Ladies and gentlemen, thank you for standing by and welcome to the AbCellera Full Year 2021 Earnings Results and Business Update. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being record. I would now like to turn the conference over to Tryn Stimart, Chief Legal and Compliance Officer. Please go ahead.

Thank you. Good afternoon and welcome to AbCellera's full year 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. if you're following along on the phone and wish to access the slide portion of this presentation, you 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 post 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 on our call today are U.S. dollars. Now, I am pleased to turn the call over to Carl Hansen.

Thanks Tryn and thank you, everyone for joining us today. It's my pleasure to provide an update on our business and a recap of 2021. Abcellera had a banner first year as a publicly-listed company, executing on our long-term strategy by growing our portfolio, deepening our platform to unlock new modalities, and expanding our deal structures to add new ways to capture value. We ended 2021 with over $720 million in cash, cash equivalents, and marketable securities, and approximately $70 million in receivables net of payables. We added 53 new programs under contract with nine new partners, bringing our cumulative total of programs under contract to 156 with a total of 36 partners. We ramped up our discovery capacity and started working on 26 new drug discovery programs, bringing our total number of programs starts to 78. Finally, we saw four molecules we discovered into the clinic, bringing our total number to five new molecules in the clinic for indications in oncology, infectious disease, animal health, and immunology, dermatology, and gastrointestinal disease. Building on our momentum from 2021, we are now well-positioned to continue executing on our growth strategy. Abcellera is building a technology company that drives innovation in antibody therapeutics, which currently represents an estimated $170 billion market opportunity. Based on historical content compounded annual growth of over 10% for the last three decades, this market is expected to reach over $350 billion by 2030. Our strategy for growth in this market is to become the de facto technology leader in the early part of drug development, ultimately covering all the activities that lie between target discovery and clinical testing. Our work begins once the fundamental science has been done and a drug target has been identified. Starting from the indication and requirements of a drug target and therapeutic…

Thanks Carl. I'm pleased to highlight the progress we've made on our key business metrics beginning with our program starts. We started 26 new programs in 2021, of which nine were in the fourth quarter to take us to a cumulative number of 78 program starts. While starts will continue to be somewhat irregular, we expect a generally increasing trend year-over-year as we have seen throughout this past year, We ended 2021 with 156 programs under contract with 36 unique partners. That is a 51% increase in programs under contract as compared to 2020. As we noted previously, programs under contract has been a leading indicator of the long-term trajectory expected for program starts. Also in 2021, our partners advanced four more molecules into the clinic, bringing our total molecules in the clinic to five at year end. We view the growing list of 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. The recent eway [ph] of bebtelovimab and the current U.S. government purchase order do, of course, imply meaningful near-term royalty potential. The momentum we achieved with the number of partners, programs in the contract, program starts, and molecules in the clinic this year has far outperformed our expectations from one year ago. These will be key drivers of growth in the business and of shareholder value in the years ahead. Turning to revenue, revenue in the year was $375 million. Revenues for 2021 were dominated by the $327 million of royalties we earn from shipments of bamlanivimab during the year. We realized $8 million in milestone fees in 2021, $7 million of which relate to the commercial milestones from the sale of bamlanivimab. We recognize $21 million of licensing fees in revenue in 2021, mostly attributable to one large Trianni licensing agreement in the first quarter. Finally, research fees connected to our work on a great many programs with a wide range of partners in 2021 were $19 million. That is similar to the $20 million we recognized in 2020, a year that includes significant fees for our work with our partner at DARPA. Looking ahead, we expect the majority of 2022 revenue still to be derived from royalties on COVID antibodies. Lilly continue to shift bamlanivimab into early 2022 and entered into a purchase agreement with the U.S. government to supply up to 600,000 doses of bebtelovimab for at least $720 million no later than March 31st, 2022 with an option of an additional 500-- [technical difficulty]

Ladies and gentlemen, please stand by. Your conference will resume when the speakers reconnect. One moment please.

