AbCellera Biologics Inc.

and compliance officer. You may begin. Thank you. Hello, everyone. Thank you for joining us for Obscilla's 2025 second quarter earnings call. I'm Trent Steinmart, Obscilla's chief legal and compliance officer. Dr. Carl Hanson, Obscilla's president and CEO, and Andrew Booth, Obscilla's chief financial officer are also on the call. During today's call, we anticipate making projections and forward-looking statements based on our current expectations and following the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results may differ materially due to several factors outlined in our latest Form 10-K and subsequent Forms 10-Q and 8-K filed with the Securities Exchange Commission. Obscilla is not obligated to update any forward-looking statements, whether due to new information, future events, or otherwise. Our presentation today, including our earnings press release and SEC filings issued earlier today, are available on our Investor Relations website. The information we provide about our antibody therapy pipeline is for the benefit of the investment community is not intended to be promotional. As we transition to our prepared remarks, please note that all dollars referenced are 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.

Thanks, Trinh, and thank you everyone for joining us today. This quarter we achieved a major company milestone, receiving Health Canada authorization to initiate Obscilla's first two clinical trials for ABCL 635 and ABCL 575. Today I'm pleased to announce that dosing has begun in our Phase 1 clinical trial evaluating ABCL 635 for moderate to severe vasomotor symptoms. This marks completion of the transition from a platform company to a clinical-stage biotech that we committed to back in 2023. After the end of the quarter, we also opened our Phase 1 clinical trial for ABCL 575, and we anticipate dosing will begin shortly. I'm also pleased to announce that we have added a third program to our pipeline by advancing ABCL 688 into IND-enabling studies. We ended the quarter with approximately $750 million in available liquidity, and we are well positioned to continue to execute on our strategy and are on track to complete our remaining goals for 2025. These include continuing to build our pipeline by advancing at least one more development candidate into IND-enabling studies, completing platform and infrastructure investments, and starting to use these capabilities in clinical manufacturing. ABCL 635 is a potential -in-class therapeutic antibody being developed for the non-hormonal treatment of moderate to severe vasomotor symptoms, more commonly known as hot flashes, that are associated with menopause. ABCL 635 is a potential next-generation NK3R antagonist designed to have both an improved safety profile and a more convenient dosing regimen. If ultimately successful, we believe it can be a highly differentiated product that would launch into a large and established market. We successfully completed the CTA process for ABCL 635 in Q2 of 2025, and today we are pleased to announce that we have begun dosing participants. The ABCL 635 Phase 1 clinical trial is a randomized, placebo-controlled, double-blind study in men and postmenopausal women with or without VMS. Its purpose is to evaluate safety, pharmacokinetics, pharmacodynamics, and the frequency and severity of VMS with subcutaneous doses of ABCL 635. The primary endpoint of the study is safety, and a key secondary endpoint is pharmacokinetics. As I mentioned on the last earnings call, we believe the main scientific risk for ABCL 635 is whether or not we can achieve sufficient target engagement. We expect this will be addressed through biomarker and -of-concept studies that are part of our Phase 1 design. As previously stated, we expect initial safety and efficacy data from this trial in mid-2026. Turning to our second program, ABCL 575, we received authorization from Health Canada in May to initiate a Phase 1 clinical trial. The trial was opened in July, and we anticipate dosing our first participants this quarter. This is a double-blind, placebo-controlled study designed to assess safety and tolerability in healthy participants following subcutaneous doses of ABCL 575. ABCL 575 is an investigational antibody therapy targeting oxfordyligand that is being developed for the treatment of moderate to severe atopic dermatitis and which also has broad potential in several other I&I indications. We recently presented preclinical data which demonstrates it has potent functional activity in vitro that is in line with amyotillumab as measured by cytokine responses across a variety of cytokines, including IL-13, IL-5, and IL-9. As a reminder, ABCL 575 is engineered with Half-Life Extension to support less frequent dosing. Based on PK data we have obtained from studies in fCRN humanized mice, we predict a human half-life of approximately 67 days. Using this half-life, our modeling predicts that a 300-milligram dosing of ABCL 575 every six months should achieve circulating concentrations that remain above the efficacy threshold that was observed for amyotillumab. This prediction, once confirmed in clinical studies, would support a product profile with subcutaneous dosing once every six months. In addition to our clinical programs, we continue to allocate significant resources to internal discovery to build out our pipeline. This quarter we advanced ABCL 688 into IND and CTA enabling studies. ABCL 688 is a potential antibody medicine for an undisclosed indication in autoimmunity. It is the third program in our pipeline and the second program derived from our GPCR and ion channel platform. Similar to ABCL 635, for strategic reasons we will not be disclosing additional information on ABCL 688 until this program reaches the clinic. Our intent is to submit an IND in mid-2026. For the remainder of the year, our priorities are as follows. Executing on our clinical studies with ABCL 635 and ABCL 575, moving ABCL 688 forward in IND enabling studies, advancing a fourth program from discovery into our pipeline, and finally bringing our clinical manufacturing capabilities online. And with that, I'll hand it over to Andrew to discuss our financials. Andrew? Thanks, Carl.

