimbursement vary from country to country.
Our ACE assay then evaluates and sorts hundreds of millions of designs to collect the best hits - versions of the protein-of-interest, based on target binding, protein quality, and expression titer. We use this high-quality, high-throughput data to train our AI models.
Our ACE assay technology then evaluates and sorts hundreds of millions of designs to collect the best hits - versions of the protein-of-interest, based on target binding, protein quality, and expression titer. We use this high-quality, high-throughput data to train our AI models.
If we or our partners fail to comply with applicable laws or regulations at any time, we or our partners may become subject to administrative or judicial sanctions or other legal consequences, including among other things, restrictions on marketing or manufacturing, withdrawal of products, product recalls, fines, warning letters, untitled letters, clinical holds on clinical studies, refusal of the FDA to approve pending applications or supplements to approved applications, suspension or revocation of product approvals, product seizure or detention, refusal to permit the import or export of products, consent decrees, corporate integrity agreements, debarment or exclusion from federal 19 Table of Contents healthcare programs, mandated modification of promotional materials, issuance of safety alerts, Dear Healthcare Provider letters, injunctions or the imposition of civil or criminal penalties.
If we or our partners fail to comply with applicable laws or regulations at any time, we or our partners may become subject to administrative or judicial sanctions or other legal consequences, including among other things, restrictions on marketing or manufacturing, withdrawal of products, product recalls, fines, warning letters, untitled letters, clinical holds on clinical studies, refusal of the FDA to approve pending applications or supplements to approved applications, suspension or revocation of product approvals, product seizure or detention, refusal to permit the import or export of products, consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs, mandated modification of promotional materials, issuance of safety alerts, Dear Healthcare Provider letters, injunctions or the imposition of civil or criminal penalties.
For example, our trade secrets encompass certain algorithms associated with our deep learning AI Engine, our computational antibody and target discovery technology, manufacturing protocols for our E. coli SoluPro strains, libraries of protein folding solutions and design of molecular libraries for drug discovery. We believe our proprietary rights are strengthened by our comprehensive approach to intellectual property protection.
For example, our trade secrets encompass certain algorithms associated with our deep learning AI models, our computational antibody and target discovery technology, manufacturing protocols for our E. coli SoluPro strains, libraries of protein folding solutions and design of molecular libraries for drug discovery. We believe our proprietary rights are strengthened by our comprehensive approach to intellectual property protection.
There is no assurance, however, that our partners will advance any drug candidates that are currently the subject of Active Programs into further preclinical or clinical development or that our partners will elect to license our technologies upon completion of the technology development phase in a timely manner, or at all.
There is no assurance, however, that our partners will advance any drug candidates that are currently the subject of Active Programs into further preclinical or clinical development or that our partners will elect to license our technologies upon completion of the drug creation phase in a timely manner, or at all.
Our patents and patent applications, if issued, are expected to expire between August 2033 and December 2042, in each case without taking into account any possible patent term adjustments or extensions and assuming payment of all appropriate maintenance, renewal, annuity, or other governmental fees.
Our patents and patent applications, if issued, are expected to expire between August 2033 and December 2043, in each case without taking into account any possible patent term adjustments or extensions and assuming payment of all appropriate maintenance, renewal, annuity, or other governmental fees.
If our partners’ operations are found to be in violation of any of such laws or any other 21 Table of Contents governmental regulations that apply, by extension, we may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations, integrity oversight and reporting obligations, exclusion from participation in federal and state healthcare programs and responsible individuals may be subject to imprisonment.
If our partners’ operations are found to be in violation of any of such laws or any other governmental regulations that apply, by extension, we may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations, integrity oversight and reporting obligations, exclusion from participation in federal and state healthcare programs and responsible individuals may be subject to imprisonment.
We form partnerships with large pharmaceutical companies, biotechnology companies, and other organizations deploying our breakthrough technologies to enable biologic drug discovery for these partners and to continually expand the breadth and depth of our partnered programs.
We form partnerships with large pharmaceutical companies, biotechnology companies, and other organizations deploying our breakthrough technologies to enable biologic drug creation for these partners and to continually expand the breadth and depth of our partnered programs.
Our success depends in part on our ability to obtain and maintain intellectual property protection for the components of our Integrated Drug Creation platform; to defend and enforce our patents, to preserve the confidentiality of our trade secrets; to operate 17 Table of Contents without infringing valid and enforceable patents and other proprietary rights of third parties and to identify new opportunities for intellectual property protection.
Our success depends in part on our ability to obtain and maintain intellectual property protection for the components of our Integrated Drug Creation platform; to defend and enforce our patents, to preserve the confidentiality of our trade secrets; to operate without infringing valid and enforceable patents and other proprietary rights of third parties and to identify new opportunities for intellectual property protection.
However, we believe that the long-term success of our business depends, in part, on our partners’ ability to successfully develop and sell products identified and created through our platform technology. The regulations that govern our pharmaceutical and biotechnology partners are those we therefore believe have the most significant impact on our business.
However, we believe that the long-term success of our business depends, in part, on our current or future partners’ ability to successfully develop and sell products identified and created through our platform technology. The regulations that govern our pharmaceutical and biotechnology partners are those we therefore believe have the most significant impact on our business.
These agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual during the course of the individual’s relationship with us is to be 18 Table of Contents kept confidential and not disclosed to third parties except in specific circumstances.
These agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances.
We believe that we offer a way to transcend the discovery and production challenges faced by the many companies that are investing in developing innovative new protein-based medicines. As we continue to establish our platform as the go-to solution for biologic drug creation, we expect to continue to attract new partners.
We believe that we offer a way to transcend the challenges faced by the many companies that are investing in developing innovative new protein-based medicines. As we continue to establish our platform as the go-to solution for biologic drug creation, we expect to continue to attract new partners.
We have established a reporting hotline and web form that enables employees to anonymously report any suspected violations of the Code of Business Conduct and Ethics, and we have a strict non-retaliation policy for all claims brought forward in good faith.
We have established a reporting hotline and web form that enables employees to anonymously report any suspected violations of the Code, and we have a strict non-retaliation policy for all claims brought forward in good faith.
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all 20 Table of Contents research subjects provide their informed consent for their participation in any clinical study.
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study.
Communication and employee engagement : We employ a variety of tools to facilitate open and direct communication including open forums with executives, employee surveys and engagement through employee-led groups and committees. Our campus is intentionally designed to create a space for collaboration and camaraderie. We hold company wide meetings monthly and regularly schedule time for our colleagues to connect.
Communication and employee engagement : We employ a variety of tools to facilitate open and direct communication including open forums with executives, employee surveys and engagement through employee-led groups and committees. Our campuses are intentionally designed to create a space for collaboration and camaraderie. We hold company wide meetings monthly and regularly schedule time for our colleagues to connect.
Travel Act, the USA PATRIOT Act, and possibly other state and national anti-bribery and anti-money laundering laws in countries in which we conduct activities, such as the UK Bribery Act 2010 and the UK Proceeds of Crime Act 2002 (Anti-Corruption Laws).
Travel Act, the USA PATRIOT Act, and possibly other state and 25 Table of Contents national anti-bribery and anti-money laundering laws in countries in which we conduct activities, such as the UK Bribery Act 2010 and the UK Proceeds of Crime Act 2002 (Anti-Corruption Laws).
Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials. • Phase 3—The investigational product is administered to an expanded patient population to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population at geographically dispersed clinical trial sites.
Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials. 18 Table of Contents • Phase 3—The investigational product is administered to an expanded patient population to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population at geographically dispersed clinical trial sites.
Our partnerships will provide us with the opportunity to participate in the future success of the biologic candidates generated utilizing our platform, through potential clinical, regulatory and commercial milestone payments as well as royalties on net sales of approved products. We aim to assemble economic interests in a diversified portfolio of partners’ biologics across multiple indications.
Our partnerships will provide us with the opportunity to participate in the future success of the biologic candidates generated utilizing our platform, including through potential clinical, regulatory and commercial milestone payments as well as royalties on net sales of approved products. We aim to assemble economic interests in a diversified portfolio of partnered pipeline assets of biologics across multiple indications.
We believe that our platform has a clear and differentiated value proposition for biologic drug discovery and cell line development. We have been successful in attracting initial partners, and we are continuing to expand our capabilities and enhance our platform to offer an even more powerful integrated solution.
We believe that our platform has a clear and differentiated value proposition for biologic drug creation. We have been successful in attracting initial partners, and we are continuing to expand our capabilities and enhance our platform to offer an even more powerful integrated solution.
Our goal is to demonstrate the value of our fully integrated approach and expand our work with an increasing number of partners and programs.
Our goal is to demonstrate the value of our fully integrated approach and expand our work with an increasing number of partnered and internal programs.
For most future partnerships, we expect to negotiate and agree to downstream economic terms of any license to our intellectual property rights before initiating the technology development phase.
For most partnerships, we expect to negotiate and agree to downstream economic terms of any license to our intellectual property rights before initiating the drug creation phase.
Our ability to design, construct and rapidly screen large populations of genetically distinct cells enables us to evaluate billions of unique protein variants and increase the probability of finding the most promising biologic drug candidate. We design and optimize new-to- 6 Table of Contents nature modalities with insights from our AI Engine (formerly referred to as our Denovium Engine).
Our ability to design, construct and rapidly screen large populations of genetically distinct cells enables us to evaluate billions of unique protein variants and increase the probability of finding the most promising biologic drug candidate. We design and optimize new-to-nature modalities with insights from our AI models.
Collectively and individually we are defying conventions and disrupting the biopharmaceutical industry with bold ideas and passionate pursuit of new possibilities. As of December 31, 2022, we had 193 employees, many of whom have advanced post-graduate degrees. We believe that our Unlimiters are our most important asset.
Collectively and individually we are defying conventions and disrupting the biopharmaceutical industry with bold ideas and passionate pursuit of new possibilities. As of December 31, 2023, we had 156 employees, of which 155 were full-time employees, many of whom have advanced post-graduate degrees. We believe that our Unlimiters are our most important asset.
Our Business Model Our business model is to use our platform for rapid creation of biologic drug candidates by: Establishing partnerships with stakeholders in the drug and technology development life cycle: We develop drug candidates for partners, including those who are responsible for preclinical and clinical testing of the biologic candidates generated by our platform.
Our Business Model Our business model is to use our platform for rapid creation of biologic drug candidates by: Establishing partnerships with stakeholders in the drug discovery and development life cycle: We create drug candidates with partners, including pharmaceutical and biotechnology companies who are responsible for preclinical and clinical testing of biologic candidates generated through our platform.
To facilitate talent attraction and retention, we strive to make Absci an inclusive, safe, and healthy workplace with opportunities to grow and develop, supported by strong compensation, benefits, community, health and well-being programs.
To facilitate talent attraction and retention, we strive to make Absci an inclusive, safe, and attractive workplace with opportunities to grow, develop, and connect, supported by competitive compensation and benefits, as well as social, community, health and well-being programs.
Our telephone number is (360) 949-1041. Our website address is https://www.absci.com/. Information contained on, or that can be accessed through, our website should not be considered to be part of this Annual Report. You are advised to read this Annual Report in conjunction with other reports and documents that we file from time to time with the SEC.
Information contained on, or that can be accessed through, our website should not be considered to be part of this Annual Report. You are advised to read this Annual Report in conjunction with other reports and documents that we file from time to time with the SEC.
Our patents and patent applications include the following: Technology Issued Patents Pending Applications Type of Protection Cell Line & Expression Technology 7 U.S. 54 foreign 42 applications Compositions, methods, kits Proprietary Assays and Techniques 22 applications Compositions, Methods Antibody Discovery 51 applications Compositions, methods, kits Artificial Intelligence 9 applications Systems, methods The protection provided by a patent varies from country to country, and is dependent on the type of patent granted, the scope of the patent claims, and the legal remedies available in a given country.
Our patents and patent applications include the following: Technology Issued Patents Pending Applications Type of Protection Cell Line & Expression Technology 8 U.S. 64 foreign 27 applications Compositions, methods, kits Proprietary Assays and Techniques 20 applications Compositions, Methods 15 Table of Contents Antibody Discovery 19 applications Compositions, methods, kits Artificial Intelligence 3 applications Systems, methods The protection provided by a patent varies from country to country, and is dependent on the type of patent granted, the scope of the patent claims, and the legal remedies available in a given country.
As of December 31, 2022, we owned registered trademarks for Absci, SoluPro and SoluPure in the United States, as well as eleven trademark registrations in other jurisdictions.
As of December 31, 2023, we owned registered trademarks for Absci, our stylized “A” mark, Bionic SoluPro, SoluPro and SoluPure in the United States, as well as eighteen trademark registrations in other jurisdictions.
Our Partnerships We structure our partnerships as technology development agreements (each molecule we address is a “program”) with options for our partners to license intellectual property rights to the biological assets we create after completion of the technology development phase.
Our Partnerships We structure our partnerships as drug creation agreements with options for our partners to license intellectual property rights to the biological assets we create after completion of the drug creation phase.
As our AI Engine gets smarter, we can create new and better biologic constructs for our partners faster. • Continuously invest in our platform to push the boundaries of science and unlock the untapped power of biology.
As our AI models get smarter, we can create new and better biologic constructs faster. • Continuously invest in our team and platform to push the boundaries of science and unlock the untapped power of biology. We intend to maintain our technological differentiation through investments in teams and technologies.
Biological validation technologies, preclinical evaluation models, and downstream protein purification technologies are all potential areas of strategic interest that could further enhance our value proposition to partners and provide us with important insights to steer our internal efforts. • Create our proprietary asset pipeline.
We intend to continue innovating and extending avenues for creating better new biologics at a faster pace. Biological validation technologies, preclinical evaluation models, and downstream protein purification technologies are all potential areas of strategic interest that could further enhance our value proposition to partners and provide us with important insights to steer our internal efforts.
All full-time employees receive an equity grant upon hire and are eligible for annual equity grants thereafter. Our employee benefits includes an employee stock purchase plan, generous healthcare benefits for employees and their families, unlimited vacation, parental leave, 401(k) matching, referral bonuses, access to mental health resources, wellness programs, and onsite services.
Our employee benefits include an employee stock purchase plan, generous healthcare benefits for employees and their families, life and disability insurance, unlimited vacation, parental leave, 401(k) matching, referral bonuses, access to mental health resources, wellness programs, and onsite services.
As of December 31, 2022, we own 61 issued or granted patents and 126 pending patent applications worldwide, which includes seven issued U.S. patents and 57 pending U.S. patent applications. We also have granted patents in the EU, Australia, Japan, Canada, China, Hong Kong, Israel, and Mexico.
As of December 31, 2023, we own 72 issued or granted patents and 70 pending patent applications worldwide, which includes eight issued U.S. patents and 15 pending U.S. patent applications. We also have granted patents in the EU, Australia, Japan, Canada, China, Hong Kong, Israel, and Mexico. This number does not include provisional applications we may have filed.
Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.
Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life. During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical study investigators.
In October 2020, we completed a reorganization whereby we were converted from a Delaware limited liability company named AbSci LLC to a Delaware corporation under the name Absci Corporation and all outstanding membership interests in AbSci LLC were exchanged for equity interests in Absci Corporation. 22 Table of Contents Our principal executive offices are located at 18105 SE Mill Plain Boulevard, Vancouver, Washington 98683.
In October 2020, we completed a reorganization whereby we were converted from a Delaware limited liability company named AbSci LLC to a Delaware corporation under the name Absci Corporation. Our principal executive offices are located at 18105 SE Mill Plain Boulevard, Vancouver, Washington 98683. Our telephone number is (360) 949-1041. Our website address is https://www.absci.com/.
