Good afternoon. And welcome to AbCellera's Third Quarter 2022 Business Update Conference Call. My name is Dania, and I'll facilitate the audio portion of today's interactive broadcast. [Operator instructions] At this time, I'd like to turn the call over to Tryn Stimart, AbCellera’s Chief Legal and Compliance Officer.

Thank you. Good afternoon, and welcome to AbCellera's third quarter 2022 business update. We're pleased to have you with us today as we will discuss the results announced in our press release issued just 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 are 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. The presentation here today 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 U.S. dollars. Now, I am pleased to turn the call over to Carl Hansen.

Thanks Tryn. And thanks everyone for joining us today. It’s my pleasure to provide an update on our business for the third quarter of 2022. Today, November 8, marks the 10th anniversary of AbCellera Incorporation. We found AbCellera on a bold idea, to deliver the rethink and rebuild the critical product creation step in bringing new antibody therapies to the world. After decade of company building, we believe we now have the industries’ most powerful engine for antibody discovery. Along the way, we’ve grown from six counters and a lab to a business of nearly 500 people spread across four countries and three continents. We’ve earned a reputation as a leader in the industry and have worked on over 90 different programs and has succeeded where others have failed. We've also validated our platform not just once, but twice in bringing therapies to patients delivering authorized antibodies, bamlanivimab and bebtelovimab for the COVID-19 pandemic, in what was arguably the most competitive and time sensitive drug development effort in history. For a young company, our competitive position is exceptional. We've assembled an outstanding team; we have put in place the core proprietary technologies that we need to execute our strategy. And we have nearly 600,000 square feet of state-of-the-art facilities that are either operational or under construction. Over this 10-year period, we have achieved all of this while building a balance of over $450 million in accumulated earnings, and have nearly $900 million in total cash equivalents and marketable securities. It is on this solid foundation that we embark on the next decade of accelerating innovation and taking our business to the next level. Our business strategy is simple. First, it has to be the best in the world and bringing antibody therapies from target to the clinic. And second is…

Thanks Carl. I'll start by highlighting our progress made on our key business metrics in the third quarter of 2022 as we continue to see strong momentum in the business. This quarter, we started work on four new discovery programs taking us to a cumulative total of 92 program starts. Overall, we have started work on 23 programs over the trailing 12 months, which represents a quarter of all the programs that we have ever started with partners. This demonstrates the continued strong growth of our portfolio. All four starts in the quarter include downstream participation. We signed no new programs under contract in the quarter, and we ended the third quarter of 2022 with 164 programs under contract with 38 unique partners. Well, the number of starts in at any given quarter will be irregular, we expect the trajectory of starts to continue to be strong. Importantly, the numbers included in our key business metrics do not include the pre partner technology development efforts initiated by AbCellera that Carl referenced earlier in the call. For our molecules at a clinical stage, we are excited to see another molecule from a discovery partnership reach the clinic, bringing our total number of molecules in the clinic to seven. As Carl mentioned earlier, this new molecule was discovered by us in partnership with an undisclosed partner and has entered clinical trials with an indication in Alzheimer's disease. We continue to view our growing list of molecules in the clinic as specific examples of our near and midterm potential revenue from downstream milestone fees and long-term royalty payments. With respect to marketed molecules, Lilly announced in Q2 that they had begun commercial sales of bebtelovimab to states hospitals and health care providers, which subsequently materialized in Q3. Turning to revenue; revenue in the…

[Operator Instructions] The first question comes from the line of Do Kim of Piper Sandler.

Hi, thanks for taking my question. And congrats on the progress. I was hoping you could talk a little bit more about the discovery process that it takes -- that takes for going against a GPCR target, is a different than your conventional target. And does it have extended discovery timelines? And specifically for Regeneron, when they take responsibility of the antibody candidate, are they starting at IND enabling studies at this point?

