Good afternoon and welcome to AbCellera First Quarter 2022 Financial Results Conference Call. My name is Amber and I'll facilitate the audio portion of today's indirect broadcast. All lines will be in a listen-only mode during the presentation portion of the call with an opportunity for questions at the end. [Operator Instructions] At this time, I would like to turn the conference over to Tryn Stimart, AbCellera's Chief Legal and Compliance Officer. Mr. Stimart, please proceed.

Thank you. Good afternoon and welcome to AbCellera's first quarter 2022 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 in our business for the first quarter of 2022. Given the current market environment more than ever, a strong balance sheet is critical. We ended the quarter with over $780 million in cash, cash equivalents and marketable securities. As a result, we are ideally positioned to continue executing on our long-term strategy. Our strategy is to invest aggressively in our technologies, workforce and infrastructure to establish the dominant competitive advantage in the invention and creation of therapeutic antibodies. And then to use this capability to build a large and diversified portfolio that is going long in the next generation of antibody drugs. Our investments are focused on three priorities; first, building technology and infrastructure to create a centralized engine for the discovery and development of antibody therapeutics at scale; second, executing on partner programs to build a diversified portfolio of stakes in next generation therapeutic antibodies; and third, technology development to unlock new target classes into enable new modalities. For the past 10 years, Abcellera has been laser focused on this one thing, reinventing and rebuilding a new frontend for therapeutic antibody industry. Starting from a clean slate, we've replaced legacy platforms with new workflows that take full advantage of modern technologies from biology, engineering and computation. Our vision is to establish a centralized discovery engine that integrates all steps from drug targets to IND at greater speed, the highest quality, and at much greater scale than it's ever been achieved before. This strategy will only work if it is done at scale. After a decade of work, we believe it is now inevitable that we will achieve our vision, and we also believe that there is no other company that will be…

Thanks, Carl. I'm pleased to highlight the progress we've made on our key business metrics beginning with our program starts. We started six new programs in the first quarter of 2022. Taking this to a cumulative number of 84 programs starts. And while the rate of starts will continue to be somewhat irregular, we expect that generally increasing trend year-over-year as we have seen in the recent past. This is particularly true for the last year, we've started 30 programs in the trailing 12 months ended March 31, 2022, compared to 7 programs and the trailing 12 months ended March 31, 2021. We ended the quarter with two new programs under contract with 36 unique partners. That is a 33% increase in programs under contract as compared to the end of Q1 in 2021. As we noted on a previous earnings call, with our total of 158 programs under contract, we have a strong look of work. Our business development focuses on the high quality programs that are a complement to our existing partnerships and where we have a strong economic position for AbCellera. As we have indicated previously, total programs under contract is a leading indicator of the longer term trajectory expected for program starts. Also in Q1 2022, our partners advanced one more molecule into the clinic, bringing our total molecules in the clinic to sixth at the end of the first quarter. We view this 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 emergency use authorization of bamlanivimab and the current U.S. government purchase order in the first quarter contributed meaningfully to our Q1 results. As mentioned on the prior slide, in the first quarter, we…

Thank you. [Operator Instructions] Our first question comes from Tiago Fauth with Credit Suisse. Tiago, your line is now open.

Great. Thanks for taking the question and congrats back progress. So perhaps just using the Empirico experience as a comparison model, so, you actually have the option to co-develop some of these drugs. I'm assuming that's mostly going to be on the financial side to keep your ownership and not necessarily a potential pivot to developing internal drugs. But I guess the broader question is that, that seemed like a pretty unique structure and a pretty unique deal. Is that something that you see as you alluded to potentially becoming a little bit more selective in higher probability or higher quality partners or targets to the extent that it is possible? Is that a trend that you see for the near future and how do you balance that out relatively to getting a larger book of business, a more diversified book of business? Is that an actual trade-off or how do you see the universe of potential opportunities there in terms of quality, volume and capital allocation in your tax and even co-investment with your partners? I know it's a pretty broad question, but that would be helpful. Thanks.

Great. I will address that Tiago. Thanks for joining the call today, Carl Hansen, here. So first, just to be clear, we would not characterize this as co-development. What we have is an option to co-fund on a program-by-program basis and on a staged basis various programs. So that allows us to put capital to work for programs where we have conviction in the indication and where, we are confident in the qualities of the molecules that have come through. And of course we have done the work in discovering those or well positioned to make that assessment. That option we see as another way to add value in deals. It is not the only way that we will do business really our main strategy is to be the Company that makes long-term investments that allow for rapid discovery at high quality and to do that at scale. And we are not dogmatic about the way that we will do deals to capture value on that. The one consistent theme is that we are looking not to take or two big bets on single assets, but to diversify across a large number of assets, which of course we have done. And to shift this quarter is to given that we have a strong book of work from 2021 that we are still working on. We are now looking for opportunities that we believe could meaningfully move the business. But we are not looking for those at the exclusion of our base business in doing discovery deals, which is still something that we are working on and we are excited about.