As Carl pointed out, Epsilera continues to be in a strong liquidity position with approximately $580 million in cash and equivalents and with roughly $170 million in available committed government funding to execute on our strategy. We are continuing to execute on our plans with a focus on internal programs and on completing our CMC and GMP investments. Looking at our business metrics, in the second quarter we started work on five partner-initiated programs, which takes us to a cumulative total of 102 programs with downstream participation. Both ABCL 635 and ABCL 575 received their clinical trial authorizations in the second quarter, thus advancing into the clinic. They are the first Epsilera-led molecules to reach the clinic, taking the cumulative total number of molecules to have reached the clinic, including those led by partners, to 18. As we have previously stated, we view the overall progress of molecules in the clinic as a potential source of near and midterm revenue from downstream milestone fees and royalty payments in the longer term. Turning to revenue and expenses, revenue for the quarter was approximately $17 million, comprising of research fees relating to work on partner programs and amounts related to licensing. This compares to revenue of $7 million in the same quarter of 2024. The licensing fees of $10 million stems from our Triene Humanized Rodent Platform and most closely consists of a lump sum amount in this quarter. With respect to research fee revenue, as we have mentioned in the past, we expect these to continue to trend lower as we increasingly focus our internal and co-development programs. Our research and development expenses for the quarter were approximately $39 million, $2 million less than last year. This expense reflects ongoing investment in our internal and co-development programs. The slight decrease is related to the timing of larger program-specific related expenses, which were larger in the second quarter of last year. In sales and marketing, expenses for Q2 were about $3 million, a small reduction relative to the same quarter last year. And in general and administration, expenses were approximately $19 million, compared to roughly $20 million in Q2 of 2024. Included in these expenses are the ongoing expenses related to the defense of our intellectual property. Looking at earnings, we are reporting a net loss of roughly $35 million for the quarter, compared to a loss of $37 million in the same quarter of last year. In terms of earnings per share, this result works out to a loss of $0.12 per share on a basic and diluted basis. Looking at cash flows, operating activities for the first half of 2025 used approximately $44 million in cash and equivalents. Excluding investments in marketable securities, investment activities amounted to a net $36 million, mostly in property, plant, and equipment driven by the ongoing work to establish CMC and GMP manufacturing capabilities. The investments in PP&E were partially offset by government contributions. As a part of our Treasury strategy, we have about $460 million invested in short-term marketable securities. Our investment activities for the quarter included an approximately $12 million net increase in these holdings. Altogether we finished the quarter with $580 million of cash, cash equivalents, and marketable securities. As a reminder, we have received commitments for funding for our GMP facility and 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 over $580 million in cash and equivalents and the unused portion of our secured government funding, we have around $750 million in total available liquidity to execute on our strategy. The cash usage for the remainder of 2025 will continue to prioritize advancing our two lead programs through their Phase I clinical studies, building the pre-clinical pipeline, and completing our investment in the integrated clinical manufacturing capabilities. Our new manufacturing facility is on track to come online at the end of 2025, as we had indicated in previous calls. With respect to our overall operating expenditures, our capital needs continue to be very manageable. We continue to believe that we have sufficient liquidity to fund well beyond the next three years of increasing pipeline investments. And with that, we'll be happy to take your questions.

If you'd like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by 2. Again, to ask a question, it's star 1 on your telephone keypad. Our first question is from Andrea Newkirk with Goldman Sachs. Your line is now open.

Hi everyone, this is Talani on for Andrea. Thanks for taking our questions. I can grab some progress this quarter. One quick one from us. Just given the recent news of the delayed to-do for our Allen's and attendants, do you guys anticipate any risk to the development path for 635 from a regulatory perspective? And what do you expect regulators will be most focused on in evaluating the drug profile as it advances in development? Thank you.

You were breaking up a little bit at the end of the question. I did get the first part of it. So yes, there was a delay with Allen's and attendants. Our understanding is that the FDA requested additional information from Bayer and that information is forthcoming. I think the comment suggested that there was no concern raised about the approvability and our expectation is that that would move forward to approval later this year. So beyond that, I don't think we have anything, any special insight into that. I didn't get the last part of the question. Could you please repeat?

