AbCellera Biologics Inc.

Good afternoon and welcome to Absella Rust Q3 2024 Business Update Conference Call. My name is Tamiya and I will facilitate the audio portion of today's interactive broadcast. If you would like to ask a question, please press star 1 on your telephone keypad. If you require assistance at any time during the call, please press star 0 to access the help hotline. At this time, I would now like to turn the call over to Trent Stymart, Absella Rust Chief Legal and Compliance Officer. You may proceed.

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

Thanks, Trin, and thank you everyone for joining us today. Given that there were a few new disclosures this quarter, I'll use today's prepared remarks to give a brief update on Absella's position and our progress. It was a year ago that we committed to building an internal pipeline and transitioning from a platform company to a clinical stage biotech. Over the past 12 months, we've reorganized our teams and reallocated our investments, focusing on advancing our internal programs and completing the build of our platform capabilities. The first two programs in our pipeline, ABCL 635 and ABCL 575, are on track for CTA filings in Q2 of next year. Behind them, we are prosecuting a broad portfolio of discovery stage programs. This includes wholly owned programs against multi-pass transmembrane protein targets, T cell engagers, and a smaller number of 50-50 co-development programs on novel targets and to greater antibody conjugates. We are pleased with the breadth and the quality of this portfolio, and we are confident that it will mature into a pipeline of differentiated clinical assets. At the same time, we are now in the final stages of building our capabilities and facilities. Notably, this quarter, we completed the move in to our new headquarters in Vancouver, finalizing a project that began back in 2020. We also continue to make steady progress on our GMP manufacturing facility, which remains on track and will come online in 2025. Additionally, over the past year, we have built our translational and development teams and are well prepared for our first two clinical trials starting next year. We anticipate further investments in this team as our pipeline continues to advance and to grow. Turning to partnering, as mentioned on the last call, this quarter we expanded our partnership with Eli Lilly. Consistent with our focus on pipeline development, our partnering priority moving forward is to build on co-development collaborations where we have co-ownership of resulting assets. In addition, we will continue to look to engage with existing and new partners on our TCE platform. And in relation to this, we will be presenting updated data on our TCE platform later this week at CITC. I'd like to end by thanking our leadership and teams for their work in successfully navigating what has been a year full of change and challenge. We are clearly on track in our transition to a clinical stage company. Over the coming years, with focus and execution, I am confident that this path will deliver maximum value to patients and to shareholders. And with that, I will hand it over to Andrew to discuss our financials. Andrew?

Thanks,

Carl.

Absela continues to be in a strong liquidity position with approximately $670 million in cash and equivalents and with roughly $210 million in available government funding to execute on our strategy. In the third quarter of 2024, we continue to execute on our plans to advance both partner-initiated and internal programs and to complete our CMC and GMP investments. Looking at our key business metrics, in the third quarter we started work on two partner-initiated programs, which takes us to a cumulative total of 95 programs with downstream participation. During the quarter, ABDARA announced that ABD147 received orphan drug designation from the FDA. As we have stated previously, we view our growing list of progressing molecules in the clinic as specific examples of our near and midterm potential revenue from downstream milestone fees and royalty payments in the longer term. Turning to revenue and expenses, revenue in the quarter was almost $7 million, mostly driven by research fees relating to work on partnered programs. This compares to revenue of also approximately $7 million in Q3 of last year. We expect research fee revenue to trend lower as we increasingly focus on internal and co-development programs. Our research and development expenses for the quarter were approximately $41 million, $3 million more than last year. This expense is driven by ongoing program execution, continuing platform development, and our increasing investment in our internal program pipeline. In sales and marketing, expenses for Q3 were about $3 million, a small reduction relative to last year. And in general and administration, expenses were approximately $19 million compared to roughly $14 million in Q3 of 2023. The increase is driven primarily by expenses related to the defense of our intellectual property. Looking at earnings, we are reporting a net loss of roughly $51 million for the quarter, compared to a loss of nearly $29 million in the same quarter of last year. This loss includes a non-cash impairment charge for in-process R&D of approximately $32 million. This impairment resulted from our prioritization of internal programs and the decision to discontinue the development of next-generation transgenic mice. In terms of earnings per share, this quarter's result works out to a loss of $0.17 per share on a basic and diluted basis. Looking at cash flows, in the first nine months of 2024, we have used approximately $118 million in cash and equivalents. This includes funding all operations, as well as the investments completing our infrastructure build of our headquarters and CMC GMP manufacturing capabilities. Operating activities for the first nine months of 2024 used roughly $100 million. As a part of our treasury strategy, we have nearly $520 million invested in short-term marketable securities. Our investment activities for the nine months included an approximately $124 million net decrease in these holdings. All other investment activities amounted to a net $38 million, including approximately $63 million invested in property, plant, and equipment driven by our ongoing work to establish CMC and GMP manufacturing capabilities. The investments in PP&E were partially offset by government contributions and the cash proceeds from the sale of our stake in Invitex in this quarter. We expect our investments in PP&E to continue at approximately this rate through the fourth quarter of 2024 and be substantially complete in early 2025. Altogether, we finished the quarter with $670 million of total cash, cash equivalents, and marketable securities. As a reminder, we have received commitments for funding of our GMP facility and for the advancement of our internal pipeline from the Government of Canada's Strategic Innovation Fund and the Government of British Columbia. This available capital does not show up on our balance sheet. With approximately $670 million in cash and equivalents and the unused portion of our secured government funding, we have approximately $880 million in total available liquidity to execute on our strategy. With respect to our overall operating expenditures, our capital needs are very manageable. We continue to believe that we have sufficient liquidity to fund well beyond the next three years of pipeline and platform investments. And with that, we'll be happy to take your questions. I'll turn it back to the operator.

