Good day and thank you for standing by. Welcome to the AbCellera Q1 2021 Earnings Results and Business Update Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today Tryn Stimart, Chief Legal Officer and Chief Compliance Officer. Please go ahead.

Thank you. Good afternoon everyone and welcome to AbCellera's first quarter 2021 business update. We are pleased to have you with us today where we will discuss the results announced in our press release issued after the market closed today which you can find on our Investor Relations website. With me on the call are Dr. Carl Hansen, AbCellera's Chief Executive Officer and President; and Andrew Booth, AbCellera's Chief Financial Officer. The webcast portion of this call contains a slide presentation that we will refer to during the call. Those of you following along on the phone who wish to access the slide portion of this presentation, may do so on the Investor Relations section of our website. For those who have accessed the streaming portion of the webcast, please be aware that there may be a delay and that you will not be able to pose questions via the web. This presentation may contain forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements are based on management's current expectations and are subject to certain risks and uncertainties. Please review our SEC filings for risk factors that could impact our future performance. Our presentation and SEC filings are available on our Investor Relations website. Note that all dollars referred to during our call today are US dollars. Now, I am pleased to turn the call over to Carl Hansen.

Thank you, Tryn and thank you to everyone for joining us today. I'm excited to share with you the results of our first quarter of 2021 which saw us carrying forward momentum from 2020 and achieving strong growth performance across all areas of our business. But before I do that, I'd like to pull back and take a few minutes to revisit our long-term vision for what we are building here at AbCellera and for the magnitude of the opportunity that we see before us. Put plainly, our vision is to build the most technologically advanced antibody drug discovery engine in the world and to redefine the state of the art for the industry not just today, but for decades to come. This is a bold vision. It is one that we are uniquely positioned to achieve. We believe that the technology stack that we've assembled over the last nine years, offers capabilities in the discovery of therapeutic antibodies that are already unmatched in combined metrics of speed, versatility, quality, and diversity. Despite our leading position today, we are far from done. Over the coming years, we will continue to invest aggressively in building our technology stack to push back the frontiers of what is possible. This is not only about invention and innovation; it is also about building modern facilities to empower interdisciplinary R&D, it is about industrialized molecular biology automation, and it is about integration of CMC and GMP manufacturing. It will require increasingly powerful computational tools based on artificial intelligence that can take advantage of hyperscale data science to predict drug-like properties. It is also about building an elite workforce one that is inspired by the opportunity to work on technologies that can radically change how drug development is done. Perhaps most importantly, it is about maintaining…

Thanks, Carl. First, I'll talk about our key performance indicators. We ended the quarter with 119 programs under contract with 29 different partners. That is a 63% increase in programs under contract as compared to the end of Q1 in 2020. We believe that we are starting to see the combined positive impacts of several factors with this increase in business development activity. These factors include our investment in the business development team and the profile that our platform has received both from the success of our COVID antibody programs and the broader publicity of the technology that we have received from our IPO and being a public company. Importantly, this growth also reflects the success that we have had in our initial programs with some partners, who are now looking to work on more programs with us. We saw that extension of partnerships with several groups in 2020 and again in the first quarter with the expanding relationship with Gilead. During the quarter, we saw two more programs starts in order to take us to 59 cumulative starts. Note, that we are not including our work on 1404 as a new start. The 1404 effort was part of the same COVID antibody program that we started in 2020, which had already delivered bamlanivimab. As a reminder, program starts occur when our partners are ready to trigger the work on a selected target, including having all the appropriate reagents ready for us to start discovery and their teams ready to continue development when they get our results back. This can be variable. It's not unusual for there to be a lot of preparatory work and lag before we actually start a program after signing an agreement with a partner. At the same time, we expect a robust number of program…

[Operator Instructions] Our first question comes from Tiago Fauth with Crédit Suisse. Your line is open.

Hey, thanks for taking the question. So programs under contracts seem to be moving at a fairly good pace and you did mention that it's a leading indicator and outlined some of the factors that may impact the timing of converging a PUC to a new program start. I am curious what is the potential factors that may lead to some attrition between the 2 right? Because since the decision is partially driven by the partner there may be some shift in priorities or new biology find. Curious if you have any expectations explicitly for that? And to the extent that you're comfortable discussing since you said that we can expect a robust number in 2021 during the first few days in Q2 are you seeing a change in that pace? And would you expect to see a performance kind of similar to what you've seen historically? I'm trying to understand exactly what - a little bit what robust could mean? Thanks.