Hello, this is Andrew Booth speaking. It looks like we had some technical difficulties and dropped the line. I understand where we left off, and I'll just continue on the business update. So, looking ahead, we expect the majority of 2022 revenue to still be derived from royalties on COVID antibodies. Lilly continue to shift bamlanivimab into early 2022 and entered into a purchase agreement with the U.S. government to supply up to 600,000 doses of bebtelovimab for at least $720 million no later than March 31st, 2022 with an option of an additional 500,000 doses for delivery no later than July 31st. As a reminder, under our agreement with Lilly for any COVID-19 products developed, we are eligible to receive royalties in the low to mid-teens for aggregate sales below $125 million and mid-teens to mid-20s on aggregate sales above $125 million. We continue to view COVID royalties as a non-dilutive source of funding to support our investments in capacity and platform capabilities, including investments into forward integration. Turning to operating expenses, our research and development expenses for the year were approximately $62 million, a $33 million increase over the previous year, $10 million of which relates to non-cash stock-based compensation. The overall increase reflects our ongoing investments into R&D, which we will continue to grow as we expand our R&D team's capabilities and capacity. This allows us to deliver our partner programs as well as enhance our technology stack organically. In sales and marketing, expenses for the year were approximately $7 million, nearly doubling from 2020. This reflects the ongoing growth of our business development team capabilities and reach. General and administration expenses for the year were approximately $42 million, compared to approximately $12 million in 2020. Almost $12 million of this increase were related to higher non-cash…

Thank you. [Operator Instructions] We have your first question from Stephen Willey with Stifel. Your lines open.

Yes, good afternoon. Thanks for taking the questions and congrats on a really good year.

Thanks Steve.

I just one wondering if -- so I know that you guys are really emphasizing new program starts this year, working through -- I guess not the backlog, but the large amount of programs or the contract that you currently have. How should we think about the case of those new programs starts throughout the course of 2022? Is that pace rate-limited at all on the capacity front, or is it really just a bandwidth issue at this point?

Thanks Steve, Carl here, and I'll take a first crack at that and then maybe hand over to Andrew, if there's anything he wants to add. So, first of all, the shifting focus from programs under contract to program starts is something that we did mention on the last call and we're reinforcing that. The situation basically is that we came into the start of 2021 looking to build our book of work and make sure we had a good fit and good demand for our technology and offering. And the business development through 2021, I would say vastly exceeded what was our expectation, as a result, as mentioned, we've got about 70 -- 70 or more programs that are currently under contract, that's not all for this year that includes multi-target agreements that go two or three years out that have yet to be started. And with that in mind, we are fully confident that we have put to rest any question, we will be able to find high value work to apply our platform and our technology to. So for that reason, we are now focusing on more higher value -- perhaps more strategic, more selective business development activities. And thus are sort of pointing people away from programs under contract as the metric the program starts. Now, program starts. We exited the year, doing nine program starts in the last quarter. That was a big uptick from the start. That reflects increases in efficiency in the process as well as the investments in equipment and people and technology to build our capacity. We anticipate coming into 2022 at that pace and I do expect that we're going to have strong growth in program starts in -- over the course of 2022. But I want to also emphasize that capacity is not just the number of programs that you start, it also reflects how much work you're doing per program. And one of our big drives this year and in the next couple years is a move towards forward integration where we're starting to take programs much further, ultimately, once we're fully enabled all the way to IND filing. So, there'll be a much larger growth in capacity in terms of work, and of course, our participation, those programs, then will be reflected in program starts, but we do believe that's going to go up.

Okay, that's helpful. And then I guess, just with the current liquidity position, obviously, a good time to be liquid, given the fact that valuations kind of across the board seem to be down. And just curious if because of that, you think about maybe prioritizing additional technology acquisitions given the state of the current market? Or is it just going to be kind of continued opportunism on that truck? Thanks.

Hey, Steve, great question. And yes, we're -- obviously, we're in a great liquidity position with our cash balance, a full book of receivables. And then looking into the first quarter additional expected sales of bebtelovimab into the future -- the first couple of quarters. And, of course, we are calling any sort of revenue number, because if there's one thing we've learned in the last couple of years, it's that COVID-19 can be quite volatile. But we would point out that there is a possibility that bebtelovimab could be part of a long-term solution towards COVID. But of course, that's in Lilly's hands. We're quite comfortable with that cash balance to continue the investment we have in forward integration in the expansion of the team. And with -- if it comes to as we have done in the past, any opportunities on M&A that fit within the technology stack or fit within the strategy of the company, we will have the cash balance to execute on those. So, that puts us in a good position to be keep our eye out.