Thank you. We will now begin the Q&A session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason at all you would like to remove that question, please press star followed by 2. Again, to ask a question, please press star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. The first question comes from Allison Bradfield with Piper Sandler. You may proceed. Allison, your line is open. Please enter your name.

Hey, sorry. Can you hear me? Hey, sorry about that. I had a question. Okay, great. Sorry. Maybe just a question for me on Ox 40 and the competitive landscape there. You know, I'm just considering some recent competitive updates like from Rocatindal Mab, which I think kind of underwhelms investors. I'm just curious, could you update us or share your thinking on advantages of an Ox 40 ligand targeted therapy such as 575? You know, does that data change your view of the landscape? And does your overall view of the space in a topic term versus other, you know, in-flamed indications? I'd just be curious to get your thoughts on that as it relates to 575. Thanks.

Sure, Allison. Carl here. So first, yes, we did see the update on Rocatindal Mab. And, you know, I think that does, you know, put some additional data on the table to address this question that we've gotten a lot about the difference between Ox 40 ligand and Ox 40. You know, before going there, I would emphasize that Roc is also an antibody with a different mechanism of action than what we have in 575. So Roc is engineered to be a depleting antibody, which means that it ablates or kills the cells that express Ox 40. Whereas what we have is an effector null antibody that is non-depleting of the target cells, which are, you know, antigen presenting cells typically. So I've had this question a lot. You know, my scientific response has been for some time that this pathway is critical to the expansion and survival of both B cells and T cells, and that you should be able to get the effect if you block either Ox 40 or Ox 40L. So, you know, prior to that data, I would have said it's unclear that one has a definitive advantage over the other. What we did see with the Amgen data was significantly less response or efficacy as compared to what was seen with L-atilumab. So from our perspective, that reinforces the view that non-depleting Ox 40 ligand antibodies are currently the lead horse in this race. And of course, Amlatilumab is the first one that's out there. 575, as I've said before, is engineered to have a -in-class profile, namely, you know, potency and developability and half-life that we believe will make it, if not best in class, very comparable to the best in class. It remains to be seen what the early assets will look like. And we are more bullish than ever on that pathway and its potential. So obviously, atopic dermatitis is one of the big indications and the first one that we have stated that we're going to develop into. But beyond that, you know, it has potential in probably a dozen different indications, many of which are significant. And so we remain bullish on that program and we expect to update. We plan to present preclinical data at a conference sometime next year, close to the CTA filing on 575.

Got it. Thank you.

Thank you. The next question comes from Andrea Tan with Goldman Sachs. You may proceed.

Good afternoon. Thanks so much for taking our questions. Carl, could you just speak a little bit more about the extent of data we can expect at CITC for the T-cell engagers? Thanks so much.