Item 1. Business Our Mission Absci is a generative AI drug creation company that combines AI with scalable wet lab technologies to create better biologics for patients, faster. With the data to train, the AI to create, and the wet lab to validate, our vision is to deliver breakthrough therapeutics at the click of a button, for everyone.
Item 1. Business Our Mission Absci is a data-first generative AI drug creation company that combines AI with scalable wet lab technologies to create better biologics for patients, faster. With the data to train, the AI to create, and the wet lab to validate, our Integrated Drug Creation platform aims to engineer better biologics with design-in functionality and best-in-class properties.
In some cases we may out-license or transfer drug candidates for clinical advancement by a partner, with the expectation of a greater share in the economics relative to the milestones and royalties we may secure for our core platform technology development licenses. • Leverage our platform to address market opportunities outside of biopharmaceuticals.
In some cases we may out-license or transfer our lead drug candidates for clinical advancement by a partner, with the expectation of a greater share in the economics relative to the milestones and royalties we may secure for our drug creation partnership licenses. 12 Table of Contents • Establish new partnerships for biologics.
This combination of in silico modeling with wet lab testing allows us to generate immense real-world datasets that we harness to train and refine our deep learning models. These models guide our protein and cell line designs and enable in silico optimization of multiple attributes.
We then use our proprietary wet lab assays to validate those antibody candidates at scale. This combination of in silico modeling with wet lab testing allows us to generate immense real-world datasets that we harness to train and refine our deep learning models.
We intend to maintain our technological differentiation through investments in teams and technologies, and to continue bolstering our capabilities in areas such as bioinformatics, molecular sciences, biology and chemistry, computation, and protein engineering. We expect to grow and enhance our intellectual property portfolio to protect and secure the value of our innovations. Similar to our acquisitions of Denovium, Inc.
We expect to continue cultivating an integrated team of subject matter experts in AI and biology to bolster our capabilities in areas such as bioinformatics, molecular sciences, biology and chemistry, computation, and protein engineering. We expect to grow and enhance our intellectual property portfolio to protect and secure the value of our innovations.
AI to Create : We design new therapeutic candidates using generative AI models similar to those used for creating text and images from natural language prompts. Working from massive biology datasets, we apply generative AI to design drug candidates that are optimized based on target affinity, tolerability, manufacturability, and other traits.
AI to Create : We design new therapeutic candidates using generative AI models similar to those used for creating text and images from natural language prompts.
Data to Train : Our SoluPro technology is a multiplex synthetic biology approach designed to overcome the limitations of today's highest-throughput automation labs. It constructs billions of genetically-distinct cells, each containing instructions to make one version of a protein of interest, as well as a different assortment of folding and expression solutions.
It constructs billions of genetically-distinct cells, each containing instructions to make one version of a protein of interest, as well as a different assortment of folding and expression solutions.
Our annual employee engagement survey process utilizes a third-party survey tool, and we supplement this process with periodic pulse surveys to help us gauge ongoing progress and employee sentiment. The executive leadership team continues to identify key initiatives that tie directly back to employee feedback to further increase employee engagement.
We appraise and refine our employee programs through our company pulse surveys. Our annual employee engagement survey process utilizes a third-party survey tool, and we supplement this process with periodic pulse surveys to help us gauge ongoing progress and employee sentiment.
We anticipate that these technology development and license agreements may provide us with rights to receive payments upon the achievement of various clinical, regulatory and commercial milestones for the applicable product candidates, as well as royalties on net sales at least during the marketing exclusivity period of candidates approved for commercialization.
We anticipate that these drug creation agreements may provide us with rights to receive payments upon the achievement of various clinical, regulatory and commercial milestones for the applicable product candidates, as well as royalties on net sales at least during the marketing exclusivity period of candidates approved for commercialization. 9 Table of Contents Active Programs We define “Active Programs” as drug creation programs that are subject to ongoing technology development activities intended to determine if the program can be pursued by our partner for future clinical development, as well as any program for which our partner obtains and maintains a license to our technology to advance the program after completion of the drug creation phase.
Two of these cell line development Active Programs are preclinical and one is in Phase 3 (PhaseBio Pharmaceuticals’ drug candidate, bentracimab, assumed by SFJ Pharmaceuticals, Inc. in January 2023). Exclusive of our 16 Active Programs with partners, we have utilized our platform to perform technology development activities related to 31 additional molecules.
We also have three Active Programs focused on our legacy model of developing production cell lines for drug candidates that our partners are developing. Two of these legacy cell line development Active Programs are preclinical and one is in Phase 3 clinical development (PhaseBio Pharmaceuticals’ drug candidate, bentracimab, assumed by SFJ Pharmaceuticals, Inc. in January 2023).
We may selectively create our own biologic product candidates and advance such candidates up to the investigational drug application IND stage or later validation and cGMP manufacturing scale-up. Before testing any biologic product in humans, the product candidate must undergo rigorous preclinical testing.
We intend to selectively create our own biologic product candidates and to advance such candidates up to value inflection points, anywhere from preclinical validation to early clinical proof of concept in human clinical trials with requisite cGMP manufacturing scale-up. Preclinical and Clinical Development Before testing any biologic product in humans, the product candidate must undergo rigorous preclinical testing.
Our Employee Safety Committee is comprised of cross-departmental members and meets regularly to review workplace safety and adherence to safety policies. We require annual workplace safety training to reinforce workplace safety procedures that may be useful in the event of emergency situations and to assist our employees in helping to prevent workplace accidents.
We require annual workplace safety training to reinforce workplace safety procedures that may be useful in the event of emergency situations and to assist our employees in helping to prevent workplace accidents. We have numerous employees with current first aid, CPR, and AED certifications for emergency preparedness.
We intend to use our Integrated Drug Creation platform to empower innovation by identifying new targets, creating new modalities, driving efficiencies, broadening pipelines, and shortening preclinical timelines. Our strategy to accomplish this is as follows: • Enable the discovery and development of biologics and new modalities through our proprietary platform.
Our Integrated Drug Creation platform is poised as a growing innovation engine in creating de novo candidates, using reverse immunology to identify novel epitopes, driving efficiencies, broadening pipelines, and shortening preclinical timelines. We aim to stay at the forefront of drug creation by: • Enable the discovery and development of biologics and new modalities through our proprietary platform.
They can take us from AI-designed antibodies to wet lab-validated candidates in as little as six weeks. The quality and scale of wet lab data give us extensive training data, propelling our iterative design-build-test-learn cycle.
They can take us from AI-designed antibodies to wet lab-validated candidates in as little as six weeks.
Our AI Engine learns with each new program we undertake. We are enhancing the predictive power of our AI Engine by training its deep learning models with our unique multi-dimensional data sets.
Our AI models learn and improve with each new program. We are enhancing the predictive power of our AI models by training our deep learning models with our own unique multi-dimensional data sets. With enough data and iterations, we aim to achieve in silico creation of novel drug candidates with desired pharmacologic attributes.
To establish an oversight structure, in 2022, we amended the charter of the Nominating and Corporate Governance Committee of the Board (the “Committee”) to stipulate that the Committee would oversee and coordinate with the Board and its other committees the periodic review of corporate responsibility and ESG matters pertaining to the Company, which may include the evaluation of industry practices, investor views, reputational impact, legal standards, and overall risks and benefits of ESG initiatives, as well as public reporting on these matters.
The Nominating and Corporate Governance Committee of the Board (the “Committee”) oversees and coordinates with the Board and its other committees the periodic review of corporate responsibility and ESG matters pertaining to the Company, which may include the evaluation of industry practices, investor views, reputational impact, legal standards, and overall risks and benefits of ESG initiatives, as well as public reporting on these matters. 16 Table of Contents Government Regulation Regulations Related to the Discovery, Development, Approval and Commercialization of Biotherapeutics Our focus is on the use of our platform to enable us and our partners to improve the speed and success of biologic product discovery and development efforts.
The principal purposes of our equity incentive plans are to attract, retain, and motivate 16 Table of Contents selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards while aligning the interests of our employees with our stockholders.
The principal purposes of our equity plans are to attract, retain, and motivate employees, consultants and directors through the granting of stock-based compensation awards that align the interests of our employees with our stockholders. All full-time employees receive an equity grant upon hire and are eligible for annual equity grants thereafter.
(AI Engine) and Totient, Inc. (Target platform), we believe we will continue to evaluate strategic technology acquisitions that would be additive to expand and strengthen the capabilities of our platform and deepen our expertise in biologic drug discovery and cell line development.
We may continue to evaluate strategic technology acquisitions that would be additive to expand and strengthen the capabilities of our platform and deepen our expertise in biologic drug discovery. Our Growth Strategy Our goal is to establish our proprietary, end-to-end platform as the industry standard for biologic drug creation. Our growth strategy is to: • Develop our proprietary asset pipeline.
Our Integrated Drug Creation platform 8 Table of Contents combines the data to train, the AI to create, and the wet lab to validate millions of AI-generated designs a week. It can take us from AI-designed antibodies to wet lab-validated candidates in as little as six weeks.
With the data to learn, the AI to create, and the wet lab to validate, Absci can create billions of antibody designs and screen millions of ranked antibody sequences in weeks, allowing us to go from AI-designed antibodies to wet lab-validated candidates in as little as six weeks.
All employees are eligible for an annual monetary stipend for continuing education and career development training. Additionally, we have a paid internship program that offers university or graduate students real-world experience and the chance to work with our extraordinary people, while helping Absci identify and develop the next generation of Unlimiters.
Additionally, we have a paid internship program that offers university or graduate students real-world experience and the chance to work with our extraordinary people, while helping Absci identify and develop the next generation of Unlimiters. 14 Table of Contents Ethics and compliance : We have adopted and regularly review the Code of Business Conduct and Ethics (the Code) to aid our directors, officers and employees in making ethical and legal decisions when conducting business and performing day-to-day duties.
We intend to grow existing partnerships across all of our drug creation applications, which include novel target identification, lead optimization, de novo discovery, Bionic protein creation (nsAA incorporation), human antibody discovery, and the enablement of novel scaffold designs that could spawn new modalities.
We intend to grow existing partnerships across all of our drug creation applications, which include novel target identification, lead optimization, de novo discovery, and human antibody discovery. We look to expand the scope of partnerships to address additional classes of molecules, thereby presenting additional milestone and royalty opportunities. • Grow our platform through R&D and strategic acquisitions.
Insights we achieve through the integration of deep learning will ultimately help identify new drug candidates with the best chances for clinical success.
Insights we achieve through the integration of deep learning will help identify new drug candidates with the best chances for clinical success and ultimately increase net present values (NPVs) of programs. • Expand intellectual property space : AI drug creation generates broader IP for first-in-class drugs and finds new IP for fast-follower or best-in-class strategies.
Diversity, equity, inclusion and belonging (DEIB) : Our vision is to deliver breakthrough therapeutics at the click of a button — for everyone. That vision isn’t possible unless we live in a diverse and equitable world, where everyone benefits from the potentially life-changing technology we’re creating.
Achieving that vision isn’t possible unless we have a diverse and talented team and unless we live in a diverse and equitable world, where everyone can benefit from the potentially life-changing therapeutics we’re creating. We are committed to building a team with a variety of backgrounds, skills and views.
In addition to the direct utility of these antibodies and targets as drug discovery assets, these data comprising antibody-epitope recognition elements expand our AI models’ training sets and may improve predictive capabilities for future discovery campaigns. 5 Table of Contents Through iterative AI predictions, wet lab validation, and AI training we enable a virtuous cycle that we believe will accelerate us toward fully in silico biologic drug discovery.
Through iterative AI predictions, wet lab validation, and AI training we enable a virtuous cycle that we believe will accelerate us toward fully in silico biologic drug discovery.
Our near-term vision is to enable the discovery of novel, targeted biologic drug candidates for our partners and for our internal drug discovery pipeline. Strategy We believe we represent a new breed of biotechnology company, integrating powerful artificial intelligence with new synthetic biology technologies to create biologics.
These programs include both internal research programs and drug creation programs with third parties. * 11 Table of Contents Strategy We believe we represent a new breed of biotechnology company, integrating powerful artificial intelligence with new synthetic biology technologies to create biologics to improve human health.
Our core values set the tone for how we work together: • Believe in the impossible • Proceed with passion and grit • Foster collaboration and communication • Expect integrity and excellence • Enjoy the adventure Building these values into our culture enables our people to translate ideas into impact as we strive to create a better, faster path to new medicines.
Our values guide both our daily decision-making and our long-term cultural development, setting the tone for how we work together: • We believe in the impossible • We are one team with one finish line • We deliver results • We innovate because lives depend on it • We embrace our differences • We do the right thing Building these values into our culture enables our people to translate ideas into impact as we strive to create a better, faster path to new medicines.
With enough data and iterations, we aim to achieve in silico creation of novel drug candidates with desired pharmacologic attributes, in bespoke scaffolds, along with high titer production cell lines. With our target technology we are expanding the content of our training datasets to develop models that understand immune protein interactions and determinants of antibody-antigen specificity.
With our reverse immunology technology for target identification, we are expanding the content of our training datasets to develop models that understand immune protein interactions and determinants of antibody-antigen specificity. Our AI models are the link that correlates business scale with speed and precision. The more programs we have, the more data we generate, the more our AI models learn.
The Discovery applications that we expect to address with our Integrated Drug Creation platform are the following: • Novel target identification - From tissue samples that are of particular therapeutic interest, we identify prevalent immune-response molecules such as antibodies along with the corresponding antigens, offering new therapeutic targets as well as cognate binding partners for further validation.
The quality and scale of wet lab data give us extensive training data, propelling our iterative design-build-test-learn cycle. 7 Table of Contents Our Integrated Drug Creation platform enables our core competencies in three broad areas: • Target discovery with novel approaches : We reconstruct prevalent immune-response molecules such as antibodies from disease tissue and identify their corresponding antigens, offering new therapeutic targets, as well as the cognate binding partners, for further potential validation and optimization. • AI-guided antibody drug creation: We design de novo antibodies.
As of December 31, 2022, we had drug candidates in 16 Active Programs across five current partners’ preclinical or clinical pipelines. We have negotiated license agreements, or expect to negotiate license agreements upon completion of certain technology development activities, with potential downstream milestone payments and royalties for all active programs.
We have negotiated license agreements, or expected to negotiate license agreements upon completion of certain drug creation activities, with potential downstream milestone payments and royalties for all Active Programs. We have not negotiated terms for a sufficient number of royalty- and milestone-bearing licenses, however, to enable us to make accurate predictions regarding our potential revenue and financial performance.
For the technology development phase, partners may (i) provide a target for discovery of a new biologic and/or Bionic protein or novel scaffold, (ii) supply a specified lead drug candidate sequence for cell line development, or (iii) request a scope that falls somewhere in between (i) and (ii) with optimization of a lead candidate or set of candidates as the primary goal.
For the drug creation phase, partners may request a scope that includes, but is not limited to, a specified disease area, a target for creation of a new biologic, or supply a specified lead candidate for AI-driven optimization.
We provide employees with competitive pay, a wide range of benefits, and an equity incentive program.
We provide employees with competitive cash compensation, an all employee equity program, and a wide range of benefits. Our short-term incentive or cash bonus program is designed to recognize and reward achievement of company goals and individual performance as measured by impact and demonstration of our corporate values.