Yes, I might just layer on to that that you know, as mentioned, the big push on the platform is likely going to be our organic, it's the move towards forward integration. I echo everything Andrew said about looking for opportunities. But of course M&A strategy and in particular as a pertains to technologies, we need to be opportunistic. So, it's really about finding the right fit.

We have your next question from Tiago Fauth with Credit Suisse Your line is open.

Hey, thanks for taking the question. So, one that we get pretty often is related to programs going into clinic. And I understand you guys have limited visibility on that. But given the cumulative number of program starts and several of those a few years back, I was wondering if you have a sense of additional progress perhaps going into clinic throughout 2022? And perhaps my collect a bigger picture than that, I mean you alluded to that in the prepared remarks, you have executed ahead of expectation in the for bonding most of the operating metrics that seems as to be overlooked by the Street. And I think a part of that is the nature of the contracts where you have the back end of economics. So -- and I know that's the best question to answer, but what could perhaps change perception later investors? Is it more about just getting more -- a bigger portfolio mortgage in terms of operational progress in terms of the stuff that you can actually control what do you think can actually, at some point, be received more positively by the Street? And how do you see that dynamic in light of their current capital position a few years to execute on that? Thanks.

Thanks, Tiago, Carl here. I think there was maybe a couple of questions woven together there. If I don't cover both or more, please let me know, and I'll address anything I miss. So the first question was about our expectation or visibility on program starts. As you know, we do not have complete information about the status of all the programs that are in the portfolio. It's a large portfolio. and it is in our partner's hands. And of course, when we do know that things are moving forward, we typically are not at liberty to communicate on that. So that is a challenge. We have been investing in building up quite a strong alliance management capability within the company that allows us to build relationships and have a better insight and better communication to know where those programs are. So we expect to have more predictability as things move forward. And also, we are investing in the forward integration. And a big part of that is that we will then be intimately involved in fact, controlling and driving the advancement of programs further along the pipeline, ultimately, all the way to IND. And that of course, is being done because we believe the integration of our front end with end can make a dramatic change to the speed at which we can get there. It also has the advantage that we are in control and have good visibility to where those all are. We expect that when we do that be doing that full suite of work for programs where we have a deeper participation. And so those are things that are going to be most meaningful for AbCellera. But of course, that's out in the future. I'll maybe just add one more thing that as mentioned in my prepared remarks, given that we have added increasingly more programs year-over-year and given that the terms are getting better and better, the general trend that we expect is that we're going to see an increasing frequency or rate of programs entering the clinic and that those programs will become more and more meaningful for AbCellera as that matures. I think that is the thing ultimately that is going to be best perceived. The other proxies, of course, are the repeat business, the validation in the market and I think also importantly, our ability to start to bring some of our own science forward for you to see so that people get an understanding not only the performance of this technology in COVID, which has attracted a lot of attention, but has also opening up all these other areas. And so -- that's going to be a bit of a conversation over the next little while, but it's one that we're excited to have.

Perfect. I think you covered it all. Appreciate it.

You bet.

We had your next question from Gary Nachman with BMO Capital Markets. Your line is open.

Hi, guys. Good afternoon. Carl, what does the pipeline look like for these higher-value partnerships that you're looking at? And do those take longer to materialize in general? I'm curious like what the cadence for these might be if you're being more selective with partnerships now going forward to generate more value? And then also, how much more work needs to be done on this forward integration? You said it somewhere down the road in the future, but I'm curious, I mean, is this like one to two years away, three to five years away. And how much do you need to invest behind that? Just talk about some of the things that you're thinking about doing or in the process of doing in order to get there? Thank you.