Yeah, Andrea. So at CITC, we're going to be presenting updated data from the platform technology, including highlighting a few programs where we have demonstrated we can use the combination of TAA antibodies and our unique CD3 panel to get desired profiles in both killing and cytokine response. And in addition to that, we will be presenting some of the work that we've done that sets up developing TCEs that are trispecifics and that include binders that are designed to provide co-activation or co-stimulation to get better sustained T-cell killing. That is, you know, work that's still in progress, but an area that we think is going to be important, certainly in some cancers, for getting the efficacy that's needed.

Okay, thank you.

Thank you. The next question comes from Stephen Willey with CIFL. You may proceed.

Yeah, good afternoon. Thanks for taking the questions. I guess just with respect to the TCE platform, I know you've talked about how you've been engaged with various partners on this front, but just kind of curious as you think about, you know, what you want the wholly owned pipeline to look like and as you think about the longer-term investment that is necessary to support an expanding pipeline, you know, how many of these programs do you think you could push forward independently on your own in the absence of a broader platform-based partnership?

Thanks, Steve. Carl here, I'll take that one. So first, pulling back, you know, over the past 12 years, we have been working heavily to build the core capabilities to develop new -in-class and -in-class antibody therapies. As mentioned in my prepared remarks, we are getting very close to the end of that investment. And so the foundation in being able to develop lead assets is in place. And we also have just under $900 million in available liquidity to fund the use of that platform to populate a clinical pipeline of what we hope will be and what we intend to be exciting assets for development. We have already, you know, for some time been working on preclinical programs. We have a broad portfolio and are just in the process of doing a portfolio review to prioritize the programs on which we are going to really lean in to populate that clinical pipeline. We're excited about what's there. I think there's a lot there that have potential to be the big winner that we need and to back it up with other ones. Right now, we have an anticipated pace of perhaps as many as two or three new development candidates per year starting next year. And we have liquidity to move those forward past three years, as Andrew mentioned. So once we get there, if we get dispositive data on a clinical asset, so compelling data, that shows that we have a much better than average chance of moving forward a molecule that can address a large unmet medical need, that opens a lot of possibilities for the business. And we would expect that if we take those into late stage trials, we will need to raise equity financing or outlicense another asset in order to fund that. But that's still down the road a bit, as the first two programs are only going to hit the clinic next year.

And is there any timeframe for the completion of this portfolio review?

We'll have that wrapped up near the end of the year. December is the official date. Okay.

And then just another question on the CTA filings that are going to be taking place next year. I know you have funding in place from the Canadian government, but just curious as to whether or not clinical development because of that funding, if there's a requisite amount of that development work that needs to occur through Canadian trial sites, is there some minimal number of sites that need to be used? And if so, how do you think that impacts, if at all, your ability to move through phase one?

Hey, Steve, it's Andrew here. Yeah, good question. The funding is oriented towards taking close to 15 or up to 17 molecules into phase one. And as you note, we have this funding both from the government of Canada and the government of British Columbia to do that very cost effectively, but with those phase ones being done in Canada. So far with the molecules that we're looking at, certainly 575 and 635, we don't anticipate having any issue or any headwind in completing those phase one by running those phase ones in Canada, and it is our intent to do that in Canada. If that turns out to be a requirement or an issue, let's say, for future trials, we can also expand trial sites into the United States if necessary or around the world. But in order to qualify for that funding, those phase ones would need to be conducted in Canada.

Okay.

Thanks

for taking my questions.

Thank you. The next question comes from Suri Creepa, Devarakonda with Truis. You may proceed.

Hey, guys. Thank you so much for taking my question. I have a question about ABCL 635. You mentioned that it's being developed for metabolic and endocrine conditions and also targets the GPTR or Ion channel, which, if experienced well, has been pretty challenging in the field. Can you provide any more color about this target? What sort of market it targets? I think you've said 2 billion in the past, but just wanted to confirm that. And also how competitive you think this space is. Thank you.

Hi, Creepa. Yeah, so we have disclosed previously, I think you've covered most of it, that this is a -in-class antibody against a target for a condition in endocrine or metabolic disorders. And it is against the target that is a multi-pass transmembrane protein target, which has been one of the key areas of emphasis. We do believe that, you know, quite conservatively, there is an addressable market in excess of 2 billion. Beyond that, we're not disclosing any details about that program. We do expect that when the CTA is approved that we will then disclose both the target and the indication. But until then, we're keeping our cards close to our chest for strategic reasons.