Ethics and compliance : We have adopted and regularly review the Code of Business Conduct and Ethics to aid our directors, officers and employees in making ethical and legal decisions when conducting business and performing day-to-day duties. All directors, officers and employees are required to review and sign an acknowledgment regarding the Code of Business Conduct and Ethics.
All directors, officers and employees are required to review and sign an acknowledgment regarding the Code and to agree on an annual basis to comply with the Code.
In addition to creating innovative change in the world, we are also working for change much closer to home. We are committed to building a team with a variety of backgrounds, skills and views. We encourage grassroots efforts by employees such as the formation of affinity groups like our Women’s Alliance Group and Rainbow Group.
We encourage grassroots efforts by employees such as the formation of affinity groups like our Women’s Alliance Group and Rainbow Group. We continue to evolve and advance our DEIB efforts. We believe that inclusiveness helps drive innovation and increases our understanding of the diverse group of patients we seek to benefit.
These programs were both internal research programs and technology development programs with third parties intended to demonstrate our platform’s capabilities as we address successively broader ranges of biologics and modalities.
Platform Capabilities Our Active Programs, internal asset programs, and historical programs demonstrate our platform’s capabilities to successively address broad ranges of biologics and modalities. Exclusive of our Active Programs with partners and internal pipeline, we have utilized our platform to perform drug creation activities related to 32 additional molecules.
We believe this will increase the value of our assets and serve as further validation of our platform as we continue to simultaneously establish partnerships with stakeholders in the drug and technology development life cycle. We may enter into clinical trials and/or manufacturing partnerships to advance a lead candidate.
Accordingly, we may enter into clinical trials and/or manufacturing partnerships to advance specific therapeutic assets to target such value inflection points. We believe that by developing our own pipeline, we will create optionality for enhanced monetization and validation of our platform.
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We recognize the extraordinary medical and economic potential of protein-based therapeutics (biologics) and the significant challenges the biopharmaceutical industry faces to discover novel biologics. We look at the end game – getting life-changing medicines to patients, faster — and ask: how? Our technology is built to be that how.
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Antibody-based therapeutics represent an extraordinary medical and economic opportunity, yet the biopharmaceutical industry faces significant challenges in bringing these life-changing medicines to patients. Our Integrated Drug Creation platform is designed to improve upon traditional biologic drug discovery by using AI to simultaneously optimize multiple drug characteristics that may be important to development and therapeutic benefit.
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Our Integrated Drug Creation platform replaces the fragmentation and inefficiencies of traditional biologic drug discovery by simultaneously optimizing multiple drug characteristics important to preclinical and clinical development, as well as therapeutic benefit. In turn, this has the potential to significantly shorten time to clinic and increase the probability of success.
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This has the potential to significantly shorten time to clinic and increase the probability of success. Our approach expands the possibilities in biopharmaceuticals — shifting from a paradigm of drug discovery to drug creation — with the goal of bringing best-in-class and first-in-class antibody therapeutics to the patients who need them.
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We leverage our platform to expand biological possibilities — shifting from a paradigm of drug discovery to drug creation — with the goal of advancing better biologics into clinical trials on shortened timelines and, if approved, ultimately into the marketplace to impact people’s lives.
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The AI Drug Creation Opportunity Biologic drug discovery is ripe for disruption. Studies of drug discovery and development estimate that it takes an average of 5.5 years to go from discovery to initiation of human clinical trials. Success rates for traditional drug discovery campaigns reaching a marketed product are estimated at less than 5%.
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Overview We are a generative AI drug creation company harnessing deep learning and synthetic biology to expand the therapeutic potential of proteins. We leverage our Integrated Drug Creation platform to identify novel drug targets and create biotherapeutic candidates that are optimized.
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Moreover, it generally takes 12–15 years and more than $1 billion to bring a drug to market. 5 Table of Contents Progress in machine learning and artificial intelligence has been building for decades, with increasing application in drug discovery. In May 2023, the U.S.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changePotential competitors addressing certain steps in the target identification, biologic drug discovery and cell line development processes or adjacent aspects of these broad processes include the following: • in the field of novel target identification, we may face competition from academic, pharmaceutical, and biotechnology research initiatives, as well as companies focused on novel methods for target identification, including Insitro, Inc., TScan Therapeutics, Inc. and 3T Biosciences, Inc.; 36 Table of Contents • in the field of AI-guided drug design and discovery, we may face competition from companies designing novel proteins such as Generate Biomedicines, Inc., as well as adjacent technology companies pursuing small molecule design such as Schrodinger, Inc., Recursion Pharmaceuticals, Inc., Relay Therapeutics, Inc. and Exscientia Limited; • in the field of scaffold design and drug platform development, we may face competition from pharmaceutical and biotechnology companies developing novel biologic modalities including Amgen Inc., Crescendo Bioscience, Inc. and Harpoon Therapeutics, Inc., among others; • in the field of novel human/humanized antibody discovery, we may face competition from companies such as AbCellera Biologics Inc. and Adimab LLC; • in the field of non-standard amino acid protein engineering, we may face competition from companies such as Ambrx Inc. and Sutro Biopharma, Inc.
Biggest changePotential competitors addressing certain steps in the target identification, biologic drug discovery, or adjacent aspects of these broad processes include the following: • in the field of AI-guided drug design and discovery, we may face competition from companies attempting to use AI to design novel biologic drugs such as Generate Biomedicines, Inc., and Exscientia Limited, among others.
We expect our current cash and cash equivalents and short term investments and anticipated cash flows from operations, will be sufficient to meet our working capital and capital expenditure needs over at least the next 12 months.
We expect our current cash, cash equivalents and short term investments and anticipated cash flows from operations will be sufficient to meet our working capital and capital expenditure needs over at least the next 12 months.
In addition, we do not control the timing of disclosure by our partners of any milestones or other information related to any drug candidates generated using our platform.
In addition, we do not control the timing of disclosure by our partners of any milestones or other information related to drug candidates generated using our platform.
Risks Related to Our Intellectual Property If we are unable to obtain and maintain sufficient intellectual property protection for our technologies, including our cell line and expression technologies, generative deep learning technology, proprietary assays and techniques, and antibody and target discovery technology, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technologies similar or identical to ours, and our ability to successfully leverage our technologies may be impaired.
Risks Related to Our Intellectual Property If we are unable to obtain and maintain sufficient intellectual property protection for our technologies, including for our cell line and expression technologies, generative deep learning technology, proprietary assays and techniques, and antibody and target discovery technology, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technologies similar or identical to ours, and our ability to successfully leverage our technologies may be impaired.
In addition, the stock market in general, and the Nasdaq Global Select Market and technology and life sciences companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.
In addition, the stock market in general, and the Nasdaq Global Select Market and technology and life sciences companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated and/or disproportionate to the operating performance of these companies.
Food and Drug Administration (FDA) or any other regulatory body for drugs that are developed based on molecules discovered and/or manufactured using our Integrated Drug Creation platform technologies; • our partners’ and the biopharmaceutical industry’s continued interest and investment in biologic drug development, and the continued market growth and clinical and regulatory success of this category collectively; • the impact of our investments in innovation and commercial growth; • negative publicity regarding our or our competitors’ technologies resulting from defects or errors; • our ability to further validate and enhance our platform through research and technology development activities; • our ability to leverage our platform technologies to create product candidates for internal development and advancement into clinical trials.
Food and Drug Administration (FDA) or any other regulatory body for drugs that are developed based on molecules discovered and/or manufactured using our Integrated Drug Creation platform technologies; • our partners’ and the biopharmaceutical industry’s continued interest and investment in biologic drug development, and the continued market growth and clinical and regulatory success of this category collectively; • the impact of our investments in innovation and commercial growth; • negative publicity regarding our or our competitors’ technologies resulting from defects or errors; • our ability to further validate and enhance our platform through research and development activities; • our ability to leverage our platform technologies to create product candidates for internal development and advancement into clinical trials.
In particular, in 2010, the Patient Protection and Affordable Care Act, as amended by the ACA, 38 Table of Contents was enacted, which, among other things, subjected biologic products to potential competition by lower-cost biosimilars; addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations; subjected manufacturers to new annual fees and taxes for certain branded prescription drugs; created a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (increased to 70% pursuant to the Bipartisan Budget Act of 2018, effective as of January 1, 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; and provided incentives to programs that increase the federal government’s comparative effectiveness research.
In particular, in 2010, the Patient Protection and Affordable Care Act, as amended by the ACA, was enacted, which, among other things, subjected biologic products to potential competition by lower-cost biosimilars; addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled 44 Table of Contents in Medicaid managed care organizations; subjected manufacturers to new annual fees and taxes for certain branded prescription drugs; created a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (increased to 70% pursuant to the Bipartisan Budget Act of 2018, effective as of January 1, 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; and provided incentives to programs that increase the federal government’s comparative effectiveness research.
The development of any drug candidate we pursue may also ultimately prove to be unsuccessful or less successful than another potential drug candidate that we might have chosen to pursue on a more aggressive basis or at all. The failure of our partners to meet their contractual obligations to us could adversely affect our business.
The development of any drug candidate we pursue may also ultimately prove to be unsuccessful or less successful than another potential drug candidate that we might have chosen to pursue on a more aggressive basis or at all. The failure of our drug creation partners to meet their contractual obligations to us could adversely affect our business.
We have devoted substantially all of our resources to the development of our Integrated Drug Creation platform and commercialization of resulting technology development capabilities. We will need to generate significant additional revenue to achieve and sustain profitability, and even if we achieve profitability, we cannot be sure that we will remain profitable for any substantial period of time.
We have devoted substantially all of our resources to the development of our Integrated Drug Creation platform and commercialization of resulting drug creation capabilities. We will need to generate significant additional revenue to achieve and sustain profitability, and even if we achieve profitability, we cannot be sure that we will remain profitable for any substantial period of time.
The market price of our common stock is volatile and subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including: • actual or anticipated fluctuations in our financial condition and operating results, including fluctuations in our quarterly and annual results; • the termination of partnership agreements by our partners or announcements that our partners will cease developing a product originating from our platform; • the introduction of new technologies or enhancements to existing technology by us or others in our industry; • our inability to establish additional partnerships or expand the scope of existing partnerships; • departures of key personnel; • announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; • our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public; • changes in the regulatory landscape that subject us to additional regulatory and legal requirements; • publication of research reports about us, our industry or our competitors, or biologic drug discovery or cell line development in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts; • release of unfavorable publicity about us, our partners, our competitors, or the biopharmaceutical industry, including through press coverage or social media; • changes in the market valuations of similar companies; • overall performance of the equity markets; • sales of our common stock by us or our stockholders in the future; • trading volume of our common stock; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; • significant lawsuits, including patent or stockholder litigation; • the impact of public health crises, including the COVID-19 pandemic, on our business; • general political and economic conditions; and • other events or factors, many of which are beyond our control.
The market price of our common stock is volatile and subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including: • actual or anticipated fluctuations in our financial condition and operating results, including fluctuations in our quarterly and annual results; • the termination of partnership agreements by our partners or announcements that our partners will cease developing a product originating from our platform; • the introduction of new technologies or enhancements to existing technology by us or others in our industry; • our inability to establish additional partnerships or expand the scope of existing partnerships; • the recruitment or departures of key personnel; • announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; • our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public; • changes in the regulatory landscape that subject us to additional regulatory and legal requirements; • publication of research reports about us, our industry or our competitors, or biologic drug discovery in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts; • release of unfavorable publicity about us, our partners, our competitors, or the biopharmaceutical industry, including through press coverage or social media; • changes in the market valuations of similar companies; • overall performance of the equity markets; • sales of our common stock by us or our stockholders in the future; • trading volume of our common stock; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; • significant lawsuits, including patent or stockholder litigation; • the impact of public health crises, including the COVID-19 pandemic, on our business; • general political and economic conditions; and • other events or factors, many of which are beyond our control.
Our partners may also determine their research and development budgets based on other factors, including conservation of cash resources, changes in business priorities, the need to develop new products, technological expertise, continued availability of governmental and other funding, competition, and intellectual property landscape.
Our partners and future partners may also determine their research and development budgets based on other factors, including conservation of cash resources, changes in business priorities, the need to develop new products, technological expertise, continued availability of governmental and other funding, competition, and intellectual property landscape.
Our partners may experience numerous unforeseen events during, or as a result of, preclinical studies or clinical trials that could delay or prevent their ability to conduct further development or obtain regulatory approval or licensure of, or commercialize, biologic drug candidates generated through our partnerships, including: • preclinical studies designed to enable the submission of IND applications, or other preclinical development activities, by our partners may not result in data sufficient to support the advancement of the applicable product candidates into clinical development, or our partners may abandon development activities for such product candidates prior to any IND submission for a variety of reasons; • regulatory authorities or ethical review boards, including IRBs, may not authorize commencement of a clinical trial or conduct a clinical trial at a prospective trial site; • there may be delays in reaching or failure to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites; • the FDA or other regulatory authorities may disagree with a clinical trial design or a sponsor’s interpretation of data even after such regulatory authorities have reviewed and commented on the clinical trial design; • differences in trial design between early stage clinical trials and later-stage clinical trials may make it difficult to extrapolate the results of earlier clinical trials to later-stage clinical trials; • the FDA or other regulatory authorities may disagree about whether study endpoints are clinically meaningful or recommend study endpoints that require lengthy periods of observation; • the number of patients, or amount of data, required to complete clinical trials may be larger than anticipated, patient enrollment in these clinical trials may be slower than anticipated or patients may drop out of clinical trials at a higher rate than anticipated; • contract research organizations and other contracted third parties may fail to perform their duties in accordance with the study protocol or applicable laws and regulations; 35 Table of Contents • changes may be made to product candidates after commencing clinical trials, which may require that previously completed stages of clinical testing be repeated or delay later stages of testing; • clinical trials may fail to satisfy the applicable regulatory requirements of the FDA or other regulatory authorities responsible for oversight of the conduct of clinical trials in other countries; • regulators may elect to impose a clinical hold, or our partners, governing IRBs, data safety monitoring boards or ethics committees may elect to suspend or terminate our partners’ clinical research or trials for various reasons, including non-compliance with regulatory requirements or a finding that the participants are being exposed to unacceptable risks to their health or the privacy of their health information being disclosed; • the cost of clinical trials of the applicable product candidates, or improvements to such product candidates, may be greater than our partners anticipate, causing them to delay or terminate their clinical development efforts; • the supply or quality of materials necessary to conduct clinical trials of the applicable product candidates may be insufficient or inadequate; • the outcome of our partners’ preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results; • product candidates may be associated with negative or inconclusive results in clinical trials, and our partners may decide to deprioritize or abandon these product candidates, or regulatory authorities may require our partners to abandon them or may impose onerous changes or requirements, which could lead to de-prioritization or abandonment; • product candidates may have undesirable side effects which could lead to serious adverse events, or other unexpected characteristics.