Our next question comes from Puneet Souda with SVB Securities. Puneet, your line is now open.

Yes. Hi, Carl and Andrew, thanks for taking the question. So, just following up on that, I mean, at a high level, has there been any shift towards exploring optionality to invest into your own development separately, or otherwise, despite the, obviously, the focus on helping your partners grow and scaling up the business?

Carl here. So I'm happy to take that one as well. Again, our strategy is to build a competitive advantage on all the steps that sit between target identification and go all the way through to, but not including clinical development. That's where we believe technology can make a difference, to increase speed and quality and to open up new target opportunities. So, it is not our intention to pivot and to work on internal programs, but we do have long range R&D efforts underway to AbCellera of which the CD3 work is a prime example, where we have seen a need, and we have taken initiatives to solve that need. And in the process of proving that out, we will need to validate that across a variety of different, target antigens and tumor antigens. When we do that, our plans for that are absolutely to partner those as soon as possible. And that scenario, of doing R&D that leads to assets that could be partnered is not at all different from what we've done in the past. In fact, that's exactly what we did with COVID-19. So, it is it is the nature of this R&D that you need to work on real things. And when you work on real things, you have the possibility to anticipate needs from partners, for the benefit of both sides.

On the new program starts maybe this is for Andrew, appreciate that your focus on new programs starts worse with contract ads. But as I look at it, last two quarters, you had nine program starts and then only six this quarter. Maybe just help us understand is this a capacity or is it just first quarter seasonality or any other reason why we're seeing fewer programs starts despite your focus on new program starts largely? And is their capacity or any other thing that's getting the expansion in the numbers here?

Great question, Puneet. As we've already said the program starts on a quarter to quarter basis will be slightly irregular. And the real metric to watch is going to the longer term trend of these programs starts. And that's why in the prepared remarks, I commented on the trailing 12 months growth over the previous period. It will be irregular and you have to also remember that in each of these programs, we are doing more and more work on each of the programs that we start, which is actually an increase in the capacity that we have within the organization and the capabilities. So, we will continue to see this irregularity in going forward and that should be expected. I think what really is to be watched is that longer term trend as well as the sense of how much more we're doing on a per program basis.

And then just last one, Carl this for you on. Yes, sorry, go ahead.

I was going to layer on top of that, that, if you look out over the next two, three years, as I mentioned, we are making heavy investments in forward integration. So work on translational science, CMC, GMP manufacturing, we are starting to take programs forward on the frontend of that right now. And so you can expect that in terms of capacity building, that dimension of doing work for program, I suspect is at least as big as is the volume metric that is reflected in program starts. So that's important to keep in mind.

And then Carl given the current cash position and the cash generation that's ongoing with the bebtelovimab and the COVID antibodies, appreciate that is unpredictable and that can completely change, but when you look at the overall market today, multiples have continued to contract and both the therapeutics and broadly across healthcare. Has that changed your view or the lens or how you're looking at the opportunities at this point in time?

I interpret that question as being one about inorganic editions of the technology class. Yes, we have a history of that. And we always survey the landscape to look for technologies that either would expand or improve our existing platform. That said, at this point, we believe we have assembled the best frontend in the industry. And the path now to complete this right up to IND is going to be primarily focused on organic growth in translational science, CMC and GMP. So we are certainly open to opportunities. But at this point, it's very much an internal facing efforts to complete this project that we started a decade ago, and given the capital and given that this is mostly about execution, and team building, we believe completing that now is inevitable.

Our next question comes from Stephen Willey with Stifel. Stephen, you line is now open.

Just going back to the Empirico arrangement. Can you just remind us what are the inflection points, that allow you to make these investment decisions? I know, you're saying that it's staged, which is kind of curious if you can maybe speak to some of the triggers, which allow you to then make these decisions?

Stephen, I can take that one. It's without disclosing too much, there are go-no-go stages in the early discovery, and don't-go-no-go stages trigger an option on our part to continue to fund the work. The first of those would be in funding to an IND filing. And then there would be stages at various breakpoints in clinical development which would line up with, Phase 1, 2, 3 type activities.

Okay. So the take was human and perhaps across the seven potential targets that are covered under the deal that you may have, I guess, a different ownership position in each of these assets, depending upon your view of the opportunity?

That's exactly right. We would look at -- go ahead Andrew.