Got it. Thank you.

Thank you. The next question comes from Evan Seigerman with BMO. You may proceed.

Hi there. This is Connor on for Evan. Thanks for taking our question. With a few assets entering clinic in the near term, can you maybe just remind us how you're thinking about ramping spend into the new year and sort of allocation of resources for internal programs versus partnered programs given the recent shift? Thank you.

Yeah, hey, Connor. Andrew here. I think into the new year, the phase one clinical trials for 635 and 575, we're not expecting that to be too significant an increase, certainly for 2025 and maybe even into 2026. The costs are still very manageable. I think our R&D expense, the run rate into 2025 will be very similar to as it is in this quarter and in Q4, which we expect to be pretty similar. You may remember at the beginning of the year, we had projected overall expenses to be relatively flat from Q4 of last year, and it has maintained that. The difference is going to be in the first part of 2025, we expect our PP&E, so our CAPEX expenses to drop off significantly. They have still been quite significant through 2025 as we've been completing these big facilities or 2024 as we've been completing the big facilities build. But that will be much different into 2025. But in terms of operating expenses, actually, I would expect 2025 to be very similar to 2024.

Thank you.

Thank you. The following comes from David Martin with Bloomberg. You may proceed.

Thank you for taking my question. Back to 575, you positioned it relative to the other OX40s and OX40 ligands. I'm wondering, what about -a-vis the IL receptor antibodies? Would you expect that you compete for first line with them or for second line? And is there evidence that patients might respond to anti-OX40 ligand if they failed IL-4 receptor antibodies?

Great question. So first I'll say that in atopic dermatitis, I think it's important to specify the indication. There's really, to my mind, three mechanisms that are working and driving a lot of the interest. There's the IL-13 antibodies, which Dupixent is the big one. And then now, OX40, OX40 ligand coming up. Our view is that Dupixent is a great drug, but it is not working for everyone. And there's a substantial fraction of patients that are non-responders or that discontinue. I think that's roughly 40%. I'd have to check that, but it doesn't work for everyone. And there's a large unmet medical need and obviously not a huge penetration yet in biologics for atopic dermatitis. So based on that, we would think that the OX40, OX40 ligand mechanism would probably enter second line behind Dupixent. And that over time, we think it could have real potential to take first line as people start to recognize the advantage, particularly in the durability. So Dupixent being a two week administration and Sanofi testing right now, both one month and three months. And we have a molecule that we believe would get at least three months, perhaps even more. So we think it could be a competitive product in that space. And the other part of your question was, do you think that patients would respond differently to IL-13 versus OX40, OX40 ligand? Based on the biology, we think that that's a pretty good bet, but that remains to be shown in the clinic. I have heard anecdotally that the response rates for patients on ROC with similar post-Dupixent. And so that would lend some credence to the idea that this is a orthogonal therapy that would catch patients that fail on Dupixent. But I don't think that is really, or that proposition has really been tested yet in the clinic.

Got it. Thanks.

Thank you. As a quick reminder, if you would like to ask a question, please press star one on your telephone keypad. The following comes from Brendan Smith with TD Securities. You may proceed.

All right, great. Thanks for taking the question. Maybe just one more on the TC platform and maybe zooming out just a little bit. I mean, can you just remind us what an ideal partnership there would actually look like? I mean, I understand timing is still TBD, but kind of just looking at how the T cells, excuse me, T cells space a little bit more broadly has evolved with oncology and autoimmunity example. Just trying to understand a bit more concretely how you're thinking about the direction for that vertical based on maybe what you're seeing in your data and kind of how that could evolve over the next year or so. Thanks.