Fantastic. Tiago, Carl Hansen here happy to take the first part of that question maybe I'll then hand off to Andrew Booth. So your question was what was our thinking about potential attrition between programs under contract and subsequent starts. The first thing I'll say to that is that historically we have had very little, if any attrition. So in the deals that we've done historically which have included several deals that were multi-year, multi-target agreements all of those thus far have converted into programs that are either completed or actively been pursued within AbCellera. That doesn't mean that it's not possible that there would be some attrition between the two. I think that probably happens if you sign up for deals with companies that have multiple slots that they anticipate and for some business reason decide that they no longer want to pursue those. We have built that into some of our internal models but to date that has not been a very substantial factor. I will add that one of the things that is difficult to predict is the timing of those. And it is more common that based on scientific data or decisions at the partner there may be starts that are -- that come at a later time than as originally anticipated and that is something that we try to manage. But at the same time, it's important for us that the partners have conviction in their targets and that all of the reagents and materials are in place so that we can begin a program that has the best chance possible to actually make it through to the clinic. With the last part of your question perhaps I'll hand off to Andrew.

Yes. Thanks Carl. Tiago so as you know so many of our deals with partners especially these repeat deals are for multiple targets over multiple years. So we would expect them to be started over a longer period of time. And the large number of PUCs compared to program starts is not a backlog, but rather sales and business development activity that we've done well in advance and secured. And as Carl said quite a high degree of confidence that we will execute on them. It's not unusual for a lot of preps and a lag before we start a program. And we see and as a result again this metric can be variable, but we do see a robust number of programs starts for the duration of 2021. And so, I think we have a high degree of confidence that while this metric was maybe a bit low in the first quarter, we see a high degree of confidence for the remainder of the year.

Perfect. Awesome. Appreciate it. Congrats on the progress.

Thanks, Tiago.

Our next question comes from Stephen Willey with Stifel. Your line is open.

Yes, good afternoon. And thanks for taking the questions. Congrats on the progress. So I know that building out the workflow via new technology is a focal point and I know that's something that you've talked about with respect to putting some of the bam royalties to use. But I guess maybe you can just provide a little bit of color around where you are in that process right now. I guess how much bandwidth do you feel you have at this point to integrate new tech into the workflow? And I guess with valuations now having been reset across the space does that make you any more opportunistic over the near term?

Great question Steve. So Carl here. So on the first part of that we have -- your question was asking where are we in the process and where do we see opportunities in the future. This strategy of rebuilding at the forefront of what is possible with modern technologies a complete solution for antibody drug discovery is one that we set off to complete almost nine years ago. So we have been on this path for quite sometime. It is now very well advanced. And as I said in my opening remarks, I do believe, that we have a full position, at least at the front-end of this process. So today, from going from target biochemistry through to discovery and selecting high-quality candidates, we have invested in technologies that provide diversity, speed, adaptability, that we think, sit at the very front of the industry. It is not at all complete. One of the big themes that we touched on and that you will see in the coming months and years is the emphasis on forward integration. So, building out the capabilities to do translational science, the CMC and the manufacturing, and that is one big theme which will allow us to have more control and accelerate the development of programs particularly from groups that are not enabled internally, to get those to the clinic faster and to get better molecules to the clinics faster. In addition to that, one of the big themes is achieving scale and efficiency. And that is through a combination of R&D and protocol development, but also a very heavy emphasis on data science, being able to organize operations, collect data from the many different points at which we have experimental capabilities. And then, to aggregate that and use things like machine learning, or other AI-based algorithms to accelerate the process of looking through that data and getting increasing returns in terms of speed and efficiency. That's something that's going to play out, not over a year, but it's going to play out over several years, if not decades. I think there's a lot of headroom there, as where technology can go. Given valuations in the space, there certainly are opportunities, where we could see companies with platform technologies or capabilities that would be very synergistic with what we're doing. At this point, we wouldn't comment much more on that. But of course, the emphasis is always on finding the most direct and fast path to achieving the long-term goal and at the same time, making sure that we're not taking shortcuts, and we're putting the very best people, and the very best technologies in place.