Yes, I was going to say that's exactly the right way to think about it, Stephen. So, and this is very similar to other deals, similar deals we've done, where, as you would imagine, the more you invest along the greater ownership position that you take, if it's a partner who chooses to advance that molecule where we have not invested, then it's sort of a pre-agreed terms on the percentage ownership position that we would have, depending on how long we have funded for.

And I guess, maybe just given some of the attrition that we've seen in the therapeutic space, specifically against amongst those kind of smaller cap development stage, biotechs. Just wondering if you've seen any kind of impact on the business development front, and I guess whether or not you think that the model that you guys provide to a potential company is more attractive in a liquidity constraint environment than perhaps it is when things are better.

Thanks Steve. Carl here. So, obviously it's been trying times in the market, as, as mentioned on the comments, our business is in terrific shape. So we are strong and we are executing on our strategy, that's not the case broadly. That said, recently we have seen a strong uptick in activity and business development discussions. I believe a good part of that is a response to the data that was presented at AACR on CD3 work. It's probably too early to know exactly how market conditions are going to impact all partners, but I would agree with you that, our model provides a way for companies to continue advancing programs, to do that more quickly and more capital efficiently, while preserving their resources. So, we typically structure our deals with value sharing based on success in clinical development and ultimately in the approval of therapies and that lines up well with companies that are not -- that are cautious about building internal capabilities and taking on the complexity and cost of distributed outsourcing. So, we think that could well be a tailwind, but I think it's still a bit early to tell.

Thank you, Stephen. Our next question comes from [indiscernible] Capital Markets. Gaurav, your line is now open.

Hey, guys. Thanks for taking my questions and for the time. Just two for me. So when looking at new product opportunities, are you only entertaining deals at entitled southern to downstream participation, or are you still open to let's a new non-downstream payment deal?

Thanks Gaurav. Andrew here. No, when we really only look exclusively at business development opportunities that have downstream participation, so that has been the case for some time. I guess there are some with the Gates Foundation or Delta where we have managed to make applications for grant funding, which are really investments in the platform and capabilities. And sometimes those deals we would do on a case-by-case basis, but it's a very different dynamic in that grant funding environment than it is when you are doing discovery on actually a commercial, potentially commercial molecule and all of those deals have downstream participation.

Got it. Thanks. And then, if you are looking more long-term, right. What level are you looking to continue diversifying the modality exposure? Do you expect a broader focus on the calling antibodies to continue to dominate the pipeline including from new products as well? Or do you eventually envision Abcellera having a more modality-balanced pipeline, as it seems like you guys are continuing to explore new modalities that they see fit?

Carl here. I can take that one. So, we are squarely focused on therapeutic antibodies defined quite broadly. So that would include monoclonal bispecifics other modalities that include antibodies as part of the composition of matter. Looking forward, we expect that main drivers of this sector are going to be discoveries in biology that are amenable to antibody therapies in a variety of different ways. It's also going to be new modalities that allow you to use antibodies to get novel mechanisms of action. Within that class, we're very bullish on the future of five specifics and are making big investments on that capability. And third is going to be about being able to unlock target space where there are large numbers of well validated targets that represent a giant market opportunity, but where the industry has struggled mightily over the past couple of decades to find molecules that are suitable for development. We are -- we have a long-term research effort on that front, looking particularly at GPCRs and ion channels. Those are tough problems, but we're making good progress and we aim to be a major enabler for that part of the sector.

Our next question comes from Gary Nachman with BMO Capital Markets. Gary, your line is now open.

So for the six molecules in the clinic, what's the earliest that we might hear about some clinical data from the non-Lilly b-mab molecules, you added one in the first quarter through Trianni. Could you be on pace to put a few molecules in the clinic every year from your different partnerships? And when could those other four generate good revenue for you, whether it's in terms of hitting certain milestones, or ultimately getting to market but that's probably still away?

Gary, good to hear from you. Yes, exactly right. This is why we focus on the portfolio, of course, we have a large portfolio, that is, we would expect consistently molecules from that portfolio would start to hit the clinic. Of course, we also expect some attrition in that portfolio. That's just the nature of drug development. With regards to those molecules that are the six that we show, of course, two of them are the COVID related molecules. So, we've seen the progress of those. And we don't have a lot of visibility on individual programs. And actually, we've designed the portfolio strategy to move away from looking at programs like things on a program by program basis. So, I think we would hope that more molecules would enter the clinic in the coming year, and, of course, the years to come. And we will start to see that as a more-steady stream. And then we will be watching the progress of those molecules as they advance through the clinic. They'll certainly be some milestone revenue and I would think that there will be some material milestone revenue in the coming years. But remember, these molecules right now, aside from the COVID molecules are in Phase 1. So they're still very early in the clinical development. And they'll mature over the coming like three to five years. And as they progress through, we've got millions and millions of dollar milestones every time a molecule would advance through clinical development. And we would expect to see that and recognize as it happens.