Sure, sorry about that. I was just wondering what do you think the FDA and other regulators will be focused on in evaluating 635's profile as it moves forward in clinical development?

I'm sure. So there's now, I think, a well-trod path for the NK3R class, both with Fezlin and Allen's and attendants. Obviously, we need to demonstrate efficacy. As I mentioned in my prepared remarks, we're excited about the upcoming data and the readout midpoint next year that should give us a lot of information about the efficacy and target engagement, which we do see as the primary scientific risk. On the safety side, as I mentioned on the last call, so far, what has been seen in the class for NK3R antagonists is some liver toxicity or the signal of liver toxicity as well as somnolence or sleepiness. We believe the somnolence is because of targeting not just NK3R but also NK1R, which our antibody does not do. So we expect that that would not be a concern. And similarly, because we are the first in class antibody for this indication and antibodies are not metabolized in the liver as our small molecules, and because there is little evidence of expression of NK3R in the liver, we don't expect that there will be liver tox associated with our drug. But of course, we need to demonstrate that in the trial. And I'm sure the regulators as the investment community will be looking at the two main things, which we always look at, which is efficacy and safety.

I have a couple. Thank you.

Our next question is from Rikirpa Devarakonda with RUIS. Your line is now open.

Hey, guys. Thank you so much for taking my question and congratulations on the progress of QUATA. So for the ABCL635 phase one trial, congrats, first of all, on getting the trial initiated efficiently. But now that you've initiated the trial, can you talk a little bit more about the specifics? Is there a certain, what the total number of patients and if there is a certain ratio of healthy men to postmenopausal women you expect to enroll? And maybe a bit more broader question. You previously said that 50% of menopausal women are hesitant to take HRT because of the pregnancy and the consequences. With Dr. McCarrie being, he seems to be a very strong proponent of HRT. Do you think this might change the way, the market overall or do you think you still have a substantial market?

Sure. So first I'll maybe provide a little bit more information on the clinical trial. So as you might expect, the first parts of the trial are basically a single ascending dose and multiple ascending dose. So in the single ascending dose, we'll include both menopausal men. I'm sorry, pardon me. That would be difficult to recruit. We will include both menopausal women and healthy men or healthy male volunteers. And in that part of the trial, we will be able to assess the biomarkers. In the MAD, we will be recruiting only postmenopausal women. And the combination of the SAT and the MAD could be roughly 56, 60 patients or so. Once we progress on to the proof of concept, we expect to enroll up to 80 patients. And in that case, in that phase of the study, we will of course be recruiting postmenopausal women with moderate to severe BMS. So to the second part of your question, there has been some discussion lately about the use of menopausal hormone therapy and some revisiting of the women's health study that was a study that I think cast a bit of a shade on the benefits of menopausal hormone therapy for the treatment of BMS and other symptoms related to menopause. Our view has always been that the NKHVR class is not in competition with hormone therapies. So it turns out that there are roughly 20% of the eligible population that either have contraindications, so have risk factors that mean they're not eligible for hormone therapy, or that try hormone therapy and are unable to continue. So 20% of the population for which hormone therapy is not meeting their needs. And then of course, there's some other portion of the 80% that are going to have a preference not to use hormone therapy. So if you look at the number of eligible patients in the US alone, that's a very large patient population, and we would need to only capture a relatively small portion of that market to have this drug be a terrific success. So we're still very confident about the market opportunity, and we expect the conversation about MHT will continue as it should, and that doesn't change our view of the market since we sort of had that in mind from the very beginning.

Okay, great. Thank you so much for the color. Really helpful.

Our next question is from Faisal Khurshid with Fully Rank Partners. Hi, this is now open.

Hey, guys, thank you for taking the question. I really appreciate it. I just wanted to ask on the partnership and licensing revenue for the quarter, it seemed a little bit higher than kind of where you've been. Should that be an expectation kind of going forward, or how should we think about sort of the cadence and sequencing of those funds coming in? Thank you.

Yeah, good question. This is Andrew here speaking, Faisal. The, no, you should not, this was definitely a one-off payment, really related to activities post the acquisition of Triani that were completed really as an earn-out to the former shareholders of Triani. So you'll see in addition to the 10 million licensing revenue, a change in the contingent consideration on our balance sheet, which is really the balancing entry related to that transaction. So it's not something that we would expect to have happen in the future.

Got it. Thank you.

Our next question is from Malcolm Hoffman with BMO. The line is now

open. Hi, Malcolm Hoffman. I'm from BMO. Can you remind us what key efficacy data we should be looking out for in the 635 Phase I study? I understand we're largely looking for safety in a Phase I, but what biomarker efficacy measures would start to give us kind of confidence and further development here from a competitive perspective? Thanks.