We or our partners may experience numerous unforeseen events during, or as a result of, preclinical studies or any clinical trials that could delay or prevent the ability to conduct further development or obtain regulatory approval or licensure of, or commercialize, biologic drug candidates generated through our platform, including: • preclinical studies designed to enable the submission of IND applications, or other preclinical development activities, by our partners may not result in data sufficient to support the advancement of the applicable product candidates into clinical development, or our partners may abandon development activities for such product candidates prior to any IND submission for a variety of reasons; • regulatory authorities or ethical review boards, including IRBs, may not authorize commencement of a clinical trial or conduct a clinical trial at a prospective trial site; • there may be delays in reaching or failure to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites; • the FDA or other regulatory authorities may disagree with a clinical trial design or a sponsor’s interpretation of data even after such regulatory authorities have reviewed and commented on the clinical trial design; • differences in trial design between early stage clinical trials and later-stage clinical trials may make it difficult to extrapolate the results of earlier clinical trials to later-stage clinical trials; • the FDA or other regulatory authorities may disagree about whether study endpoints are clinically meaningful or recommend study endpoints that require lengthy periods of observation; • the number of patients, or amount of data, required to complete clinical trials may be larger than anticipated, patient enrollment in these clinical trials may be slower than anticipated or patients may drop out of clinical trials at a higher rate than anticipated; • contract research organizations and other contracted third parties may fail to perform their duties in accordance with the study protocol or applicable laws and regulations; • changes may be made to product candidates after commencing clinical trials, which may require that previously completed stages of clinical testing be repeated or delay later stages of testing; • clinical trials may fail to satisfy the applicable regulatory requirements of the FDA or other regulatory authorities responsible for oversight of the conduct of clinical trials in other countries; • regulators may elect to impose a clinical hold, or our partners, governing IRBs, data safety monitoring boards or ethics committees may elect to suspend or terminate our partners’ clinical research or trials for various reasons, including non-compliance with regulatory requirements or a finding that the participants are being exposed to unacceptable risks to their health or the privacy of their health information being disclosed; • the cost of clinical trials of the applicable product candidates, or improvements to such product candidates, may be greater than our partners anticipate, causing them to delay or terminate their clinical development efforts; • the supply or quality of materials necessary to conduct clinical trials of the applicable product candidates may be insufficient or inadequate; • the outcome of our partners’ preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results; • product candidates may be associated with negative or inconclusive results in clinical trials, and our partners may decide to deprioritize or abandon these partnered product candidates, or regulatory authorities may require our partners to abandon them or may impose onerous changes or requirements, which could lead to de-prioritization or abandonment; 41 Table of Contents • product candidates may have undesirable side effects which could lead to serious adverse events, or other unexpected characteristics.
For example, our workforce reductions could lead to unanticipated consequences, such as turnover beyond planned reductions, increased difficulties in our day-to-day operations or claims of unlawful discharge. Our workforce reductions may also harm our ability to attract and retain qualified personnel who are critical to our business.
For example, our workforce reduction could lead to unanticipated consequences, such as turnover beyond planned reductions, increased difficulties in our day-to-day operations or claims of unlawful discharge. Our workforce reduction may also harm our ability to attract and retain qualified personnel who are critical to our business.
Among others, these provisions include that: • our board of directors has the right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • our stockholders may not act by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • a special meeting of stockholders may be called only by the chair of the board of directors, the chief executive officer, or a majority of the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • our board of directors may alter our bylaws without obtaining stockholder approval; • the required approval of the holders of at least 75% of the voting power of all of the then outstanding shares of voting stock to adopt, amend or repeal our bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; • stockholders must include management’s nominees on its proxy card in contested director elections, which may decrease the likelihood that a potential acquiror can replace a majority of the Board; and 61 Table of Contents • our board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror.
Among others, these provisions include that: • our board of directors has the right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • our stockholders may not act by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • a special meeting of stockholders may be called only by the chairperson of the board of directors, the chief executive officer, or a majority of the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • our board of directors may alter our bylaws without obtaining stockholder approval; • the required approval of the holders of at least 75% of the voting power of all of the then outstanding shares of voting stock to adopt, amend or repeal our bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; • stockholders must include management’s nominees on its proxy card in contested director elections, which may decrease the likelihood that a potential acquiror can replace a majority of the Board; and • our board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror.
Although we were able to remediate this material weakness, there is no guarantee that we will not experience additional material weaknesses in the future or that we will be able to remediate any such material weakness in a timely manner or at all.
Although we were able to remediate this past material weakness, there is no guarantee that we will not experience additional material weaknesses in the future or that we will be able to remediate any such material weakness in a timely manner or at all.
Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with the SEC, before making investment decisions regarding our common stock. • Our current business has a limited operating history, which may make it difficult to evaluate our business and predict our future performance; • We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability; • We will need to raise additional capital to fund our operations and improve our platform.
Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Annual Report on 26 Table of Contents Form 10-K and our other filings with the SEC, before making investment decisions regarding our common stock. • Our current business has a limited operating history, which may make it difficult to evaluate our business and predict our future performance; • We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability; • We will need to raise additional capital to fund our operations and improve our platform.
Our efforts to develop an internal asset may also limit the resources available for other programs and may be less successful than if we allocated those resources to a partnered program.
Our efforts to develop internal asset programs may also limit the resources available for other programs and may be less successful than if we allocated those resources to a partnered program.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the closing of our IPO, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer, which requires the market value of our common stock that are held by non-affiliates to exceed $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the closing of our IPO, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a large accelerated 73 Table of Contents filer, which requires the market value of our common stock that are held by non-affiliates to exceed $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
Even if we do succeed, it is possible that none of the drug candidates discovered using our platform, if any, that are further developed by our partners will achieve development or regulatory milestones, including marketing approval, or become viable commercial technologies, on a timely basis or at all, which would harm our ability to generate revenue.
Even if we do succeed, it is possible that none of the drug candidates created using our platform, if any, that are further developed by our partners will achieve development or regulatory milestones, including marketing approval, or become viable commercial technologies, on a timely basis or at all, which would harm our ability to generate revenue.
Patent terms may be inadequate to protect our competitive position on our technology for an adequate amount of time. Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date.
Patent terms may be inadequate to protect our competitive position with our technology for an adequate amount of time. Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date.
An event of default will occur if, among other things, we fail to make required payments under the MFA; we breach any of our covenants under the MFA, subject to specified cure periods with respect to certain breaches; the lender determines that a material adverse change (as defined in the MFA) has occurred; we or our assets become subject to certain legal proceedings, such as bankruptcy proceedings; we are unable to pay our debts as they become due; or we default on contracts with third parties which would permit the third party to accelerate the maturity of such indebtedness or that could have a material adverse change on us.
An event of default will occur if, among other things, we fail to make required payments under the MFA; we breach any of our covenants under the MFA, subject to specified cure periods with respect to certain breaches; the lender determines that a material adverse change (as defined in the MFA) has occurred; we or our assets become subject to certain legal proceedings, such as bankruptcy proceedings; we are unable to pay our debts as they become due; or we default on contracts with third parties which would 48 Table of Contents permit the third party to accelerate the maturity of such indebtedness or that could have a material adverse change on us.
Our existing and future partners may have limited resources to initiate new programs, which could limit their adoption or scale of application of our technologies.
Our existing and potential future partners may have limited resources to initiate new programs, which could limit their adoption or scale of application of our technologies.
Since our inception, we have financed our operations primarily from private placements of our preferred equity securities, convertible promissory notes, the sale of common stock in our initial public offering (IPO), the incurrence of other indebtedness and other financing activities, and to a lesser extent, revenue derived from our technology development activities leveraging our Integrated Drug Creation platform.
Since our inception, we have financed our operations primarily from private placements of our preferred equity securities, convertible promissory notes, the sale of common stock in our initial public offering (IPO), the incurrence of other indebtedness and other financing activities, and to a lesser extent, revenue derived from our drug creation activities leveraging our Integrated Drug Creation platform.
Technology development fees are generated by technology development activities that we perform for our partners, the timing and nature of which are dictated by the timing of program commencement, which depends on various permissions, information and supplies provided by our partners and/or third party vendors as well as the pace of program progression and receipt of ongoing input from our partners.
Technology development fees are generated by drug creation activities that we perform for our partners, the timing and nature of which are dictated by the timing of program commencement, which depends on various permissions, information and supplies provided by our partners and/or third party vendors as well as the pace of program progression and receipt of ongoing input from our partners.
To the extent we fail to timely introduce new and innovative technologies, adequately predict our partners’ needs or fail to obtain desired levels of market acceptance, our business may suffer and our results of operations could be adversely affected. We may not be successful in our efforts to identify or discover internally-generated drug candidates.
To the extent we fail to timely introduce new and innovative technologies, adequately predict our partners’ needs or fail to obtain desired levels of market acceptance, our business may suffer and our results of operations could be adversely affected. We may not be successful in our efforts to identify or create internally-generated drug candidates.
We are still in the very early stages of implementing our business model and, to date, no partner has entered into a license for clinical or commercial use of any intellectual property rights related to biologic drug candidates or cell lines generated utilizing our platform.
We are still in the very early stages of implementing our drug creation model and, to date, no partner has entered into a license for clinical or commercial use of any intellectual property rights related to biologic drug candidates or cell lines generated utilizing our platform.
Similarly, a key element of our business plan is to continue to expand our Integrated Drug Creation platform through an increase in partnered programs. Our business prospects and business development efforts could be limited if we are unable to validate aspects of our platform to discover drug candidates for our own internal development.
Similarly, a key element of our business plan is to continue to expand our Integrated Drug Creation platform through an increase in partnered programs. Our business prospects and business development efforts could be limited if we are unable to validate aspects of our platform to create drug candidates for our own internal development.
As a result, we currently do not generate significant recurring revenue and, until we are able to 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 advancing subject 27 Table of Contents programs, and our partners achieving development milestones or commercial sales with respect to drug candidates discovered and/or manufactured in cell lines developed by us.
As a result, we currently do not generate significant recurring revenue and, until we are able to establish significant recurring revenue, if at all, we will be prone to regular and significant fluctuations in our revenue dependent on the timing of our entry into partnership agreements, our partners advancing subject programs, and our partners achieving development milestones or commercial sales with respect to drug candidates discovered and/or manufactured in cell lines developed by us.
Any of the foregoing could harm our business, financial condition, results of operations and prospects. 54 Table of Contents We may not be able to protect and enforce our trademarks and trade names, or build name recognition in our markets of interest thereby harming our competitive position.
Any of the foregoing could harm our business, financial condition, results of operations and prospects. 60 Table of Contents We may not be able to protect and enforce our trademarks and trade names, or build name recognition in our markets of interest thereby harming our competitive position.
Operating as a public company makes it more difficult and more expensive for us to maintain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
Operating as a public company makes it more difficult and more expensive for us to maintain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage than as a private company.
In addition, absent the rights granted to us under such license agreements, we may infringe the intellectual property rights that are the subject of those agreements, we may be subject to litigation by the licensor, and if such litigation by the licensor is successful we may be required to pay damages to our licensor, or we may be required to cease our technology development and commercialization activities which are deemed infringing, and in such event we may ultimately need to modify our activities or technologies to design around such infringement, which may be time- and resource-consuming, and which may not be ultimately successful.
In addition, absent the rights granted to us under such license agreements, we may infringe the intellectual property rights that are the subject of those agreements, we may be subject to litigation by the licensor, and if such litigation by the licensor is successful we may be required to pay damages to our licensor, or we may be required to cease our technology development and commercialization activities which are deemed infringing, and in such event we may ultimately need to modify our activities or 56 Table of Contents technologies to design around such infringement, which may be time- and resource-consuming, and which may not be ultimately successful.
Any violations of these laws, or 45 Table of Contents allegations of such violations, could disrupt our operations, involve significant management distraction, involve significant costs and expenses, including legal fees, and could result in a material adverse effect on our business, financial condition, results of operations and prospects.
Any violations of these laws, or allegations of such violations, could disrupt our operations, involve significant management distraction, involve significant costs and expenses, including legal fees, and could result in a material adverse effect on 51 Table of Contents our business, financial condition, results of operations and prospects.
There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the life sciences, clinical diagnostics and drug discovery industries, including patent infringement lawsuits, declaratory judgment litigation and adversarial proceedings before the USPTO, including interferences, derivation proceedings, ex parte reexaminations, post-grant review and inter partes review, as well as corresponding proceedings in foreign courts and foreign patent offices.
There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the life sciences, clinical diagnostics and drug discovery industries, 61 Table of Contents including patent infringement lawsuits, declaratory judgment litigation and adversarial proceedings before the USPTO, including interferences, derivation proceedings, ex parte reexaminations, post-grant review and inter partes review, as well as corresponding proceedings in foreign courts and foreign patent offices.
Although we are not a borrower or party to any such instruments with SVB or any other financial institution currently in receivership, if any of our customers, suppliers or other parties with whom we conduct business are unable to access funds pursuant to such instruments or lending arrangements with such a financial institution, such parties’ ability to pay their 63 Table of Contents obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected.
Although we are not a borrower or party to any such instruments with SVB or any other financial institution currently in receivership, if any of our customers, suppliers or other parties with whom we conduct business are unable to access funds pursuant to such instruments or lending arrangements with such a financial institution, such parties’ ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected.
On or after March 16, 2013, under the Leahy-Smith America Invents Act (America Invents Act) enacted in September 16, 2011, the United States transitioned to a first inventor to file system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a 48 Table of Contents third party was the first to invent the claimed invention.
On or after March 16, 2013, under the Leahy-Smith America Invents Act (America Invents Act) enacted on September 16, 2011, the United States transitioned to a first inventor to file system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention.
In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future products. We may not be aware of all third party intellectual property rights potentially relating to our platform or technology.
In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future products. 55 Table of Contents We may not be aware of all third party intellectual property rights potentially relating to our platform or technology.
We depend on information technology and telecommunications systems for significant elements of our business operations, including the operation of our AI Engine, our antibody discovery software platform, our computational biology system, our knowledge management system, our partner reporting, our platform, our advanced automation systems, and advanced application software.
We depend on information technology and telecommunications systems for significant elements of our business operations, including the operation of our AI models, our antibody discovery software platform, our computational biology system, our knowledge management system, our partner reporting, our platform, our advanced automation systems, and advanced application software.
In this regard, we will need to continue to dedicate internal resources, engage outside consultants, execute our detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing whether such controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting.
In this regard, we will need to continue to dedicate internal resources, engage outside consultants, execute our detailed work plan to assess and document the adequacy of internal control over financial reporting, 74 Table of Contents continue steps to improve control processes as appropriate, validate through testing whether such controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting.
Moreover, some of our future partners may be located in markets subject to political and social risk, corruption and infrastructure problems, and could be subject to country-specific privacy and data security risk as well as burdensome legal and regulatory requirements.
Moreover, some of our future partners may be located in markets subject to political and social risk, armed conflict, corruption and infrastructure problems, and could be subject to country-specific privacy and data security risk as well as burdensome legal and regulatory requirements.
In addition, certain of our agreements with third parties 50 Table of Contents may provide that intellectual property arising under these agreements, such as data that could be valuable to our business, will be owned by the counterparty, in which case, we may not have adequate rights to use such data or have exclusivity with respect to the use of such data, which could result in third parties, including our competitors, being able to use such data to compete with us.
In addition, certain of our agreements with third parties may provide that intellectual property arising under these agreements, such as data that could be valuable to our business, will be owned by the counterparty, in which case, we may not have adequate rights to use such data or have exclusivity with respect to the use of such data, which could result in third parties, including our competitors, being able to use such data to compete with us.
These established companies may have a competitive advantage over us due to their size, capital resources and greater technology development or commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us.
These established companies may have a competitive advantage over us due to their size, capital resources and greater technological development or commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us.
We have installed, and expect to expand, a number of enterprise software systems that affect a broad range of business processes and functional areas, including for example, systems handling human resources, procurement, financial controls and reporting, contract management, regulatory compliance and other infrastructure operations. These implementations were expensive and required a significant effort in terms of both time and effort.
We have installed, and expect to expand, a number of enterprise software systems that affect a broad range of business processes and functional areas, including for example, systems handling human resources, procurement, financial controls and reporting, contract management, regulatory compliance and other infrastructure operations. These implementations were expensive and required significant time and effort.