Great. Thanks Do. So this is Carl Hansen. I'll take those two questions in turn. So first, your question related to differences in discovery against non-GPCR targets, or more standard targets and GPCRs. And perhaps I'll even frame that by expanding the question to talk about Ion Channels as well, which are both within this effort that we're running. So GPCRs and Ion Channels represent a huge class of targets, they are two of the largest target classes. There are many high-profile targets that are out there that have been well validated either through clinical development of small molecules, but where perhaps specificity or toxicity has been an issue, or that are well validated through other mechanisms. And where antibodies are believed to be a very attractive modality to solve some of those challenges. Despite that, both historic classes have been notoriously difficult to run discovery against. And the reasons are not just one thing, the reasons are manifold, it includes poor immunogenicity of the targets, it includes a small epitope or real estate that's available for binding an antibody. And it also includes the need for special capabilities in functional assays, and identifying antibodies that are both developable and that have the right functional activity against the target. So it's not one thing. What is really needed is a latticework of technologies that allow you with high probability to go from a target name through to a molecule that does what it's supposed to do is efficacious, and also has the properties to develop it as a drug. We have been working in this space now for many years. And for just about three years now, I've had a long-range intensive R&D effort to put in place all of those different technologies and leverage AbCellera’s core platforms to unlock that space. So once that technology development has been done, the timelines for development of those targets are not different. But of course, many of these would still be considered some of the hardest in the industry. And we are still doing work to break those open. With respect to the Regeneron collaboration, as mentioned, we worked with Regeneron productively on a GPCR target. And we've helped them to overcome the formidable hurdle of finding a candidate that's ready for further development. That molecule is not yet in an IND enabling studies, but our belief and the indication from Regeneron is that they are now moving that molecule towards those studies and ultimately towards IND.

The next question comes from the line of Puneet Souda of SVB.

Hi, you have Michael on for Puneet. Thank you for taking my question. My first question is about the early pipeline. So we've been hearing a little bit about increased caution for capital spending by Biopharma. I am wondering if that's at all reflected in the program starts or new programs on the contract, or do you think if you're seeing any sort of similar impact on your pipeline? Then One quick question about bebtelovimab and the new COVID Mab. I was wondering if the development timeline for this new mab would be at all similar to bebtelovimab or the fact that COVID kind of have the pandemic state to an extent if that affects the timeline. Thank you.

Michael, this is Carl. So maybe I'll start first by answering your question on bebtelovimab and the new lead that we've identified as a next generation or third generation molecule for COVID-19. So as you know, we have now applied our platform three times, to come up with solutions for COVID-19. The first of course, was bamlanivimab, which was done at tremendous speed in combination with Eli Lilly. That was, I believe, and still is a record in speed in developing the therapeutic. The next one was bebtelovimab where we focused on breadth and potency. And in this case, we have now developed, or we've now discovered a new antibody that we believe, has the potency and breadth to cover the current situation with COVID-19 and what is in the foreseeable future. I would expect that the timeline to bring that to the clinic, and then through clinical development would be similar to what we've done in the past with Eli Lilly, provided that we are successful in finding a clear regulatory path for that development. And I do know that there have been conversations between Eli Lilly and the FDA about how that would proceed. I don't know the status of that. But we are ready with that solution if that opening is there. Now moving on to the other part of your question, which I believe was related to program starts. There certainly is some element of the macro environment that everyone's keeping an eye on. But I will remind you that in the Q4 call of last year, we indicated that we were shifting our business development priority from volume from the number of programs and partners that we have secured to prioritizing the highest value deals. And we expected that we would do fewer deals but do some deals that we have greater participation in and where as we forward integrate, we are doing more of the work for program. For us, that is one of the ways in which we maximize the overall value of the portfolio. That is what has been happening over the last couple of quarters. And I did mention some exciting progress on the co-development programs where we have completely in house brought these from an email with the target right through to what we expect in 2023 will be a development candidate. And on those programs, as I mentioned, we have currently a 50% ownership stake and an option to co invest and maintain that ownership stake. So there are now seven programs in that bucket with four different partners. And of course, as we apply more effort, and do more of the work per program, we expect that the total number of we're going to work on will be lower, we expect the total value will be higher. And importantly, it's our belief that the timelines to clinical development will be faster and the probability of each program getting to clinical development will also be very significantly improved.

The next question comes from Gaurav Goparaju of Berenberg.

Congrats on the quarter. Just two for me. Given you announced the Regeneron program entering preclinical studies, should we expect similar announcements on future programs that enter preclinical studies. And then as a follow up to that are you able to disclose how many programs are currently in preclinical studies based on the answer?

Great question. Yes. So we typically do not make an announcement when programs move towards preclinical studies, in this particular case, we did make an announcement in part because we had not formally announced that deal back in 2020. And also because of the significant progress with a high-profile partner in moving forward a program against a very difficult target. So I would consider this the exception, and we will not routinely be giving progress updates on molecules until they reach IND for sure. And perhaps earlier on a case-by-case basis.