Sure. So Carl here. So early in the study, we will be assessing some biomarkers, so LH and FSH in men and women. In the SAD, where there will be only healthy volunteers participating, men and women. Obviously in the men, we'll be able to assess testosterone in the women estradiol. So all of those, I think, are a really positive indication, and we expect to see those biomarkers modulated by treatment at the higher doses. So that's a first check, but that is not equal to efficacy. So the real measure of efficacy needs to wait until the POC study. And as I mentioned, we will be enrolling up to 80 post-menopausal women with moderate to severe BMS. And there we're going to be assessing the frequency and severity of BMS, which is self-reported. And so we won't have that data until sometime in mid-2026. But we think that that study is sufficiently powered to give us, you know, coming out of that, if it lines up the way that we hope and expect, a lot of confidence that we've got something that looks like a drug and that we intend to move forward.

Appreciate it. Thanks, guys.

Our next question is from Jacqueline Giso with TD Security. Your line is not open.

Hi, guys. I think it's supposed to be Brendan. I think you have Brendan from TD Security on. Sorry about the confusion there. Thanks for taking all the questions, guys, and all the good color expertise of the BMS asset moving along. I actually just wanted to maybe ask another follow-up on that, actually, just related to target dosing in any respect. I fully appreciate it. It's still early days. A lot to kind of understand with some of the biomarker data and what that realistically means for kind of uptake down the road. But are there any special considerations when you're thinking about formulation or frequency of dosing that could kind of help as you're thinking about clinical plan down the road and then just any ability to kind of target these kinds of patients from a commercial standpoint?

Yeah, I'm happy to give a little bit of color on that. So a lot of this rests on our preclinical work from which we believe that we've got an antibody that has a half life and a potency that would support once monthly dosing on a single subcutaneous dose. And that subcutaneous dose would be a high concentration formulation at 150 mics per mil at two mils. So remains to be seen. But based on what we've seen so far, we've got a molecule we believe hits that TPP. And of course, that's one of the things we're going to be testing both in the efficacy and in the bioavailability and PK data that will come out of the Phase 1 study.

OK, got it.

Great. Thanks, guys.

Our next question is from Stefan Wiley with the beautiful lines.

Thanks for taking the question. This is Josh under Steve and congrats on the progress. So I noticed the healthy volunteer trial for 575 is now posted to clinical trials. I noticed there was one Canadian site listed and I guess just looking forward as like a longer term strategy, do you plan on activating in the US sites beyond Phase 1? Is this kind of related to like a capital commitment contingency with the governments of Canada and British Columbia to run all your trials in Phase 1 in Canada first? And then I just have to follow up.

Yeah, so we have activated a site in Canada that's an expert in dermatology. We are very pleased with that site, and we think they have full capabilities to execute the Phase 1 study. Right now, our focus is on that. You know, from our perspective, the big thesis around 575 is our belief that the ox 40 lagging class is going to be an immense class, not just in atopic dermatitis, but in other autoimmune and inflammatory conditions. We think that the key readout we're going to get in the near term is going to be bioavailability and PK, confirming some of the preclinical work we've done and the modeling that I showed during my prepared remarks. And that the other big catalysts are going to come from outside of the company, in particular, some of the clinical development with amateur lab and other molecules in the class that are moving forward. So we are we are currently focused on that. We are also beginning to engage with the FDA and lay the foundation for the Phase 2 studies, which you would likely expect to include US sites. But we haven't figured that yet, and we have some time before we need to.

Great, thanks. And then just follow up. I know it's early. You said you won't really disclose any details around 688 for now, but could you maybe speak to some of the autoimmune indications of interest you might be considering for this asset?

Yeah, I'm afraid we're going to hold this one close to our chest for strategic reasons. So what I will say is that this is a program that that we're very bullish on. I'd put it in a similar category to ABCL 635. It's one where we have a high conviction in the biology and where we think we can get some meaningful data early on. It's got a bit of a different competitive dynamic, but it's also a program that that we intend to move very quickly. And so our focus right now is getting that to the clinic as quickly as possible. And when we do, we'll be able to share more details with you. So sorry for being a little bit reticent on details, but I think it's probably in the best interest of the program.

No worries. Thanks, guys.

It looks like there are no more questions, so I'll pass the call back over to the management team for closing remarks.

Just to say thank you everyone for the support and for joining us today, and we look forward to updating you as we progress from where we are today into the clinic. Thanks very much.

That concludes the conference call. Thank you for your participation. Enjoy the rest of your day.