Sure. That's an interesting question. First, I'd say that, you know, it's typical that modalities sort of rise and fall and sort of ebb and wane in their attention and enthusiasm. We certainly see right now that there's there's a groundswell of excitement about TC ease. You're seeing that in conversations or seeing that some of the clinical data and also in some of the deals that have been announced recently. So our view is that, you know, we have put in place what we still believe are, you know, some of if not the best tools to create TC ease. What we really need to do right now is address the science and figure out how to put those together to make drugs that are effective and safe for patients. That's going to be played out, you know, in part by the work we're doing internally, but also through collaborations with companies that have experience in that space and have interest and commitment to start to do some of the clinical testing that's really going to be needed to make these therapies. Or to get these therapies, the potential that I think a lot of people believe that they have. So in terms of, you know, our first partnership, of course, we'd love to get something that that brings in some cash up front to show some validation for the deal. But honestly, the most important thing from my perspective is that we work with teams that are deep in the science and working with us to help to understand how best to use these tools to make new drugs that actually work for cancer patients. And this is a story that is not going to play out over a quarter or a year. This is a story that's going to play out over several years. But we are, you know, enthusiastic and I think excited about what we're seeing both internally and externally and believe that we're well positioned to participate in what's going to be an important part of cancer therapy.

Thanks very much.

Thank you. The next question comes from Punip Suda with Learing Partners. You may proceed.

Yeah, hi, Carl. Andrew, thanks for taking my question. So maybe first one on, can you provide us an update on the GMP facility? And we wanted to see how the pipeline stacks today and into that. And then just a broader question on biosecure. Curious if you are seeing any inbounds as a result of the US biosecure and just wondering if people are looking for capacity and whatnot. Maybe the first question, follow up. Thank you.

Hey, I'll take the first part of that and then hand it off to Carl. So you'll remember about four years ago we started on this project and with the plan to bring our first molecules through that facility in like late 2024, early 2025. So we are now believing it's going to be in late 2025 that we'll be bringing our first molecules through. I'd say the project has been doing extremely well. It's been a big lift over the last number of years to build the team and get the facility. As you'll remember, it's a greenfield site that we used here not far from our headquarters. And we're pretty excited to be bringing the first molecules and engineering runs through there in 2025. And then our next molecules, NOT 575 and 635, would be manufactured in that facility. And maybe I'll hand off to Carl just to talk a little bit more about that.

Sure. So we have, as I mentioned, my prepared remarks, you know, a broad preclinical pipeline that we are moving forward. There's a substantial number of those or several of those that are now getting pretty close to development candidate. And so over the next, you know, couple months or few months, we'll have clarity on which of those molecules, either from wholly owned EPSOL or internal programs or through co-development, are likely to be the first ones to go through the facility. And based on where the portfolio is and how the science is advancing, of course, there's always risk until things are done. We don't expect there'll be any problem in having valuable programs to work on through the first year. The first year of this facility is going to be about demonstrating the capabilities and making sure that we've got everything, you know, working exactly as it should. After that, I expect, you know, we're going to be well positioned to control that capability, particularly given, you know, what is currently looking like headwinds geopolitically with the Biosecure Act. So we believe that, you know, over time, as this capability builds, controlling your own manufacturing will be a major advantage that will provide, you know, speed and honestly, over time, also reduce cost in moving molecules from concept through the clinic.

Got it. My second question is on sort of the priority levels and activity levels within EPSOLARA. You have a number of internal programs. You talked about pipeline moving forward, 575, the 635, 675 programs, the TCE program, your efforts ongoing on the manufacturing facility side. Can you maybe, Carl, can you prioritize for us what are sort of the near term priorities and more sort of medium term as you go into 2025?

Sure. So as I mentioned in response to Steve's question, you know, the situation is that we have in quite a unique way for a company at our stage, a fully built platform that can generate high quality antibody assets. And we have the capital that we're going to turn over the next few years into a clinical pipeline. So the priorities in the company are really simple. It's make sure that we're making good capital allocation decisions in that portfolio so that we find our first big winner. And then the second priority is to make sure we back that up with a differentiated portfolio of exciting assets. And the third is to make sure that we continue to work on efficiency and keep our operations focused on that priority so that we stay in control of our future. And as Andrew mentioned, we have a terrific liquidity position. We have lots of runway and we intend to do what it takes to make sure that stays the case.

Okay. All right. Thanks, guys.

Thank you. I'm showing no further questions at this time. I will now turn it back over to Carl Hanson for closing remarks.

Thank you everyone for joining the call today. We appreciate your time and we look forward to providing more updates in the future. Enjoy your evening and we'll talk soon.

This concludes today's conference call. Thank you for your participation. You may now disconnect your line.