Thanks, Gary. So first, maybe a comment on the business development pipeline. At any given time, we have conversations ongoing with tens of companies. And as you know, this includes some very large vertically integrated biopharma sort of the top 10 names that you would recognize and also to more innovative companies. So that is -- that's always the state of things. We are -- we have been selective in partnerships. We had multiple examples last year where we decided to back away from opportunities. We've also had examples, particularly in the last part of 2021, where there was demand for multiyear contracts with larger numbers of programs lots than we ultimately were willing to commit to. So that dynamic has already happened. This year, we're excited about the business building pipeline. We've made really big strides in recruiting that function, bringing in originally Neil Berkley as the Chief Business Officer and then now having expanded that to a bigger team. So you have to give that time to mature. And of course, closing the deal is not something that is very predictable. It depends very much upon the negotiation and exactly what is the complexity of that particular transaction. Your other question was on the forward integration. On that front, I would think of it not as something that is either done or not done, but rather a continuous evolution towards having the full capabilities to take something right from an e-mail that tells us what is the target and what is the specification of the drug right through to the IND filing. This year, what is coming online is the translational science part. This goes from the final lease and start to generate the data, the biological data that supports the IND package. We're working on two or three programs already right now on that front. The longer-term objective includes the CMC capability and the G&P manufacturing. Andrew mentioned that, we recently purchased land for the GMP facilities. So this is a greenfield project that needs to be built. We are still anticipating that we'll have that up and running by 2024. Of course, we'll be looking to start to line up the projects that will go into that ahead of time. And so it's not too early to start thinking about that function as part of business development and so it's not too early start thinking about our function as part of business development.

And Gary, just to add to that, you also asked -- I just wanted to remind you that, we do have a participation from the government of Canada in order to fund those endeavors, you asked about the expense of it. And the Government of Canada is contributing about $125 million towards our efforts of building out the building, the equipment facilities and the teams processes and getting those up and running in that time frame that Carl mentioned.

Yeah. So, thanks for reminding of that. And I guess also, just with all the cash that you're generating from both BmAb antibodies, are you able to accelerate this process, Carl, that you were just talking about? Are there I don't know, third parties maybe that you could bring in house that have more of these capabilities. Just maybe we can have more of an appreciation of deploying that capital that you're generating from the COVID antibodies to then push this whole business model to the next level.

Great question, Gary. We are looking at several options for how we could put that capital to work. Always keeping an eye on the long term and the need to make sure we stay in a strong liquidity position, particularly given where the markets are today. But if things continue the way that they look and if bebtelovimab has an impact as big as we think that it might. It opens up new options. I probably shouldn't say much more beyond that. In terms of accelerating the forward integration project, there are definitely things that we can do. And I think one of the biggest things is starting to accelerate the hiring, particularly in the translational science and the CMC side. There is a time line associated with construction and certification of facilities that, I don't see a big opportunity to really -- by deployment of capital. One of the things, I will highlight here is that when we thought about this the option was always on the table, to go and buy a group that was already doing manufacturing. We elected not to do that because we do believe that it is absolutely mission critical that this be right next to the facility and that there's seamless integration between the front end discovery, the translational science right through to the manufacturing. It's through that integration that we believe we can get some major speed advances. And in drug development, if you can get a leg up in speed, that is very valuable and it's something that touches every program. So it's an ambitious goal, but it's one, and you have to build it from scratch, you have to build it right. And we decided that in the interest of long-term value, it's something that we need to do organically. So that's currently how we see it, Gary.

We have your next question from Puneet Souda with SVB Leering. Your line is open.

Yes. Hi, Carl, Andrew. Thanks for taking the questions. So maybe just a clarification, I know you're emphasizing program starts here. But on the contract ads, just want to make sure there was only one contract added in the quarter, if that's correct? And you know in past you had sort of the mid-teens type of a number of contract ads. And so just thinking about that for 2022, I know you're emphasizing program starts but how should we think about contract ads in 2022? Should we have anything in that sort of blind and just asking that because ultimately, it is about probabilities of success? So getting the programs into the funnel is important. So just want to get sort of high level context on that? And I have a follow-up.

Sure. So first, I can confirm that in Q4, we closed a single deal that included a single target that is with a mid-cap biotech company. And we're not at liberty to say much more beyond that, except that it's a program that we view as being potentially of high value. Of course, there's risk associated with all these things. In terms of the addition of programs under contract, maybe what I would turn to is, what are we actually trying to do at the company? There's two things we're doing. One is, we're investing in platform capabilities, to make sure that we extend and double down on our competitive position there. And the place where we play is between the identification of a target right through ultimately to the filing of an IND, a big effort right now on moving forward there. The second thing that we're doing is we're using that capability to build a portfolio of stakes in programs. And we are not dogmatic about the way in which we're looking to build that portfolio. So we have done the traditional deals that I talked about today. We've done different types of deals. What is most important is that we maximize probably the success our stake in that program. And make sure that we're always also keeping an eye on it being diversified appropriately. So, at this point, given the work that we have lined up, it's not really material in my mind, whether we add additional programs under contract in the next quarter or not, though, we do believe that business still in pipeline is strong. And we expect to do that, what's most important is when you actually start the work, because that is when they start to contribute to the portfolio. At this point, we've got no concerns whatsoever, that we have the opportunities to continue to have a pace program starts and to deploy those programs starts on the most important programs is our number one priority now.