Got it. Thanks. And then one more. For me just is there any updates on the timeline regarding the GMP facility?

Yes, you remember previously, hey, Gaurav, it’s Andrew speaking here. Previously, we'd indicated that the GMP facility was on track for the end of 2024. I'd say in terms of having the facility up and working on our first batches and qualification batches at the end of 2024. We're still on track for that with the first kind of commercial batches begin in 2025. So that would be that so roughly on schedule of where we were and how we've indicated previously.

Next question comes from Stephen Willey of Stifel.

Yes, good afternoon. Thanks for taking the questions. With respect to the in house work that's being done on Ion Channel and the GPCR side. I understand the Regeneron lead candidate was developed via the VelociMouse that Regeneron has, are you guys using the tree any transgenic platform for the enhanced GPCR work?

Thanks Steve. Carl here. So yes, the program with Regeneron took advantage of VelociMouse with our internal work, which is really intimately connected with long range R&D efforts on unlocking target space and unlocking new modalities, T-Cell engagers as well as GPCR and Ion Channels. We are using the tranny platform; we have access to another transgenic platform. And on a case-by-case basis, we also use other sources of diversity, including different animal species such as camelids, wild type rats, and other animals in order to maximize the chance of finding leads that can be developed. Of course, if we start with human as rodents, then the path to a final candidate is shorter. But for many of these targets, the name of the game is getting a molecule over the finish line period, because they've been out of reach for a long time. And so we don't pull punches on that.

Okay, and I guess maybe just sticking on the in-house development work. And as you mentioned, you'll be presenting some of the CD3 variant data at SITC. And I believe in the abstract, you also talk about how you've identified some, I don't know if you want to call them leads, but you've identified some candidates, both EGFR CD3 targeting, should we anticipate that there's an opportunity to maybe move one of these forwards into perhaps IND enabling studies at some point?

Yes, Steve, so the update at SITC will be later this week. And so I don't want to steal any thunder from that. Some of that work will be showing a further characterization and expansion of the panel. And we believe that that's one of the critical steps to being able to generate optimal therapeutic molecules. The work that will be presented on EGFR I would characterize as proof-of-concept. So we do not intend and do not expect that work to lead to assets. Although, of course, we could be surprised. I did mention on a previous call, that in order to validate the hypothesis that an improved diversity and quality of CD3 combined with OrthoMab can lead to therapeutic candidates with a better profile in terms of cell killing, and cytokine release. We have initiated some work internally on well-known targets that are focused on solid tumors. We are not yet at the point to share that data. So I don't expect sharing that data at SITC but that we will share that as those programs mature.

Okay, and then just lastly, are you able to say whether or not the new clinical candidate from the undisclosed partner in Alzheimer's if that has downstream economics associated with it.

Yes, it does have downstream economics. Thank you.

Next question comes from Gary Nachman of BMO.

Hi, guys, good afternoon. First for the four new programs starts in 3Q to get to 92. Is there anything that you're doing differently now versus a couple of years ago in terms of seed to start these programs or how you approach them? And you also had four new starts in the second quarter, is that a good cadence to think about? And then, are you making any further inroads with the VCs, after the Atlas and Versant partnerships that you announced last quarter that seemed like a nice initiative for you, and maybe a lot of room to run there? So I'm curious if you making any more progress there. And if you think we're going to hear that more of those partnerships, going forward?

Yes. Hey, Gary, it's Andrew here. I'll take the first part. And then when it comes to the question about the VCs, I'll hand off to Carl. So with the program starts, it's the same definition of what constitutes a program start, as we've always been using, it's quite a rigorous definition. There's always going to be some variability quarter-to-quarter. Importantly, when you said, hey, is there anything we're doing differently? I think what's important, and Carl mentioned in one of the previous questions is that in each of the programs, we're doing more and more work. And so if we use program starts as kind of a measure of both capacity and value that is being generated, we're doing more and more work in each of them. So it does, the fewer programs start shouldn't be an indication of less capacity within the company, nor should it be an indication of less value that is being created because we are adding more and more to each of the programs. And as you can see, even in the increase in expenditure for our R&D, that is growing significantly. And still a similar percentage of it is being spent on the efforts in partnership and program discovery compared to this time last year. So I think a way to think about the program starts going forward is that the roughly what we've seen in the past year or so will probably be a good indication of what's going to be in the future, we still have a full book of work from the large number of 164 programs under contract, which our partners will continue to call with whatever frequency that they determined is correct. And that's how we'll continue moving going forward. And perhaps I'll pick up from there and…