If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our share price and trading volume to decline. Unfavorable U.S. or global economic conditions could adversely affect our business, financial condition or results of operations.
If one or more of these analysts ceases coverage of our company or fails to 69 Table of Contents publish reports on us regularly, demand for our stock could decrease, which might cause our share price and trading volume to decline. Unfavorable U.S. or global economic conditions could adversely affect our business, financial condition or results of operations.
If other third parties have ownership rights to patents or patent applications we in-license, they may be able to license such patents to our competitors, and our competitors could market competing technologies and 51 Table of Contents services. This could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.
If other third parties have ownership rights to patents or patent applications we in-license, they may be able to license such patents to our competitors, and our competitors could market competing technologies and services. This could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.
Our stock price may also decline as a result of negative clinical trial results, including adverse safety events, involving any drug candidate that is subject to one of our partnerships.
Our stock price may also decline as a result of negative results from any eventual clinical trial, including adverse safety events, involving any drug candidate that is subject to one of our partnerships.
In addition, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm the market price of our stock. 67 Table of Contents Our results of operations and financial condition could be materially adversely affected by changes in accounting principles.
In addition, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm the market price of our stock. Our results of operations and financial condition could be materially adversely affected by changes in accounting principles.
In particular, our business depends, among other things, on: • our ability to successfully identify appropriate molecules and production cell lines through our platform and provide them to our partners on the desired timeframes and for further development; • our partners’ determination that the product candidates and/or production cell lines that we provide to them can ultimately be used to advance our partners’ clinical development programs; • our partners' entering into license agreements with economic terms that are acceptable to us, which is based substantially on the value our partners believe can be recognized from the product candidates and/or production cell lines that we provide to them; • our ability to execute on our strategy to enter into new partnerships with new or existing partners on technology development terms that are acceptable to us; • our ability to use our generative AI models to create actionable biological insights; • our ability to increase awareness of the capabilities of our technologies and solutions; • our partners’ and potential partners’ willingness to adopt our technologies; • whether our platform reliably provides advantages over legacy and other alternative technologies and is perceived by partners to be cost effective; • the rate of adoption of our technologies by pharmaceutical companies, biotechnology companies of all sizes, government organizations and non-profit organizations and others; • prices we charge for our technology and the discoveries that we make; • the relative reliability and robustness of our platform; • our ability to develop new technologies for partners; • our platform’s ability to offer sufficient cost effectiveness, efficiency, and performance to warrant partners’ continued adoption of and ongoing reliance on our technologies; • our platform’s ability to screen a high number of cells and drug candidates and leverage this data to train our generative AI models; • whether competitors develop a platform that enables biologic drug discovery and cell line development more effectively than our platform; • our ability to bioengineer our bespoke E. coli SoluPro and Bionic SoluPro strains to produce certain types of proteins; • our ability to adapt our assays to screen effectively for certain types of drug modalities or targets; • our ability to adapt our assays to de-orphan antibodies we discover using our target technology; • our ability to construct diverse genetic libraries covering sufficient diversity of protein sequence variants and folding and expression solutions combinations; 28 Table of Contents • our ability to reliably adapt our assays to each program to screen large strain libraries and routinely identify molecules/strains that meet the program deliverable requirements; • our ability to optimize our fermentation conditions to scale at an effective level; • our platform’s ability to create new drug modalities and novel conjugates; • our platform’s ability to incorporate non-standard amino acids into proteins with high efficiency and fidelity; • the timing and scope of any approval that may be required by the U.S.
In particular, our business depends, among other things, on: • our ability to successfully identify appropriate molecules and production cell lines through our platform and provide them to our partners on the desired timeframes and for further development; • our partners’ determination that the product candidates and/or production cell lines that we provide to them can ultimately be used to advance our partners’ clinical development programs; • our partners' entering into license agreements with economic terms that are acceptable to us, which is based substantially on the value our partners believe can be recognized from the product candidates and/or production cell lines that we provide to them; • our ability to execute on our strategy to enter into new partnerships with new or existing partners on terms that are acceptable to us; • our ability to identify partners to license or acquire rights to our internal asset programs for further preclinical or clinical development; • our ability to use our generative AI models to create actionable biological insights; • our ability to increase awareness of the capabilities of our technologies and solutions; • our partners’ and potential partners’ willingness to adopt our technologies; • whether our platform reliably provides advantages over legacy and other alternative technologies and is perceived by partners to be cost effective; • the rate of adoption of our technologies by pharmaceutical companies, biotechnology companies of all sizes, government organizations and non-profit organizations and others; • prices we charge for our technology and the discoveries that we make; 31 Table of Contents • the relative reliability and robustness of our platform; • our ability to develop new technologies for partners; • our platform’s ability to offer sufficient cost effectiveness, efficiency, and performance to warrant partners’ continued adoption of and ongoing reliance on our technologies; • our platform’s ability to screen a high number of cells and drug candidates and leverage this data to train our generative AI models; • whether competitors develop a platform that enables biologic drug creation more effectively than our platform; • our ability to bioengineer our proprietary E. coli SoluPro and Bionic SoluPro strains to produce certain types of proteins, validate protein sequences and further train our AI models; • our ability to adapt our assays to screen effectively for certain types of drug modalities or targets; • our ability to adapt our assays to de-orphan antibodies we create using our target technology; • our ability to construct diverse genetic libraries covering sufficient diversity of protein sequence variants and folding and expression solutions combinations; • our ability to reliably adapt our assays to each program to screen large strain libraries and routinely identify molecules/strains that meet the program deliverable requirements; • our ability to optimize our fermentation conditions to scale at an effective level; • our platform’s ability to create new drug modalities and novel conjugates; • our platform’s ability to incorporate non-standard amino acids into proteins with high efficiency and fidelity; • the timing and scope of any approval that may be required by the U.S.
As a result of the COVID-19 pandemic, or similar pandemics and outbreaks, we have experienced and may continue to experience severe delays and disruptions, including, for example: • interruption of or delays in receiving products and supplies from third parties; • limitations on our business operations by local, state and/or federal governments that could impact our ability to conduct our technology development and other activities; • delays in negotiations with partners and potential partners; • increases in facilities costs to comply with physical distancing guidance; • business disruptions caused by workplace, laboratory and office closures and an increased reliance on employees working from home, travel limitations, cyber security and data accessibility, or communication or mass transit disruptions; and • limitations on employee resources that would otherwise be focused on the conduct of our activities, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people.
As a result of public health crises, such as the COVID-19 pandemic, or, we have experienced and may continue to experience severe delays and disruptions, including, for example: • interruption of or delays in receiving products and supplies from third parties; • limitations on our business operations by local, state and/or federal governments that could impact our ability to conduct our technology development and other activities; • delays in negotiations with partners and potential partners; • increases in facilities costs to comply with physical distancing guidance; • business disruptions caused by workplace, laboratory and office closures and an increased reliance on employees working from home, travel limitations, cyber security and data accessibility, or communication or mass transit disruptions; and • limitations on employee resources that would otherwise be focused on the conduct of our activities, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people.
Any disruption in the supply chain for these products could materially affect our business. While there are alternative types of 39 Table of Contents equipment that we could use as a replacement, switching to different systems could require significant capital investment, long lead times and significant training and validation.
Any disruption in the supply chain for these products could materially affect our business. While there are alternative types of equipment that we could use as a replacement, switching to different systems could require significant capital investment, long lead times and significant training and validation.
There can be no guarantee that our platform will meet the expectations of pharmaceutical and biotechnology companies. We will need to develop and expand our workforce, commercial infrastructure and laboratory operations to support anticipated growth in demand for our technology development programs, and we may encounter difficulties in managing this development and expansion.
There can be no guarantee that our platform will meet the expectations of pharmaceutical and biotechnology companies. We will need to develop and expand our workforce, commercial infrastructure and laboratory operations to support anticipated growth in demand for our drug creation programs, and we may encounter difficulties in managing this development and expansion.
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. We in the past have had, and in the future may have, a material weakness in our internal control over our financial reporting process.
This type of litigation, 64 Table of Contents 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. We in the past have had, and in the future may have, a material weakness in our internal control over our financial reporting process.
To date, we have only entered into a limited number of programs with respect to which we have or are positioned to negotiate royalty- and milestone-bearing licenses. Accordingly, we do not presently have sufficient information to make accurate predictions regarding our potential revenue and future financial performance.
To date, we have only entered into a limited number of programs with respect to which we have or are positioned to negotiate royalty- and milestone-bearing licenses. Accordingly, we do not 65 Table of Contents presently have sufficient information to make accurate predictions regarding our potential revenue and future financial performance.
Our facility and equipment could be harmed or rendered inoperable or inaccessible by natural or man-made disasters or other circumstances beyond our control, including fire, earthquake, power loss, communications failure, war or terrorism, or another catastrophic event, such as a pandemic or similar outbreak or public health crisis, which may render it difficult or impossible for us to support our partners and develop updates, upgrades and other improvements to our technology and platform, advanced automation systems, and advanced application for some period of time.
Our facility and equipment could be harmed or rendered inoperable or inaccessible by natural or man-made disasters or other circumstances beyond our control, including fire, earthquake, power loss, communications failure, war or terrorism, or another catastrophic event, such as a pandemic or similar outbreak or public health crisis, which may render it difficult or impossible for us to support our partners, advance internal research and development activities, and develop updates, upgrades and other improvements to our technology and platform, advanced automation systems, and advanced application for some period of time.
Changes in the reimbursement landscape may occur, which are outside of our control, and may impact the commercial viability of our technology development services and/or therapeutics generated using our technology. There is significant uncertainty related to the insurance coverage and reimbursement of newly cleared, authorized or approved therapeutics in the United States and other jurisdictions.
Changes in the reimbursement landscape may occur, which are outside of our control, and may impact the commercial viability of our drug creation services and/or therapeutics generated using our technology. There is significant uncertainty related to the insurance coverage and reimbursement of newly cleared, authorized or approved therapeutics in the United States and other jurisdictions.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply 66 Table of Contents to private companies.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
Such additional financing may not be available on terms acceptable to us or at all. In any event, we may consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons.
Such additional financing may not be available on terms acceptable to us or at all. 29 Table of Contents In any event, we may consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons.
Any further deterioration in the macroeconomic economy or financial services industry could lead to losses or defaults by our partners or vendors, which in turn, could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition.
Any further deterioration in the macroeconomic economy or financial services industry could lead to losses or defaults by our partners or vendors, which in turn, could have a material adverse effect on our current and/or 70 Table of Contents projected business operations and results of operations and financial condition.
Certain of our competitors may be able to secure key inputs from vendors on more favorable terms, devote greater resources to marketing and 37 Table of Contents promotional campaigns, adopt more aggressive pricing policies and devote substantially more resources to technology and platform development than we can.
Certain of our competitors may be able to secure key inputs from vendors on more favorable terms, devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing policies and devote substantially more resources to technology and platform development than we can.
To finance any acquisitions or asset purchase, we may choose to issue securities as consideration, which would dilute the ownership of our stockholders. Additional funds may not be available on terms that are favorable 42 Table of Contents to us, or at all.
To finance any acquisitions or asset purchase, we may choose to issue securities as consideration, which would dilute the ownership of our stockholders. Additional funds may not be available on terms that are favorable to us, or at all.
Any return to stockholders will therefore be limited to the appreciation of their common stock, which may never occur. Our principal stockholders and management own a significant percentage of our shares and will be able to exert significant influence over matters subject to stockholder approval.
Any return to stockholders will therefore be limited to the appreciation of their common stock, which may never occur. 66 Table of Contents Our principal stockholders and management own a significant percentage of our shares and will be able to exert significant influence over matters subject to stockholder approval.
If a partner determines not to proceed with the future development of a product candidate discovered or initially developed utilizing our Integrated Drug Creation platform, if it implements a clinical or regulatory strategy that ultimately does not enable the further development, approval or commercialization of the product candidate, or if we cannot find a partner to advance an asset that we develop using our platform, we will not receive the benefits of our partnerships, which may have a material and adverse effect on our operations.
If a partner determines not to proceed with the future development of a product candidate discovered or initially developed utilizing our Integrated Drug Creation platform, if it implements a clinical or regulatory strategy that ultimately does 34 Table of Contents not enable the further development, approval or commercialization of the product candidate, or if we cannot find a partner to advance an internal asset program that we develop using our platform, we will not receive the benefits of our partnerships, which may have a material and adverse effect on our operations.
However, we may not be able to successfully validate that our Integrated Drug Creation platform will shorten the hit identification and lead optimization steps of biologic drug discovery or that our platform will enable us to discover promising biologic candidates for further development.
However, we may not be able to successfully validate that our Integrated Drug Creation platform will shorten the hit identification and lead optimization steps of biologic drug creation or that our platform will enable us to create promising biologic candidates for further development.
These large established companies have substantially greater financial and other resources than us, including larger research and development organizations or more established marketing and sales forces. Our competitors and potential competitors may enjoy a number of competitive advantages over us.
These large established companies have substantially greater financial and other resources than us, including larger research and development organizations or more established marketing and sales forces. 42 Table of Contents Our competitors and potential competitors may enjoy a number of competitive advantages over us.
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 platform to generate products.
A successful liability claim or series of claims in which judgments exceed our 71 Table of Contents insurance coverage could adversely affect our business, financial condition, results of operations and prospects, including preventing or limiting the use of our platform to generate products.
It is not always possible to identify and deter employee misconduct, and any other precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses, or in protecting us from governmental investigations or 64 Table of Contents other actions or lawsuits stemming from a failure to comply with these laws or regulations.
It is not always possible to identify and deter employee misconduct, and any other precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses, or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.
Without the timely introduction of technological advancements, our platform technologies will likely become less competitive over time, in which case our competitive position and results of operations could suffer. Accordingly, we focus substantial resources on the development and identification of new technologies to further broaden and deepen our capabilities and expertise in AI-powered drug discovery and cell line development.
Without the timely introduction of technological advancements, our platform technologies will likely become less competitive over time, in which case our competitive position and results of operations could suffer. Accordingly, we focus substantial resources on the development and identification of new technologies to further broaden and deepen our capabilities and expertise in AI-powered drug creation.
Even if our platform is capable of identifying high quality biologic drug candidates, there can be no assurance that our partners will successfully develop, secure marketing approvals for and commercialize any drug candidates based on the proteins that we discover. As a result, we may not realize the intended benefits of our partnerships.
Even if our platform is capable of identifying high quality biologic drug candidates, there can be no assurance that our partners will successfully develop, secure marketing approvals for and commercialize any drug candidates based on the biologic product candidates that we create. As a result, we may not realize the intended benefits of our partnerships.
Our common stock began trading on the Nasdaq Global Select Market in July 2021, and we can provide no assurance that we will be able to maintain an active trading market on the Nasdaq Global Select Market or any other exchange in the future.
Our common stock began trading on the Nasdaq Global Select Market in July 2021, and we can provide no assurance that we will be able to continue maintaining an active trading market on the Nasdaq Global Select Market or any other exchange in the future.