Got it. And then on the selective process that you talked about with high value programs. I just want to try to understand a bit, I mean, given your experience with the COVID antibodies, and also a number of other projects. At this point in time, I mean, how do you overall parse out these sort of these opportunities? Do you look at the royalty percentage as a big factor in deciding battle? Or is it the indication? Or is it where the scientific team strength is? Or any other set of sort of metrics that you parse through in order to decide whether this is high value programs set for AbCellera versus not? Thank you on that.

Yes. So, as mentioned in my prepared remarks, I think that one should not look at adding value to the portfolio along a single dimension. It very much depends, of course, on volume. You want to add more programs. You also want those programs to be with the highest quality partners on opportunities in terms of the target and the commercial opportunity that we judge to be most attractive. And then of course, it matters what is their economic participation in those programs? And that is a combination of what value do we bring to the partner? And what is -- what are their alternatives? And what are the -- what's the nature of the negotiation? So the business development team looks at every opportunity. And we assess those in terms of what we believe is the total value added to the portfolio. And that includes work is done by the scientific diligence teams. It includes our scientific teams, it includes the negotiations, it includes the commercial analysis, it's very much like being an investor from that perspective.

Okay. Super. Thank Carl.

We have your last question from Antonia Borovina with Bloom Burton. Your lines open.

Good afternoon. Thanks for taking my question. So, just another follow-up regarding your forward integration work. So I'm just wondering, do you expect you'll have after that work has done some room to raise your typical royalty rate? Or do you think that 5% is kind of the maximum limit that the market will bear, given the competitive environment? And then I have a follow-up.

Yes. So first of all, 5% is absolutely not the limit. We have, in fact, done a quarter of our deals that are north of 5% in recent time. So there's a range and it depends on the nature of the interaction and how much work we're doing, how much value we're bringing. We are focused on bringing more and more value to therapeutic antibody discovery and development. That is why we're making the investments in forward integration. It's also why we make an investment in the platform generally, while adding new technology, such as the OrthoMab platform, or CMS, rodents [ph] and some of the other technologies that we are either building organically or that we have acquired. If we connect with the right partner that has a great idea, the innovation, we can take our capabilities with theirs, and we've made the pie bigger, that allows us to create value through that partnership. And then the discussion is how best to split that so that both parties come away enriched from the engagement and can better meet their goals. If we are doing the work that goes all the way from discovery, right through to carrying a lot of load into an IND filing, we would of course, expect to have a much deeper participation than if we're doing the discovery and handing off candidates or leads as some of our early work has done. So, we expected that forward integration will be used primarily with programs where we have a much deeper participation than is our difficult deals. And that is in part because we're doing my work. And also, of course, because we believe with technology, we can make that much faster, and give that program a competitive advantage.

Okay. Thanks. And then just given the current downturn in the public markets, and then that potentially spilling over into the private markets, do you think that'll have a meaningful impact on your ability to attract new partners either positively or negatively?

Yes. That's a great question. I could probably make arguments that went both ways. I think our initial interactions have shown that it's perhaps more of an opportunity than a headwind. And one of the reasons I say that, particularly for private companies is when you are starting out and you're looking at a path where you need to build capabilities, it is much more capital efficient in terms of cash to work with AbCellera. You say yourself a lot of time, a lot of runway, and the investment that it would otherwise take to put that in place. And then of course, we can help them in that way, accelerate those programs, and in doing that, have created value for them and take a deeper position in those programs that, of course, has paid off primarily on success. And because we build a portfolio, we're able to look at those transactions in a rational way, whereas a smaller company really needs to preserve cash early on in its lifetime. And even more so when the markets get more difficult, which may well transfer from what's happened in the public markets into the private markets.

Great. Thanks.

I'm showing no further questions at this time. I would now like to turn the conference back to Dr. Carl Hansen, Chairman, CEO and President for any closing remarks.

Thanks. I just would like to thank everyone for joining us today. We had a terrific year. It's been a very exciting time for AbCellera and we're looking forward to keeping you updated on our future progress on future call. Thanks so much.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.