And then Carl, regarding the panel of CD3 antibodies. Can you have multiple partnerships for different types of cancers? How soon can you potentially partner those? Are there any real gating factors? And then, would you potentially keep some of these for yourself? I mean, sounds like from what you said earlier that you probably going to partner out all these antibodies. So I'm just curious if there's even a possibility that you might keep some of these when you're on development on.

So first, we do not have plans to, in the foreseeable future move into clinical development with these. So, it is really about building technologies that enable this class and therapeutics. The underlying hypothesis here is that it is not true that a single or a small number of CD3 antibodies are optimal for any given tumor antigen or class. To me that is, on its face, very likely to be true, it hasn't yet been proven, largely because people have been restricted in the diversity that they have. So we have taken the initiative to build in a very short time, what I believe is the biggest panel in the industry. And we now are going to do work internally, combining those with a variety of different tumor antigens, to prove that the potency and T cell activation is dependent upon the appropriate combination of CD3 and the tumor binder. And it's not something that you can solve with just one arm. So that work I feel we need to do to validate and get people to understand that paradigm of thinking about this class. In terms of partnering, we're already getting a ton of interest. So we've had, I'd say almost twice the business development activity in the last month than is typical. And most of that has been driven by companies that are in the oncology space, that haven't been able to secure technologies to get a good position in what looks to be one of the most exciting classes of therapeutics. And they see this as an opportunity to get ahead. And we exist as an organization to help people more quickly and effectively develop better drugs. So that's what we're focused on right now.

Our next question comes from Do Kim with Piper Sandler. Do, your line is now open.

I just have one. I know you can't say much about the Empirico collaboration program that the first one that you completed discovery. But I was hoping that you could talk about maybe how challenging it would be to get antibodies to this first GPCR target using conventional means and how you were able to get your process through?

Thanks Do. So yes, we're very excited about that program. So it's difficult to say for any given target, how difficult it would be with one technology or another. What I can say is that in this case, if the GPCR target, which is widely viewed as one of the most difficult classes, probably next to ion channels. What is particularly impressive about this one is that we went from initiation of this to generation have a very large panel of antibodies and many highly potent functional antibodies that have moved into in vivo testing, at a speed that I believe is unprecedented for this class. So, we are very excited about the quality and diversity of this program of molecules that have been developed in this program, but also on the speed. And I see this has a proof point, yet another proof point for our main thesis that if you spend the time to really build the engine, if you work on the technology to increase performance and generate speed. You can turn ideas into therapeutic candidates much faster than has conventionally been done in the industry. That's something that we showed before on bamlanivimab, We showed it best-in-class molecule with bebtelovimab. We have generated what I think is the largest panelist CD3 in the space of six months. And the first program was Empirico shows us also succeeding on GPCR targets. So our goal is to keep performing and layering on that evidence, demonstrating that we have got a technology that is really moving the needle therapeutic antibodies.

Our next question comes from Antonia Borovina with Bloom Burton. Antonia, your line is now open.

Great. Thanks for taking my question. Most of them have been answered so just a couple. So, I know that you are very limited with what you can discuss regarding the Trianni partner program advancing into the clinic. But just wondering if you could remind us of the typical deal structure for the Trianni partnerships and how they compare to the rest of your pipeline? And then if you could just give us an update on what you are forecasting for your cash runway? Thanks.

Yes, thanks. Thanks Antonia. Good to hear from you. On the Trianni licenses, these molecules are or these agreements for things that were negotiated by Trianni when it was under different ownership. We are typically seeing low single-digit royalty amounts on these, and milestones that are typical of our own programs. But the royalty rates are significantly lower, I would say than the typical program. And as we outlined in the 10-K, on our full year results for 2021, we showed what those average royalty rates are for our internal programs and the programs that we have under contract. For the cash runway, as we noticed here, we have a very healthy cash balance, and we indicated in the remarks that even with the big investment that we are making in facilities and team and expanding the team in all this work that we are doing, advancing the platform and technology, we have sufficient runway for at least the next three years, even given that very large investment that we are planning to make in the platform.

Thank you, Antonio. That concludes today's question-and-answer session. I will now pass the conference back over to Carl Hansen for any closing remarks.

Thank you everyone for joining us today. This is an exciting time for Abcellera. Thank you for attending and we look forward to keeping you updating our progress on future calls.

That concludes today's Abcellera Biologics Incorporated Q1 2022 earnings results and business call. Thank you for your participation. You may now disconnect your line.