Based on our limited experience in developing and marketing new technologies, we may not be able to effectively: • drive adoption of our technologies; • attract and retain partners; • enter into licensing arrangements with our partners following completion of our technology development activities; • establish partnerships that contain economic terms sufficient to make our business model viable; • achieve sufficient near term revenue or raise sufficient capital to sustain our business to enable us to receive the downstream economics of our existing or future partnerships; • expand the scope of our existing partnerships; • anticipate and adapt to changes in the existing and emerging markets in which we operate; • focus our technology development efforts in areas that generate returns on these efforts; • succeed in achieving our technology development goals; • maintain and develop strategic relationships with suppliers to acquire necessary materials and equipment for the development of our technologies on appropriate timelines, or at all; • implement an effective business development strategy to drive adoption of our Integrated Drug Creation platform by new and existing partners; • scale our technology development activities to meet potential demand at a reasonable cost; • acquire, in-license or otherwise obtain technologies that enable us to expand our platform capabilities; • avoid infringement of third-party intellectual property rights; • obtain licenses on commercially reasonable terms to third-party intellectual property rights, as needed for our current and planned operations; • obtain and maintain valid and enforceable patents and other intellectual property rights that give us a competitive advantage; 25 Table of Contents • protect our proprietary technologies; and • attract, retain and motivate qualified personnel.
Based on our limited experience, we may not be able to effectively: • drive adoption of our technologies; • develop proprietary drug candidates; • attract and retain partners; • enter into licensing arrangements with our partners following completion of our drug creation activities; • establish partnerships that contain economic terms sufficient to make our business model viable; • achieve sufficient near term revenue or raise sufficient capital to sustain our business to enable us to receive the downstream economics of our existing or future partnerships; • expand the scope of our existing partnerships; • anticipate and adapt to changes in the existing and emerging markets in which we operate; • focus our platform drug creation efforts in areas that generate returns on these efforts; • succeed in achieving our platform drug creation goals; • maintain and develop strategic relationships with suppliers to acquire necessary materials and equipment for the development of our platform technologies and proprietary drug candidates on appropriate timelines, or at all; 28 Table of Contents • implement an effective business development strategy to drive adoption of our Integrated Drug Creation platform by new and existing partners; • create a pipeline of internal drug candidates that generate future partnership opportunities; • scale our drug creation activities to meet potential demand at a reasonable cost; • acquire, in-license or otherwise obtain technologies that enable us to expand our platform capabilities; • avoid infringement of third-party intellectual property rights; • obtain licenses on commercially reasonable terms to third-party intellectual property rights, as needed for our current and planned operations; • obtain and maintain valid and enforceable patents and other intellectual property rights that give us a competitive advantage; • protect our proprietary technologies and internal asset programs; and • attract, retain and motivate qualified personnel.
If we raise funds by issuing debt securities, those debt securities would have rights, preferences and privileges senior to those of holders of our common stock.
If we raise funds by issuing debt securities, those debt securities may have rights, preferences and privileges senior to those of holders of our common stock.
Failure can occur at any stage of the development. Additionally, development of any technology may be disrupted or made less viable by the development of competing technologies, and changes in the industry in which our technologies are applied could obsolete our technologies.
Failure can occur at any stage of the development. Additionally, development of any technology 36 Table of Contents may be disrupted or made less viable by the development of competing technologies, and changes in the industry in which our technologies are applied could obsolete our technologies.
If we do not successfully innovate and invest in new technologies, including within the field of AI, our platform may become less competitive, and our partners could move to new technologies or engage in drug discovery themselves.
If we do not successfully innovate and invest in new technologies, including within the field of AI, our platform may become less competitive, and our partners could move to new technologies or engage in drug creation activities themselves.
In particular, payments under our technology development agreements are subject to the achievement of project milestones and our partners’ decisions to initiate or continue the technology development work, and any future downstream payments with respect to product candidates generated using our platform will be subject to our partners’ advancement of the product candidates, over which we have no control.
In particular, payments under our drug creation agreements are subject to the achievement of project milestones and our partners’ decisions to initiate or continue the drug creation work, and any future downstream payments with respect to product candidates generated using our platform will be subject to our partners’ advancement of the product candidates, over which we have no control.
There can be no assurance that the claims of our patents (or any patent application that issues as a patent), will exclude others from making, using or selling our technology or technology that is substantially similar to ours.
There can be no assurance that the claims of our patents (or any patent application that is issued to us as a patent), will exclude others from making, using, or selling our technology or technology that is substantially similar to ours.
In addition to pursuing patents on our technologies, we take steps to protect our intellectual property and proprietary technologies by entering into agreements, including confidentiality agreements, non-disclosure agreements and intellectual property assignment agreements, with our employees, consultants, academic institutions, corporate and/or strategic partners, potential or existing investors and, when needed, our advisers.
In addition to pursuing patents on our technologies, we take steps to protect our intellectual property and proprietary 59 Table of Contents technologies by entering into agreements, including confidentiality agreements, non-disclosure agreements and intellectual property assignment agreements, with our employees, consultants, academic institutions, corporate and/or strategic partners, potential or existing investors and, when needed, our advisers.
Any of these factors could adversely impact their financial condition and results of operations, which could impair their ability to meet their contractual obligations to us and have a material adverse effect on our business, financial condition and results of operations.
Any of these factors could adversely impact their financial condition and results of operations, which could impair their ability to meet their 37 Table of Contents contractual obligations to us and have a material adverse effect on our business, financial condition and results of operations.
We expect that the number of such claims may increase as our business, visibility and partnership base expand and the number of our technology development programs and resultant licensed 55 Table of Contents technologies increases, and as the level of competition in our industry increases.
We expect that the number of such claims may increase as our business, visibility and partnership base expand and the number of our technology development programs and resultant licensed technologies increases, and as the level of competition in our industry increases.
The choice of forum provisions do not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
The choice of forum provisions 68 Table of Contents do not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
Natural and man-made disasters and other events beyond our control could severely disrupt our operations, or those of our partners, and have a material adverse impact on our business, results of operations, financial condition and prospects.
Natural and man-made disasters, including cyber-attacks and other events beyond our control could severely disrupt our operations, or those of our partners, and have a material adverse impact on our business, results of operations, financial condition and prospects.
However, 53 Table of Contents we cannot be certain that such agreements have been entered into with all relevant parties, and we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.
However, we cannot be certain that such agreements have been entered into with all relevant parties, and we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters and primary research and development facilities are located in Vancouver, Washington in a 77,974 square foot facility that includes general administrative office and laboratory space. Our AI Research Lab is located in New York, New York and our Innovation Center is located in Zug, 68 Table of Contents Switzerland.
Biggest changeItem 2. Properties Our corporate headquarters and primary research and development facilities are located in Vancouver, Washington in a 77,974 square foot facility that includes general administrative office and laboratory space. Our AI Research Lab is located in New York, New York and our Innovation Center is located in Zug, Switzerland.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeEquity Compensation Plans Information regarding securities authorized for issuance under equity compensation plans is included in Part III, Item 12 of this report. Unregistered Sales of Equity Securities There were no unregistered sales of equity securities during the year ended December 31, 2022.
Biggest changeEquity Compensation Plans Information regarding securities authorized for issuance under equity compensation plans is included in Part III, Item 12 of this report. Unregistered Sales of Equity Securities There were no unregistered sales of equity securities during the year ended December 31, 2023. Issuer Purchases of Equity Securities None. 77 Table of Contents Item 6. [Reserved] 78 Table of Contents
Holders of Common Stock As of March 15, 2023, there were 54 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
Holders of Common Stock As of March 6, 2024, there were 56 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
Removed
Use of Proceeds We completed our IPO pursuant to the registration statement on Form S-1 (File No. 333-257553), as amended, that was declared effective on July 21, 2021.
Removed
On July 26, 2021, we sold 14,375,000 shares of our common stock, including the full exercise of the underwriters’ 30-day option to purchase additional shares, at a public offering price of $16.00 per share for aggregate gross proceeds of $230.0 million. J.P.
Removed
Morgan Securities LLC, Credit Suisse Securities (USA) LLC, BofA Securities, Inc., Cowen and Company, LLC, and Stifel, Nicolaus & Company, Incorporated acted as joint book-running managers for the offering. The net proceeds of our IPO were $210.1 million, after deducting underwriting discounts and commissions of $16.1 million and offering related expenses of $3.8 million.
Removed
No offering expenses were paid directly or 69 Table of Contents indirectly to any of our directors or officers (or their associates) or persons owning ten percent or more of any class of our equity securities or to any other affiliates. As of December 31, 2022, we have used $157.8 million of the net proceeds from the IPO.
Removed
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.
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Issuer Purchases of Equity Securities None. Item 6. [Reserved] 70 Table of Contents

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe following tables set forth our results of operations for the periods presented (In thousands): For the Years Ended December 31, 2022 2021 Revenues Technology development revenue $ 4,529 $ 4,009 Collaboration revenue 1,218 773 Total revenues 5,747 4,782 Operating expenses Research and development 58,908 44,586 Selling, general and administrative 40,552 28,780 Depreciation and amortization 13,037 6,654 Total operating expenses 112,497 80,020 Operating loss (106,750) (75,238) Other income (expense) Interest expense (972) (3,432) Other income (expense), net 2,357 (31,189) Total other income (expense), net 1,385 (34,621) Loss before income taxes (105,365) (109,859) Income tax benefit 461 8,899 Net loss $ (104,904) $ (100,960) Comparison of the Years Ended December 31, 2022 and 2021 The following table summarizes our results of operations for the years ended December 31, 2022 and 2021 (In thousands, except for percentages): Revenue For the Years Ended December 31, 2022 2021 $ Change % Change Revenues Technology development revenue $ 4,529 $ 4,009 $ 520 13 % Collaboration revenue 1,218 773 445 58 % Total revenues $ 5,747 $ 4,782 $ 965 20 % Total revenue was $5.7 million for the year ended December 31, 2022, representing an increase of approximately $1.0 million, or 20%, compared to $4.8 million for the year ended December 31, 2021.
Biggest changeThe following tables set forth our results of operations for the periods presented (In thousands): For the Years Ended December 31, 2023 2022 Revenues Technology development revenue $ 5,718 $ 4,529 Collaboration revenue — 1,218 Total revenues 5,718 5,747 Operating expenses Research and development 48,067 58,908 Selling, general and administrative 37,832 40,552 Depreciation and amortization 13,999 13,037 Goodwill impairment 21,335 — Total operating expenses 121,233 112,497 Operating loss (115,515) (106,750) Other income (expense) Interest expense (1,010) (972) Other income, net 6,059 2,357 Total other income, net 5,049 1,385 Loss before income taxes (110,466) (105,365) Income tax (expense) benefit (100) 461 Net loss $ (110,566) $ (104,904) 85 Comparison of the Years Ended December 31, 2023 and 2022 The following table summarizes our results of operations for the years ended December 31, 2023 and 2022 (In thousands, except for percentages): Revenue For the Years Ended December 31, 2023 2022 $ Change % Change Revenues Technology development revenue $ 5,718 $ 4,529 $ 1,189 26 % Collaboration revenue — 1,218 (1,218) (100) % Total revenues $ 5,718 $ 5,747 $ (29) (1) % Technology development revenue increased by $1.2 million, or 26%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, driven by a combination of overall program progress, the timing of project-based milestones achieved, and the mix of ongoing programs activity.
Our corporate headquarters and primary research and development facilities are located in Vancouver, Washington in a 77,974 square foot facility that includes general administrative office space and laboratory space. Our AI Research Lab is located in New York, New York and our Innovation Center is located in Zug, Switzerland. Additionally, we have research and development presence in Belgrade, Serbia.
Our corporate headquarters and primary research and development facilities are located in Vancouver, Washington in a 77,974 square foot facility that includes general administrative office space and laboratory space. Our AI Research Lab is located in New York, New York and our Innovation Center is located in Zug, Switzerland. Additionally, we have a research and development presence in Belgrade, Serbia.
We believe that our cash and cash equivalents and short-term investments will be sufficient to meet our operating expenses, working capital and capital expenditure needs over at least the next 12 months following the date of this filing.
We believe that our cash, cash equivalents and short-term investments will be sufficient to meet our operating expenses, working capital and capital expenditure needs over at least the next 12 months following the date of this filing.
Initial Public Offering In July 2021, we completed our IPO and issued 14.4 million shares of our common stock, including 1.9 million shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price of $16.00 per share and received net proceeds of $210.1 million from the IPO.
Initial public offering In July 2021, we completed our initial public offering (IPO) and issued 14.4 million shares of our common stock, including 1.9 million shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price of $16.00 per share and received net proceeds of $210.1 million from the IPO.
Key Factors Affecting Our Results of Operations and Future Performance We believe that our future financial performance will be primarily driven by multiple factors as described below, each of which presents growth opportunities for our business. These factors also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations.
Key Factors Affecting Our Results of Operations and Future Performance We believe that our future financial performance will be primarily driven by multiple factors as described below, each of which presents growth opportunities for our business. These factors also pose important challenges that we must successfully address in order to sustain our growth and improve our results of 80 operations.
We expect general and administrative expenses to stabilize as we more effectively control costs associated with operating as a public company, including expenses related to legal, accounting, regulatory, maintaining compliance with exchange listing and requirements of the U.S. Securities and Exchange Commission (SEC), director and officer insurance premiums and investor relations.
We expect general and administrative expenses to continue to stabilize as we more effectively control costs associated with operating as a public company, including expenses related to legal, accounting, regulatory, maintaining compliance with exchange listing and requirements of the U.S. Securities and Exchange Commission (SEC), director and officer insurance premiums and investor relations.
For example, as our business matures and to the extent drug candidates generated with our technologies enter clinical development, or as we may enter partnerships addressing programs over multiple years, or as certain programs may be discontinued by partners, we anticipate updating these metrics to reflect such changes.
For example, as our business matures and to the extent drug candidates generated with our technologies enter clinical 81 development, or as we may enter partnerships addressing programs over multiple years, or as certain programs may be discontinued by partners, we anticipate updating these metrics to reflect such changes.
We also hold trademarks and trademark applications in the United States and foreign jurisdictions. Costs to secure and defend our intellectual property are expensed as incurred and are classified as selling, general and administrative expenses. Depreciation and amortization Depreciation and amortization expense consists of the depreciation expense of our property and equipment and amortization of our intangibles.
We also hold trademarks and trademark applications in the United States and 84 foreign jurisdictions. Costs to secure and defend our intellectual property are expensed as incurred and are classified as selling, general and administrative expenses. Depreciation and amortization Depreciation and amortization expense consists of the depreciation expense of our property and equipment and amortization of our intangibles.
Subject to certain conditions, as an emerging growth company, we may rely on certain other exemptions and reduced reporting requirements, including without limitation (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board (PCAOB) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the consolidated financial statements, known as the auditor discussion and analysis.
Subject to certain conditions, as an emerging growth company, we may rely on certain other exemptions and reduced reporting requirements, including without limitation (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement by the Public Company Accounting Oversight Board (PCAOB) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the consolidated financial statements, known as the auditor discussion and analysis.
Equipment Financing In 2022, we received a total of $12.0 million of proceeds from equipment financing arrangements. Terms of the agreements require monthly payments over 42-48 month periods with imputed interest rates ranging from 8%-10%. As of December 31, 2022, the combined outstanding balance on these agreements is $10.9 million.
Equipment financing In 2022, we received a total of $12.0 million of proceeds from equipment financing arrangements. Terms of the agreements require monthly payments over 42-48 month periods with imputed interest rates ranging from 8%-10%. As of December 31, 2023, the combined outstanding balance on these agreements is $7.9 million.