Got it. I appreciate the response. And then, just a quick follow-up on 1404, so I know you had previously intimated, I guess, there being some kind of regulatory perspective regarding the utility of combinations to cover resistant variants. But I guess, I'm just kind of wondering based on the preclinical data that was published for 1404. What does that drug combine with bam and etesevimab by you from a biological perspective?

Fantastic question, 1404, I did touch on in the prepared comments it is an antibody with spectacular potency and breadth. So in addition to being as potent or more potent than anything else that we've seen, certainly in clinical development perhaps anything that, we've seen at all we have shown in the lab that it can neutralize all the variants of concern. And in fact, it recognizes an epitope on the spike protein, that when we look across all the genomic data that's available around the world for COVID-19, appears to be not mutated at any significant level anywhere. So from that perspective, it is currently an antibody that we would predict to be effective against everything that exists in the world, for COVID-19. So from that scientific fact set, my straight answer would be, it's not clear, that a combination would buy you anything, except for insurance. And it is important to be sober about this, that any monoclonal antibody has a theoretical and a practical vulnerability that a variant could come-up that would render it no longer effective. The immediate solution for that is to look for combination. So a combination say with bamlanivimab or a combination with another antibody, would provide a backstop to that scenario, that we do not predict will be likely to happen soon, but you never know. And perhaps more importantly, the last 12 months with bamlanivimab and etesevimab, show that we are able to apply our technology and to do this again. So if we found that another variant came-up and was catching hold, and posed a threat, to people anywhere in the world, we would deploy that platform again. And I expect that Lilly would be happy to stand behind us in that effort.

Understood. Thanks for taking my questions.

Our next question comes from Gal Munda with Berenberg. Your line is open.

Hi, Carl, Andrew and the team. Just wanted to touch on one thing that I guess, we started seeing when you reported full year results, and I think it's coming a little bit more pronounced now as well. You've added 16 programs under contract across three partners effectively as you mentioned. So that average is starting to increase and it's something that is given the input also. And I guess my question there is, are we starting to see that the platform itself is less of a proof-of-concept, because we're starting to see more expansions effectively? And is that the early indicator that you've been waiting for in terms of getting the confidence that there's a number of partners that you have but those partners can significantly ramp up the number of programs that they want to engage with you? Thank you.

Thanks Gal for that question. Right off the bat I'd say, it's very clear that our platform is not a proof-of-concept. It's a platform that's delivered on many of the hardest programs in the industry and over the past year has resulted in two clinical phase assets. So I think we've certainly proven the speed, the power, the versatility of that across many different indications or target classes and with many partners. In terms of the mix of -- or in terms of the ratio of programs under contract versus partners, I think that it's likely to be variable and it is mostly driven by the state of our relationship with partners. As I mentioned, the expansion with Gilead was based on success. We are definitely seeing that people are looking to engage now skipping over that first interaction and going right to a multi-target deal. I think that's a great signal of confidence in the market and demonstration of the technology. But there will also be mixed into that smaller firms that don't have a real use case for more than one or two programs these smaller companies. And that is a sector of the market that we think presents a huge opportunity to unlock great innovation, target ideas, science entrepreneurs that for a long time have been stranded without access to the capabilities needed to bring their ideas forward to clinical testing. And the more that we do of those you can expect that will be more partners but fewer targets per partner. And of course that will be reflected in the ratio of PUCs to partners.

Got you. I guess, I have a follow-up just on that specifically. So that's exactly how I've been thinking when we think about the future growth. Is it about engaging new partners? And when you think about new program, the most likely to come from the let's say smaller biotech firms or large pharma? Like how would that balance be in the long run out there estimate particular quarter? I'm just trying to understand the balance what your belief will happen.