Okay, great. And if I could squeeze in one other follow up just on the molecule that's advancing into the clinic for Alzheimer's. That sounds pretty exciting. And you mentioned is good downstream economics, but anything you can tell us just about that program, maybe at a high level your discovery efforts with it, if there's something unique about it, in terms of the antibody that was discovered, and that's being moved forward. I know it's with an undisclosed partner, but I don't know it just it sounds like a nice important program. So anything more you could say about it. Thanks.

Thanks Gary. We think that it's a very significant announcement, mostly because it adds further weight to validation of the platform that our work is now moving forward, molecules are getting to the clinic for important unmet medical need with a top partner. I don't think that I can go into the details of the program, given that we still haven't identified who the partner is. And we'd want to wait until that is fully in the open before we say any more about it.

The next question comes from Antonia Borovina of Bloom Burton.

Hi, there. Thank you for taking my questions. My first one is just related to your commentary on the program starts and how you're adding more value per program. So I'm just wondering, can we expect your average royalty rate, which I think average is around 5% now, can we expect that to tick up as you are doing more work per program?

Hey, Antonia, it's Andrew here. Yes, great question. If you'll remember, we disclose kind of aggregate royalty rates and how they've moved over time in the 10-K. From in the earlier years, up to 2018. They averaged about 2.5% and in the 2020-2021 timeframe, they went up to 4.2%, I think was the median royalty. We do see as we are doing more work, we do see the value of each of these programs to AbCellera increasing, I think most notably, and probably in the extreme in the co-ownership case where that Carl mentioned where we have actually a 50% ownership stake, as we start those programs, and then an option to invest in order to maintain that 50% ownership stake going forward. Those are of course, extremely valuable programs and will be accretive to the average royalty rate overall, as they're in the portfolio. So in those sorts of cases, absolutely we would expect the overall value and especially in the royalty or equivalent in the program will increase. Importantly as well, though it's not included in the program starts number there's the pre partner programs that Carl alluded to where those are wholly owned, but it is still our intention to be partnering those out at the right point in time. And those once we've -- because we've done more work on them. And because we've retired more risk and put in more development on our own steam, we would expect the economics to those to be considerably accretive to the overall portfolio. And that 4.2% Again, in the extreme case, the first pre partnered program, of course was the COVID molecule. And while the situation was exceptional there, it resulted in a very high royalty, sort of proving out the business model that we've chosen, overall, how to capture value in the success of the molecules that we work on.

Okay, and then just moving to the Regeneron deal. So I believe the deal was focused on four different targets, and one is advancing to preclinical development. So just wondering, is there still a possibility to advance the other three targets? Or was it just this one target that was selected to go forward?

Yes, so the original deal was with four targets, this is just the first one that has moved forward, and the other programs are still live. So we're hopeful that those will also move forward.

Okay. And then, related to that, we've seen some other big pharmas acquiring technologies to move GPCR drug discovery in house. So maybe you could just speak to what was the key selling point for executing this deal with Regeneron? Was it primarily focused on the speed of the platform? Or was it -- were you able to demonstrate that you could identify drug candidates that they couldn't, didn't have?

I wouldn't speculate on what was the single value proposition that resulted in the deal with Regeneron. It's a multi target partnership, and there's a multiplicity of ways in which we see synergy between our capabilities and theirs and obviously Regeneron is a very well enabled and sophisticated partner and one that we're very happy to be working with. More generally, in the class of GPCRs and I would put Ion Channels another difficult targets in there that tends to be one of the places where we have had the most engagement with the large and well enabled firms. And typically it is because these groups have tried or they have experienced with similar target classes and have realized that the existing conventional technologies are not up to the task. And so the value proposition there is to take a target or a program that is completely stuck, get it unstuck and help move it towards clinical development in what are often potentially first in class, very high value. unmet medical need indications.

Thank you. There are currently no additional questions registered at this time. So I'll pass the conference back over to Carl Hansen for closing remarks.

Thank you everyone for joining the call today. We look forward to providing further updates and wish you a good night.

That concludes the conference call. Thank you for your participation. You may now disconnect your line.