We will remain an emerging growth company until the earlier of (a) the last day of the fiscal year in which we have total annual gross revenue of $1.235 billion or more; (b) December 31, 2026, the last day of the fiscal year following the fifth anniversary of the date of the completion of our IPO; (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (d) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. 82 Table of Contents
We will remain an emerging growth company until the earlier of (a) the last day of the fiscal year in which we have total annual gross revenue of $1.235 billion or more; (b) December 31, 2026, the last day of the fiscal year following the fifth anniversary of the date of the completion of our IPO; (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (d) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
There is no assurance, however, that our partners will advance any drug candidates that are currently the subject of Active Programs into further preclinical or clinical development or that our partners will elect to license our technologies upon completion of the technology development phase in a timely manner, or at all.
There is no assurance, however, that our partners will advance any drug candidates that are currently the subject of Active Programs into further preclinical or clinical development or that our partners will elect to license our technologies upon completion of the drug creation phase in a timely manner, or at all.
There is no assurance that a partner will elect to license. • Our partners successfully developing and commercializing the drug candidates generated with our technology: Our business model is dependent on the eventual progression of biologic drug candidates discovered or initially developed utilizing our Integrated Drug Creation platform into 72 Table of Contents clinical trials and commercialization.
There is no assurance that a partner will elect to license. • Our partners successfully developing and commercializing the drug candidates generated with our technology: Our business model is dependent on the eventual progression of biologic drug candidates discovered or initially developed utilizing our Integrated Drug Creation platform into clinical trials and commercialization.
Operating Expenses Research and Development Research and development expenses include the cost of materials, personnel-related costs (comprised of salaries, benefits and share-based compensation) for personnel performing research and development 74 Table of Contents functions, consulting fees, equipment and allocated facility costs (including occupancy and information technology). These expenses are exclusive of depreciation and amortization.
Operating Expenses Research and development Research and development expenses include the cost of materials, personnel-related costs (comprised of salaries, benefits and share-based compensation) for personnel performing research and development functions, consulting fees, equipment and allocated facility costs (including occupancy and information technology). These expenses are exclusive of depreciation and amortization.
We consider a performance obligation satisfied once control of a good or service has been transferred to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. Technology development revenue includes revenue associated to the discovery, development and technology readiness phases of technology development and partnership agreements.
We consider a performance obligation satisfied once control of a good or service has been transferred to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. Technology development revenue includes revenue associated to the discovery, development and technology readiness phases of drug creation agreements.
Research and development activities consist of continued development of our Integrated Drug Creation platform, internal pipeline, target discovery and technology development for partners. We derive improvements to our platform from each type of activity. Research and development efforts apply to our platform broadly and across programs.
Research and development activities consist of continued development of our Integrated Drug Creation platform, internal pipeline, and drug creation for partners. We derive improvements to our platform from each type of activity. Research and development efforts apply to our platform broadly and across programs.
Our future capital requirements will depend on many factors, including, but not limited to our ability to raise additional capital through equity or debt financing, our ability to successfully secure additional partnerships under contract with new partners and increase the number of programs covered under contracts with existing partners, the successful preclinical and clinical development by our partners of product candidates generated using our Integrated Drug Creation platform and the successful commercialization by our partners of any such product candidates that are approved.
Our future capital requirements will depend on many factors, including, but not limited to our ability to raise additional capital through equity or debt financing, our ability to successfully secure additional partnerships under contract with new partners and increase the number of programs covered under contracts with existing partners, the successful preclinical and clinical development by our partners of product candidates generated using our Integrated Drug Creation platform, the successful commercialization by our partners of any such product candidates that are approved, and the progress of any IND-enabling studies for our internal program assets.
Income taxes Our effective income tax rate from continuing operations was 0.4% and 8.1% for the years ended December 31, 2022 and 2021, respectively. The difference between the effective rate and the statutory rate is primarily attributed to the change in the valuation allowance against net deferred tax assets.
Income taxes Our effective income tax rate from continuing operations was (0.1)% and 0.4% for the year ended December 31, 2023 and 2022, respectively. The difference between the effective rate and the statutory rate is primarily attributed to the change in the valuation allowance against net deferred tax assets.
Both our ability to successfully complete technology development activities to meet the needs of a partner, and the partner’s prioritization of the subject program, impact the likelihood and timing of any election by a partner to enter into a licensing arrangement.
Both our ability to successfully complete drug creation activities to meet the needs of a partner, and the partner’s prioritization of the subject program, impact the likelihood and timing of any election by a partner to enter into a licensing arrangement.
We expect to continue to incur significant expenses in connection with our ongoing activities, including as we: • implement an effective business development strategy to drive adoption of our Integrated Drug Creation platform by new and existing partners; • continue to engage in research and development efforts and scale our technology development activities to meet potential demand at a reasonable cost; • develop, acquire, in-license or otherwise obtain technologies that enable us to expand our platform capabilities; • attract, retain and motivate highly qualified personnel; • implement operational, financial and management information systems; and • continue to operate as a public company.
We expect to continue to incur significant expenses in connection with our ongoing activities, including as we: • implement an effective business development strategy to drive adoption of our Integrated Drug Creation platform by new and existing partners; • develop our internal proprietary asset pipeline of lead drug candidates; • continue to engage in research and development efforts and scale our drug creation activities to meet potential demand at a reasonable cost; • develop, acquire, in-license or otherwise obtain technologies that enable us to expand our platform capabilities; • attract, retain and motivate highly qualified personnel; and • implement operational, financial and management information systems.
(3) Active Programs represents the number of programs that are subject to ongoing technology development activities intended to determine if the program can be pursued by our partner for future clinical 73 Table of Contents development, as well as any program for which our partner obtains and maintains a license to our technology to advance the program after completion of the technology development phase.
(3) Active Programs represents drug creation programs that are subject to ongoing technology development activities intended to determine if the program can be pursued by our partner for future clinical development, as well as any program for which our partner obtains and maintains a license to our technology to advance the program after completion of the drug creation phase.
Our partnerships will provide us with the opportunity to participate in the future success of the biologics generated utilizing our platform, through potential clinical, regulatory and commercial milestone payments as well as royalties on net sales of approved products. We aim to assemble economic interests in a diversified portfolio of partners’ biologics across multiple indications.
Our partnerships will provide us with the opportunity to participate in the future success of the biologic candidates generated utilizing our platform, including through potential clinical, regulatory and commercial milestone payments as well as royalties on net sales of approved products. We aim to assemble economic interests in a diversified portfolio of partnered pipeline assets of biologics across multiple indications.
In certain TDAs that require a portion of the contract consideration to be received in advance at the commencement of the contract, such advance payment is initially recorded as a contract liability.
In certain drug creation agreements that require a portion of the contract consideration to be received in advance at the commencement of the contract, such advance payment is initially recorded as a contract liability.
Cash Flows from Financing Activities In the year ended December 31, 2022, net cash provided by financing activities was $5.2 million. The net cash provided resulted primarily from new equipment financing agreements of $12.0 million, partially offset by cash used for principal payments of $7.5 million made for financed equipment and long-term debt.
In the year ended December 31, 2022, net cash provided by financing activities was $5.2 million primarily from proceeds from equipment financing agreements of $12.0 million and proceeds from the issuance of common stock of $0.7 million, partially offset by cash used for principal payments of $7.5 million made for financed equipment and long-term debt.
To date, we have funded operations through issuances and sales of equity securities and debt, in addition to revenue generated from our technology development agreements.
To date, we have funded operations through issuances and sales of equity securities and debt, in addition to revenue generated from our drug creation agreements.
Currently, given our stage of development, we believe that the following metrics are the most important for understanding our current business trajectory. These metrics may change or may be substituted for additional or different metrics as our business develops.
We believe that the following metrics are the most important for understanding our current business trajectory. These metrics may change or may be substituted for additional or different metrics as our business develops.
These fees are earned and paid at various points throughout the terms of these agreements including upfront, upon the achievement of specified project-based milestones, and throughout the program. We expect revenue to increase over time as we enter into additional partnership agreements and as our partnerships continue to include more drug discovery activities.
These fees are earned and paid at various points throughout the terms of these agreements including upfront, upon the achievement of specified project-based milestones, and throughout the program. We expect revenue to increase over time as we enter into additional drug creation partnership agreements.
December 31, December 31, 2022 2021 Partners, Cumulative (1) 19 18 Programs, Cumulative (2) 47 34 Active Programs (3) 16 12 (1) Partners represents the unique number of partners with whom we have executed technology development agreements. We view this metric as an indication of our ability to execute our business development activities and level of our market penetration.
December 31, December 31, 2023 2022 Partners, Cumulative (1) 24 19 Programs, Cumulative (2) 59 47 Active Programs (3) 16 16 (1) Partners represents the unique number of partners with whom we have executed drug creation agreements. We view this metric as an indication of our ability to execute our business development activities and level of our market penetration.
Our business model is to use our platform for the rapid creation of biologic drug candidates by: Establishing partnerships with stakeholders in the drug development life cycle: We develop drug candidates for partners, including those who are responsible for preclinical and clinical testing of biologics generated by our platform.
Our business model is to use our platform for rapid creation of biologic drug candidates by: Establishing partnerships with stakeholders in the drug discovery and development life cycle: We create drug candidates with partners, including pharmaceutical and biotechnology companies who are responsible for preclinical and clinical testing of biologic candidates generated through our platform.
Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.
Emerging Growth Company Status We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.
Components of Results of Operations Revenue Our revenue currently consists primarily of fees earned from our partners in conjunction with technology development agreements (TDAs) and partnership agreements, which are delineated as technology development revenue in our results of operations.
Components of Results of Operations Revenue Our revenue currently consists primarily of fees earned from our partners in conjunction with drug creation partnership agreements utilizing our integrated drug creation platform, which are delineated as technology development revenue in our results of operations.
While our significant accounting policies are described in more detail in Note 2: Summary of Significant Accounting Policies to our financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
While our significant accounting policies are described in more detail in Note 2: Summary of significant accounting policies, we believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
We expect research and development expenses to continue to increase in absolute dollars over the long-term as we enter into additional partnerships and continue to invest in platform enhancements.
We expect research and development expenses to increase in absolute dollars over the long-term as we enter into additional drug creation partnerships, continue to invest in platform enhancements, and develop and advance our internal asset pipeline.
Our ability to successfully address these challenges is subject to various risks and uncertainties, including those described in the section of this Annual Report titled “Risk Factors”. • Establish new partnerships: Our potential to grow revenue and long-term earnings will require us to successfully identify and establish technology development arrangements with new partners.
Our ability to successfully address these challenges is subject to various risks and uncertainties, including those described in the section of this Annual Report titled “Risk Factors”. • Establish new partnerships: Our potential to grow revenue and long-term earnings will require us to successfully identify and establish drug creation arrangements with new partners. • Increase the number of programs under existing partnerships: The execution of our long-term strategy relies substantially on the value our partners believe can be recognized from our programs.
Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of the matters that are inherently uncertain. 80 Table of Contents Goodwill Goodwill is tested for impairment on an annual basis in the fourth fiscal quarter, or sooner if an indicator of impairment exists.
Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of the matters that are inherently uncertain.
The net cash used resulted primarily from purchases of short-term investments of $108.6 million, purchases of lab equipment of $16.2 million, and cash paid as part of our acquisition of Totient of $8.0 million, partially offset by cash provided by maturities of short-term investments of $5.0 million.
In the year ended December 31, 2022, net cash used in investing activities was $127.0 million primarily from purchases of short-term investments of $108.6 million, purchases of lab equipment of $16.2 million as we expanded our operations and overall capacity and cash paid as part of our acquisition of Totient, Inc. of $8.0 million, partially offset by cash provided by maturities of short-term investments of $5.0 million.
Cash Flows The following summarizes our cash flows (In thousands): For the Years Ended December 31, 2022 2021 Net cash provided by (used in) Operating activities (81,339) (60,598) Investing activities (126,982) (67,377) Financing activities 5,237 336,193 Net (decrease) increase in cash, cash equivalents, and restricted cash $ (203,084) $ 208,218 Cash Flows from Operating Activities In the year ended December 31, 2022, net cash used in operating activities was $81.3 million and consisted primarily of a net loss of $104.9 million adjusted for non-cash items, including depreciation and amortization expense of $13.0 million, stock-based compensation of $12.5 million, and a net increase in operating assets and liabilities in the amount of $1.5 million. 79 Table of Contents In the year ended December 31, 2021, net cash used in operating activities was $60.6 million and consisted primarily of a net loss of $101.0 million adjusted for non-cash items, including depreciation and amortization expense of $6.7 million stock-based compensation of $10.6 million, an increase to our convertible note liability of $30.7 million, an increase to our preferred stock warrant liability of $4.1 million, and a net increase in operating assets and liabilities in the amount of $3.1 million.
Cash Flows The following summarizes our cash flows (In thousands): For the Years Ended December 31, 2023 2022 Net cash provided by (used in) Operating activities (64,636) (81,339) Investing activities 81,944 (126,982) Financing activities (4,483) 5,237 Net increase (decrease) in cash, cash equivalents, and restricted cash $ 12,825 $ (203,084) Cash flows from operating activities In the year ended December 31, 2023, net cash used in operating activities was $64.6 million and consisted primarily of a net loss of $110.6 million adjusted for non-cash items, including depreciation and amortization expense of $14.0 million, stock-based compensation of $11.4 million, goodwill impairment of $21.3 million, and a net decrease in operating assets and liabilities in the amount of $1.5 million. 88 In the year ended December 31, 2022, net cash used in operating activities was $81.3 million and consisted primarily of a net loss of $104.9 million adjusted for non-cash items, including depreciation and amortization expense of $13.0 million, stock-based compensation of $12.5 million, and a net increase in operating assets and liabilities in the amount of $1.5 million.
We expect these expenses to vary from period to period as a percentage of revenue in the near term, and to decrease as a percentage of revenue in the long term.
Following an initial reduction due to the September 2023 realignment and resulting reduction in our global workforce, we expect these expenses to vary from period to period as a percentage of revenue in the near term, and to decrease as a percentage of revenue in the long term.
We expect that our revenue will fluctuate from period to period due to the timing of executing additional partnerships, the uncertainty of the timing of milestone achievements and our dependence on the program decisions of our partners. KBI BioPharma, Inc. Collaboration Agreement In December 2019, we executed a four-year Joint Marketing Agreement (JMA) with KBI BioPharma, Inc.
We expect that our revenue will fluctuate from period to period due to the timing of executing additional partnerships, the uncertainty of the timing of milestone achievements and our dependence on the program decisions of our partners.
Other Income (Expense) Interest Expense Interest expense, net, consists primarily of interest related to borrowings under our term debt and financed laboratory equipment. Prior to our initial public offering in 2021, interest expense also included convertible note interest. Other Income (Expense) Other income (expense) consists primarily of interest income from our investments.
Other income (expense) Interest expense Interest expense, net, consists primarily of interest related to borrowings under our term debt and financed laboratory equipment. Other income Other income consists primarily of interest income from our cash, cash equivalents and short-term investments.
Sources of Liquidity Since our inception, we have financed our operations primarily from the issuance and sale of our redeemable convertible preferred stock, issuances of equity securities, borrowings under long-term debt agreements, and to a lesser extent, cash flow from operations.
If we are unable to generate sufficient revenue or raise additional capital when desired, our business, financial condition, results of operations and prospects would be adversely affected. 87 Sources of liquidity Since our inception, we have financed our operations primarily from the issuance and sale of our redeemable convertible preferred stock, issuances of equity securities, borrowings under long-term debt agreements, and to a lesser extent, cash flow from operations.
For the year ended December 31, 2022, other income primarily included interest income. Liquidity and Capital Resources Overview As of December 31, 2022, we had $164.4 million of cash and cash equivalents and short-term investments. We have incurred net operating losses since inception. As of December 31, 2022, our accumulated deficit was $295.9 million.