Yeah. We -- it's always difficult to predict how that's going to play out, but we certainly do not expect that it will be loss sighted on either the large partners or the small partners. I believe there's going to be a healthy mix all the time. What's maybe more interesting or perhaps what is behind that and drives it is the value proposition. And for the larger very well-enabled companies, companies like the Eli Lilly’s who are sophisticated and have built up formidable capabilities internally these partnerships will be driven by the need to get into target classes or to move faster than conventional technologies allow. And that is one of the reasons we invest so heavily in R&D, because we want to be the de facto solution for people that need to get into these areas that have been traditionally out of reach. For the smaller companies, the discovery problems may be easier but the barriers to moving them forward are extremely high and difficult to overcome. And those are barriers of facilities technology expertise teams the need for investment. And in all these cases, they need to move quickly, because we live in a competitive world and there are patients that are waiting for those therapies. So we are dedicated to solving both of those problems and perhaps in the very long run even finding increases in speed and efficiencies such as the big enabled partners will start to see us as a natural extension of their teams where they can flex up and flex down depending on what's needed at the time and the opportunity that's before them.

That’s very helpful. Thank you. Appreciate it.

Our next question comes from Puneet Souda with SVB Leerink. Your line is open.

Yeah. Hi Carl, thanks for taking the question. And Andrew maybe first one cleanup question. Just wanted to understand the 52 program -- the release had about 52 programs, the slide deck had about 54. And I think you mentioned 59 program starts on the call. So I just -- maybe I missed it. Can you just clarify, how those numbers tie together? And am I missing something? Because it was 52 in the last quarter and are we now at 59 cumulative program starts?

So thanks for the question Puneet and the clarification. So you are correct that in the end of 2020, we were at 52 program starts. And I'm looking at the slide right now and the text that I said and we are at 54 at the end of the first quarter. So those -- and I'm not sure where you got the 59 number from, but the numbers I'm looking at were 52 at the end of 2020 and 54 at the end of 2021.

Got it. So two programs starts. Okay. Excellent. And then on the -- one more clarification on the 16, the PUCs or the new contracts that you added. I just wanted to clarify eight were with Gilead, where additional eight were with other companies or are majority of those are still very much Gilead programs?

No of the 16. And actually sorry, Tiffany here just told me that in my dialogue, I must have misspoke and said 59. So thanks for the clarification. It should be 54 at the end of the first quarter. The second question, 16 new programs under contract. Yes, eight of those were with Gilead. And they of course were an existing customer, so they did not contribute to the additional two customers that we added in the first quarter and those additional two customers contributed to the additional eight programs that were signed up in the first quarter.

Okay. Got it. Thanks for that clarification. And then how should we be -- I know it's a complicated question given all that's happening around COVID. How should we be thinking about the royalty revenue here in the second quarter? I mean, obviously you've got 1404 combo with etesevimab. There are new strains that are emerging, so I appreciate that it's not an easy one. But anything you can provide there that helps us think about the royalties in the second quarter that would be helpful?

Thanks, Puneet. Carl here. I'll take that one. So first just to echo, given all of the variables that are out there vaccines, adoption, other antibodies coming in, changes from monotherapy to combination therapy, we would not hazard a guess at what will be revenues from royalties in Q2. Though we do expect based on guidance from Lilly that they'll be lower. Now obviously royalty revenue is a highlight of our recent results. But frankly, I think it's a bit of a distraction from the long-term value we're building in the company. While an important proof point, we firmly believe that this is one program and it represents a small value -- a small part of the value that we're building in the platform. So the long-term vision here is to build a large portfolio of hundreds of programs. And we see as Andrew has said the revenue coming from COVID-19 royalties right now as a wonderful tailwind. It is a non-dilutive source to help to double down on that vision. And we also see COVID-19 royalties as being source of revenue for the long run, because we believe that COVID-19 is likely going to be here to stay and that is why we are excited about molecules like bamlanivimab and perhaps even more the same power of a molecule like 1404 that could be manufactured at scale delivered broadly and has that combination of potency and breadth that makes it a real candidate to be a best-in-class contender here.

Okay. Great. That's super helpful. And last one if I could squeeze in. In terms of the Trianni revenues those were pretty meaningful this quarter. Obviously, you're pointing those out as one-time or one-off meaningful revenues. But still this line is now going to be in the model. So maybe Andrew can you comment on how should we be thinking about that sort of going forward? And anything you can provide on what drove this meaningful $20 million in the quarter? What was -- anything about that project would be very helpful. Thank you.