Liquidity and Capital Resources Overview As of December 31, 2023, we had $97.7 million of cash,cash equivalents and short-term investments. We have incurred net operating losses since inception. As of December 31, 2023, our accumulated deficit was $406.5 million.
Selling, General and Administrative Expenses Selling, general, and administrative expenses increased by $11.8 million, or 41%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase was primarily driven by increased personnel costs in the amount of $3.4 million, increased stock-based compensation of $2.0 million, and increased administrative costs of $6.5 million.
The decrease was primarily attributable to a decrease in laboratory operational costs of $8.0 million and a $2.8 million decrease in personnel costs, including stock-based compensation. Selling, general and administrative expenses Selling, general, and administrative expenses decreased by $2.7 million, or 7%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Total revenue was $5.7 million for the year ended December 31, 2022, respectively, compared to $4.8 million for the year ended December 31, 2021, due to timing of project-based milestones achieved and the mix of ongoing programs utilizing our Integrated Drug Creation platform.
Total revenue was $5.7 million for the years ended December 31, 2023 and 2022, which included an increase in technology development revenue of $1.2 million due to timing of project-based milestones achieved and the mix of ongoing programs utilizing our Integrated Drug Creation platform and a decrease in collaboration revenue of $1.2 million due to completion of our collaboration program in 2022.
We have not negotiated terms for a sufficient number of royalty- and milestone-bearing licenses to enable us to make accurate predictions regarding our potential revenue and financial performance.
We have negotiated license agreements, or expected to negotiate license agreements upon completion of certain drug creation activities, with potential downstream milestone payments and royalties for all Active 82 Programs. We have not negotiated terms for a sufficient number of royalty- and milestone-bearing licenses, however, to enable us to make accurate predictions regarding our potential revenue and financial performance.
Two of these cell line development (“CLD”) Active Programs are preclinical and one is in Phase 3 (PhaseBio Pharmaceuticals’ drug candidate, bentracimab, assumed by SFJ Pharmaceuticals, Inc. in January 2023). Exclusive of our 16 Active Programs with partners, we have utilized our platform to perform technology development activities related to 31 additional molecules.
We also have three Active Programs focused on our legacy model of developing production cell lines for drug candidates that our partners are developing. Two of these legacy cell line development Active Programs are preclinical and one is in Phase 3 clinical development (PhaseBio Pharmaceuticals’ drug candidate, bentracimab, assumed by SFJ Pharmaceuticals, Inc. in January 2023).
Through iterative AI predictions, wet lab validation, and AI training, we enable a virtuous cycle that we believe will accelerate us toward fully in silico biologic drug discovery. Our unique Integrated Drug Creation approach has the potential to significantly shorten preclinical development timelines and expand therapeutic possibilities. Our goal is to become the technology leader in biologic drug creation.
Through iterative AI predictions, wet lab validation, and AI training we enable a virtuous cycle that we believe will accelerate us toward fully in silico biologic drug discovery.
In some cases we may out-license or transfer drug candidates for clinical advancement by a partner, with the expectation of a greater share in the economics relative to the milestones and royalties we may secure for our core platform technology development licenses. • Drive commercial adoption of our Integrated Drug Creation platform capabilities: Driving the adoption of our Integrated Drug Creation platform across existing and new markets will require significant investment.
In some cases we may out-license or transfer drug candidates for clinical advancement by a partner, with the expectation of a greater share in the economics relative to the milestones and royalties we may secure for our core platform technology development licenses. • Successfully complete our drug creation activities and enter licensing arrangements with our partners: Our business model depends upon entering into licensing arrangements with our partners to advance the drug candidates which we generate through clinical development to commercialization.
This combination of in silico modeling with wet lab testing allows us to generate immense real-world datasets that we harness to train and refine our deep learning models. These models guide our protein and cell line designs and enable in silico optimization of multiple attributes.
Our AI models accelerate the design and optimization of antibody candidates with potentially novel, best-in-class attributes. We then use our proprietary wet lab assays to validate those antibody candidates at scale. This combination of in silico modeling with wet lab testing allows us to generate immense real-world datasets that we harness to train and refine our deep learning models.
Prior to our initial public offering in 2021, other income (expense) also included adjustments of our convertible notes and preferred stock warrant liability to fair value. 75 Table of Contents Results of Operations The results of operations presented below should be reviewed in conjunction with our consolidated financial statements and notes included elsewhere in this Annual Report.
Results of Operations The results of operations presented below should be reviewed in conjunction with our consolidated financial statements and notes included elsewhere in this Annual Report.
We refer to our customers as “partners” when describing our relationship in an agreement. Technology development revenue Our TDAs generally include multiple phases of Discovery and/or CLD; such as target discovery, library design, assay development, strain screening, fermentation optimization, purification, and analytics that typically all represent a single performance obligation.
We refer to our customers as “partners” when describing our relationship in an agreement. Technology development revenue Our drug creation agreements generally include multiple stages of drug creation that combined represent a single performance obligation.
Given the nature of our relationships with our partners, we do not control the progression, clinical development, regulatory strategy, public disclosure or eventual commercialization, if approved, of these product candidates. As a result, our future success and our potential eligibility to receive milestone payments and royalties are entirely dependent on our partners’ efforts over which we have no control.
Given the nature of our relationships with our partners, we often do not fully control the progression, clinical development, regulatory strategy, public disclosure or eventual commercialization, if approved, of our partnered product candidates.
Other Income (Expense) The following table summarizes our other income (expense) for the years ended December 31, 2022 and 2021 (In thousands, except for percentages): For the Years Ended December 31, 2022 2021 $ Change % Change Other income (expense) Interest expense $ (972) $ (3,432) $ 2,460 (72) % Other income (expense), net 2,357 (31,189) 33,546 (108) % Total other income (expense), net $ 1,385 $ (34,621) $ 36,006 (104) % Interest Expense Interest expense was $1.0 million for the year ended December 31, 2022 compared to $3.4 million for the year ended December 31, 2021, representing a decrease of $2.4 million, or 72%.
Other income (expense) The following table summarizes our other income (expense) for the years ended December 31, 2023 and 2022 (In thousands, except for percentages): For the Years Ended December 31, 2023 2022 $ Change % Change Other income (expense) Interest expense $ (1,010) $ (972) $ (38) 4 % Other income, net 6,059 2,357 3,702 157 % Total other income, net $ 5,049 $ 1,385 $ 3,664 265 % Interest expense Interest expense was $1.0 million for the years ended December 31, 2023 and 2022, remaining consistent between periods.
Other income (expense), net Other income (expense), net , was $2.4 million income for the year ended December 31, 2022 compared to $31.2 million expense for the year ended December 31, 2021, representing a change of $33.5 million, or 108%.
Other income, net Other income, net , was $6.1 million income for the year ended December 31, 2023 compared to $2.4 million income for the year ended December 31, 2022, representing a change of $3.7 million, or 157%, primarily attributable to increases in investment income from cash, cash equivalents and short-term investments.
We expect to incur significant expenses to advance these research and development efforts or to invest in or acquire complementary technologies, but these efforts may not be successful. • Create our proprietary asset pipeline. We intend to selectively create our own lead drug candidates and advance them up to the IND stage or later.
We expect to incur significant expenses to advance these research and development efforts or to invest in or acquire complementary technologies, but these efforts may not be successful. • Drive commercial adoption of our Integrated Drug Creation platform capabilities: Driving the adoption of our Integrated Drug Creation platform across existing and new markets will require significant investment.
Business combinations We utilize the acquisition method of accounting for business combinations and allocate the purchase price of an acquisition to the various tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. We primarily establish fair value using the replacement cost approach or the income approach based upon a discounted cash flow model.
Contingent Consideration We utilized the acquisition method of accounting for our business combination related to the Totient acquisition which included allocating the purchase price of the acquisition to the various tangible and 90 intangible assets acquired and liabilities assumed based on their estimated fair values.
The Shelf Registration Statement was declared effective by the SEC on September 2, 2022. To date, we have not issued any securities or received any proceeds from the sale of any securities registered pursuant to the Shelf Registration Statement.
The Shelf Registration Statement was declared effective by the SEC on September 2, 2022.
Our continued growth depends on our ability to expand the scope of our existing partnerships and add new molecules for Discovery or CLD partnerships with current partners. • Successfully complete our technology development activities and enter licensing arrangements with our partners: Our business model depends upon entering into licensing arrangements with our partners to advance the drug candidates which we generate through clinical development to commercialization.
Our continued growth depends on our ability to expand the scope of our existing partnerships and add new molecules for drug creation partnerships with current partners. • Create our proprietary asset pipeline.
In September 2021, the JMA was amended to shorten the term to approximately three years, ending in October 2022. 76 Table of Contents Operating Expenses The following table summarizes our operating expenses for the years ended December 31, 2022 and 2021 (In thousands, except for percentages): For the Years Ended December 31, 2022 2021 $ Change % Change Operating expenses Research and development $ 58,908 $ 44,586 $ 14,322 32 % Selling, general and administrative 40,552 28,780 11,772 41 % Depreciation and amortization 13,037 6,654 6,383 96 % Total operating expenses $ 112,497 $ 80,020 $ 32,477 41 % Research and development Research and development expenses increased by $14.3 million, or 32%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Operating expenses The following table summarizes our operating expenses for the years ended December 31, 2023 and 2022 (In thousands, except for percentages): For the Years Ended December 31, 2023 2022 $ Change % Change Operating expenses Research and development $ 48,067 $ 58,908 $ (10,841) (18) % Selling, general and administrative 37,832 40,552 (2,720) (7) % Depreciation and amortization 13,999 13,037 962 7 % Goodwill impairment 21,335 — 21,335 100 % Total operating expenses $ 121,233 $ 112,497 $ 8,736 8 % Research and development Research and development expenses decreased by $10.8 million, or 18%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
This will increase the value of our assets and serve as further validation of our platform. We may enter into clinical trials and/or manufacturing partnerships to advance a lead candidate.
We may enter into clinical trials and/or manufacturing partnerships to advance specific therapeutic assets to target such value inflection points. We believe that by developing our own pipeline, we will create optionality for enhanced monetization and validation of our platform.
The increases in the administrative expenses include professional services, insurance costs, and other expenses that are primarily the result of our operating as a public company for a full year. Depreciation and amortization Depreciation and amortization expense increased by $6.4 million, or 96%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
The decrease was primarily driven by decreased stock-based compensation of $1.1 million and decreased insurance and other administrative costs of $2.2 million. Depreciation and amortization Depreciation and amortization expense increased by $1.0 million, or 7%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Collaboration revenue increased by $0.4 million, or 58%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Collaboration revenue decreased by $1.2 million, or 100%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. In September 2021, the JMA was amended to shorten the term to approximately three years, ending in October 2022.
The net cash provided resulted primarily from total net proceeds of $210.1 million from the IPO, the issuance of $125.0 million of convertible promissory notes and Series E redeemable convertible preferred stock, net of issuance costs, in the amount of $4.9 million, partially offset by principal payments made for financed equipment and long-term debt in the amount of $4.1 million.
Cash flows from financing activities In the year ended December 31, 2023, net cash used in financing activities was $4.5 million. The net cash used resulted primarily from principal payments of $5.3 million made for financed equipment, partially offset by proceeds from the issuance of common stock of $0.9 million from stock option exercises and our 2021 ESPP.
For the years ended December 31, 2022 and 2021, we incurred net losses of $104.9 million and $101.0 million, respectively. Research and development expenses increased by $14.3 million, or 32%, for the year ended December 31, 2022 compared to the year 71 Table of Contents ended December 31, 2021.
For the year ended December 31, 2023 we incurred a net loss of $110.6 million, which includes a non-cash goodwill impairment charge of $21.3 million. Research and development expenses decreased by $10.8 million, or 18%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Cash Flows from Investing Activities In the year ended December 31, 2022, net cash used in investing activities was $127.0 million.
Cash flows from investing activities In the year ended December 31, 2023, net cash provided by investing activities was $81.9 million. The net cash provided resulted primarily from maturities of short-term investments of $229.9 million, partially offset by cash used for purchases of short-term investments of $147.3 million and purchases of lab equipment of $0.9 million.
As of December 31, 2022, we had an accumulated deficit of $295.9 million and cash and cash equivalents and short-term investments totaling $164.4 million. Prior to our initial public offering (IPO), we financed our operations primarily through private placements of redeemable convertible preferred stock and convertible notes.
As of December 31, 2023, we had an accumulated deficit of $406.5 million and cash and cash equivalents and short-term investments totaling $97.7 million.
The timing and scope of any approval that may be required by the U.S.
As a result, our future success and our potential eligibility to receive milestone payments and royalties are significantly dependent on our partners’ efforts over which we have no control. The timing and scope of any approval that may be required by the U.S.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We are a generative AI drug creation company harnessing deep learning and synthetic biology to expand the therapeutic potential of proteins. We leverage our Integrated Drug Creation platform to identify novel drug targets and create encouraging biotherapeutic candidates.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Absci is a data-first generative AI drug creation company that combines AI with scalable wet lab technologies to create better biologics for patients, faster.
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We believe our approach enables us, and our partners, to develop novel biologics that are optimized for many traits at disruptive speed.
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With the data to train, the AI to create, and the wet lab to validate, our Integrated Drug Creation platform aims to engineer better biologics with design-in functionality and best-in-class properties. Antibody-based therapeutics represent an extraordinary medical and economic opportunity, yet the biopharmaceutical industry faces significant challenges in bringing these life-changing medicines to patients.
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We couple our powerful deep learning AI models, built to understand and predict determinants of protein function, with our proprietary synthetic biology capabilities, which include high-throughput single-cell assays that can evaluate billions of drug sequence variants, each within its production cell line, for target binding affinity, protein quality, and production level (titer).
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Our Integrated Drug Creation platform is designed to improve upon traditional biologic drug discovery by using AI to simultaneously optimize multiple drug characteristics that may be important to development and therapeutic benefit. This has the potential to significantly shorten time to clinic and increase the probability of success.
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Our target platform technology (formerly “Totient”) uses machine learning computational methods to evaluate patient tissue samples and, without biological bias, identify disease-relevant fully human antibodies and their disease- and tissue-specific molecular targets.
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Our approach expands the possibilities in biopharmaceuticals — shifting from a paradigm of drug discovery to drug creation — with the goal of bringing best-in-class and first-in-class antibody therapeutics to the patients who need them. Generative AI depends on massive training datasets to generate quality results.
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In addition to the direct utility of these antibodies and targets as drug discovery assets, these data comprising antibody-epitope recognition elements expand our AI models’ training sets and may improve predictive capabilities for future discovery campaigns.
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For example, GPT-4, a well-known generative AI model, was trained on data at scale readily available through public sources such as the internet. Such a data set does not exist for drug discovery. For this reason, current AI drug discovery mainly focuses on small-molecule drugs.
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Developing our own drug discovery pipeline: We intend to develop drug candidates for our own drug discovery pipeline. With the ability to find both targets and lead candidates, we intend to develop promising lead candidates to up to the investigational drug application IND stage or later.
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Their simpler structure allows the synthesis and screening of million-member chemical libraries, which can then provide training data for generative AI models. In contrast, using AI models to design biologic drugs is more challenging because the existing biological datasets are much smaller, meaning there is less training data available for developing highly predictive AI models.
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Throughout 2021 and 2022, we have continued making investments in our operating capacity which has enabled us to achieve additional project-based milestones in our technology development and partnership agreements.

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