Yeah. Thanks for the question Puneet, and yeah happy to give some clarification. As I mentioned in the prepared remarks, we would expect this to be irregular. It's really dependent on which partners and what access to the platform they're looking for, as was mentioned in the press release with Gilead that included a license to the Trianni Mouse platform. So that was a main driver of the revenues we saw in the first quarter, but we will continue to add license revenues. And if I remember correctly from a short period of time ago in our last call, you actually asked where were the license revenues from the Trianni platform and I did kind of mention we would be including that as a separate line item and we will continue that in our future. I just wanted to point out, of course, that if you look back to the acquisition we did of Trianni, this is just an outstanding example of the return where we believe we're going to get from that acquisition over 20% of the purchase price of the company covered in the first quarter of this year. And I think it's -- and we are just as excited about the next-generation animals that we are investing heavily in. So I think this is just even to Steve's earlier question about M&A where we've done the repertoire sequencing acquisition in the past the OrthoMab bispecific platform acquisition in the past and this Trianni Mouse platform in the past and have really set those up to be ready to deploy and integrate it immediately showing that we have the capabilities and the muscles to be able to do that. I think it's a great proof point of our inorganic strategy.

Okay. Great. Thank you.

Our next question comes from Do Kim with BMO. Your line is open.

Hi. Good afternoon. Thanks for taking my questions. I wanted to ask about the 16 new programs under contract this quarter. It's a pretty good step-up in programs. How much visibility do you have in future new programs? Is this a pace that you can maintain based on the discussions you're having with partners, or is it just something too unpredictable?

Hey, Do, Andrew. I'll take the first crack at that at least. As we mentioned in the last call and I mentioned in the prepared remarks, we are staffing up our business development activity and we have the most robust pipeline we've seen in business development in the history of the company. I think the strong performance in the first quarter is really proof of that. We have built the team and you see it in the increased expenses in the first quarter in Beedie so that we can be fielding all these opportunities. I would reiterate the same comments from the last quarterly call that we still have the strongest and most robust pipeline that we have seen in the history of the company even after closing these 16 programs under contract in the first quarter. So we are not giving guidance of where it will be for the full year, but we still have a robust pipeline in front of us.

Great. Thanks for that. And a question about one of the recent partnerships you have the Angios partnership where you took some equity as part of the deal. Could you talk about what kind of opportunities there are out there in these newly-formed biotechs and getting creative economic terms like equity stakes, and if you're thinking about generating an internal pipeline and creating biotechs around that?

Thanks Do. Carl here, I'll take that question. Resonating with my comments to the previous question, we see this sector as one that has been ignored and not served well and one where there's a tremendous opportunity to unlock value and just to -- sort of, paint the picture there. Currently, if you are an innovator, if you're coming out of an academic institution, you have an idea preclinical data that shows this is a viable pathway to target antibodies would be the way. Getting that off the ground has been traditionally very difficult. It has required huge amounts of capital and time. And that disconnects between -- or that friction between these ideas and between the platforms capabilities people and expertise to execute on them leaves a lot of great science and a lot of great therapies frankly or potential therapies on the table. So our model serves this group of innovators very well. We have set up to be a centralized discovery engine that they can access through partnership and our vision is to let these innovators get access to all the capabilities they need, while staying focused on the thing that they know well which is not the technology development for discovery, but rather the biology or the particular modality that they're trying to develop. Now when we move up that chain, we can provide much, much more value. And we will, of course, look to strike deals that allow us deeper participation through milestones and royalties. But at some point, you hit, sort of, a roof as to what is practical and in the best interest of the company at that early stage. In that case, one way that you can flex this into equity and create alignment between us and those companies so that we're rooting for their success as well as for the success of the assets. So that is something that we have done already in the past. We've done deals that include equity with Invetx, which is a company that is really pioneering the use of antibodies in animal health. We have done it recently with a company Abdera that is bringing forward very innovative drugs targeting cancer with radioisotopes. And now this deal with Angios follows on that and in this case built on some really deep insights into the biology and some terrific scientists. And we believe that there's a lot of excitement about both of their program and more generally about this model of unlocking innovation.

That's very helpful. Congrats on the progress.

Thanks, Do.

There are no further questions at this time. I'll turn the call back over to Carl for closing remarks.

Thank you and thank you all for joining us. Just to sum up this has been a very exciting time for AbCellera and we're looking forward to keeping you updated on our progress on future calls. Very best everyone.

This concludes today's conference call. Thank you for participating. You may now disconnect.