Good day and thank you for standing by. Welcome to the AbSci Corp. Third Quarter 2021 earnings 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]. Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your host today Alexander Conn [Ph], Investor Relations. Please go ahead.

Thank you. Earlier today Absci released financial results for the quarter ended September 30th 2021. If you have not received this news release or if you'd like to be added to the company's distribution list, please send an email to investor.absi.com. Joining me today from Absci are Sean McClain, founder and CEO; Greg Schiffman, CFO; Matthew Weinstock, CTO; Kate Corcoran, VP communications; and Jim Patricelli our new VP investor relations. Before we begin, I'd like to remind you to manage or make statements during this call that are forward-looking statements within the meetings of Federal Securities Laws. These statements about material risks and uncertainties that could cause actual results or events to materially different from those anticipated. You should not place undue reliance on forward-looking statements. Additional information regarding these risks and uncertainties appears in the section entitled “Forward-looking” statements in the press release Absi issued today. For a more complete list the description, please see the risk factors section of the company's most recent filings and Forms 10-Q, S-1, and other reports on file with the Securities and Exchange Commission. Except as required by law, Absi disclaims any intention or obligation to update or revise any financial projections or forward-looking statements whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast. November 9th 2021. With that I would like to turn the call over to Sean.

Thanks, Alex. Good morning and thank you for joining our third quarter 2021 earnings call, our first as a public company. Our team of Unlimiters has built technology to enable better, faster, smarter biologic drug discovery and cell line development. And we are excited to share our latest financial’s and operational updates with you today. Indeed, our outlook has never been more encouraging. 2021 has continued to be a momentous transformative year for Absci, exemplified by tremendous growth and punctuated by strategic acquisitions and partnerships, important additions to the team in key roles and our debut as a public company. All on top of the scientific innovation we do each and every day. At Absci we are translating ideas into drugs, channeling R&D investment and drug discovery and bionic protein technologies, and developing our innovative drug discovery and bio manufacturing platform as we continue to drive toward our goal to predict the absolute best protein-based therapies for patients a truly unprecedented speeds. This is where the industry is headed and we're excited to share our progress with you all today. Through our integrated drug creation platform, we expect to get better drugs to patients at unprecedented speeds by merging AI and biology. One of the many exciting aspects of our technology is that we have the unique ability to generate billions of data points on protein functionality and manufacturer ability in a single experiment. And we are feeding this data into AI deep-learning models to allow us to predict better drug candidates for patients with unparalleled speeds. At Absci, we have developed a differentiated business model that focuses on partnerships, wherein we develop the drug candidate and associated cell line, out license that to our partners, and benefit from program fees, milestones, and royalties. This is the core of where…

Thanks, Sean. And hi, everyone. I'm going to highlight four main areas of R&D investment in Absci and the accomplishments those investments have led to, along with how it's driving business opportunities. Those main areas include: one, our drug discovery capabilities; two, bionic proteins; three, the Denovium acquisition and AI investments; and four, the Totient acquisition and the scope of computational antibody and target discovery activities and assets. Regarding our drug discovery capabilities, in 2021, we succeeded in building out our discovery team on plan to augment the necessary skill sets from early discovery up to IND-enabling studies, tailoring our proprietary screening technologies to enable drug discovery activities, bringing online additional capabilities necessary to support drug discovery efforts, such as library design, high throughput biophysical characterization, and cell-based assays in generating sufficient proof of concept data to result in the closing of a substantial multiple program partnership with EQRx. Next, I'd like to highlight what we call Bionic Proteins. Natural proteins are composed of different combinations of 20 naturally occurring amino acids. Through our Bionic Protein technology, we are able to unlock new chemistries, not afforded to us by nature, through the incorporation of non-natural amino acids. These specialized amino acids, not found in nature, provide a unique chemical handle to cite specifically modify these proteins with additional chemical functionalities. Applications of an opportunity for this technology include attachment of chemotherapeutic molecules or payloads to antibodies to generate extremely targeted next generation cancer treatments that are more efficacious and have less side effects than current chemotherapies, and improving the circulating half life or PK/PD properties of existing drugs through site specific regulation. This year we developed our proprietary Bionic SoluPro system to enable consistent incorporation of non-natural amino acids. Demonstrated success incorporating non-natural amino acid residues into therapeutically relevant molecules…

Thanks, Matthew. Before we discuss the financial results for the quarter, I want to provide an overview of our financial model and key metrics. As Sean and Matthew have discussed, we are an enabling technology for our partners. We structure our programs to share in the success of our partners. This includes program fees, milestones, and royalties. The greater value we are bringing to our partners, the higher the payoff. As Sean has indicated, we have expanded our product offerings this year beyond our traditional cell line development into drug discovery. This expands our product offering to more comprehensive discovery deals facilitated by the company's strategic efforts this year, which are expected to have far greater economic impact to Absci in the intermediate and long run. We target risk adjusted program value between $10 million and $20 million. This includes discounting all potential milestone and royalty payments after applying for probability for success of each development milestone, and the probability of the drug candidate eventually being approved. We are using industry benchmarks to arrive at the probability of achieving these milestone payments, as well as royalty revenues. Cell line development deals are on the lower end and discovery deal on the upper end of the range. [Indiscernible] for program work represents an insignificant portion of overall deal value. To date, all of our revenues have been based solely on program work. We expect that to change as candidates begin to move to the clinic business. This has us so excited about the future here at Absci. The work we are performing today has the potential to generate revenues over the next 25 years. Milestone and royalty revenues virtually represent all profit. Thus, our focus is on active and on-going programs and growing that pool. Those include all programs where we…

Thank you. [Operator instructions]. And our first question comes from the line of Tycho Peterson with JPMorgan. Your line is open. Please go ahead.

Thanks. Appreciate all the color. I guess question on Totient, and curious about your kind of interest and willingness to do kind of accurate [ph] development, also how you're thinking about the diagnostic opportunity around that. And then on that kind of neutralized COVID spike protein, it seems like a windows kind of shutdown on monoclonal antibodies given what we saw out of Pfizer and Merck on antiviral data, but I'm curious how you think about that up to any particular as well?

So I guess I'll take the second piece of that question first regarding the COVID-19 opportunity. I agree with you that that probably the opportunities closed for the current variance. I think that we may see that opportunity opened up as the pandemic evolves. That's definitely not a major focus for the platform. The focus at the moment is on oncology and autoimmune disorders. But I do think that that's a key validation of the platform and just how quickly that the team can actually move to identify valid solutions for that. And so I think that's just something worth highlighting in terms of how that how the technology actually works, and also the potential to deploy it in the case of future pandemic situations. And Tycho, I'm sorry but I've already forgotten the first part of your question.

How far how far downstream do you take it -- like what your willingness and risk to be kind of at risk development of your own targets and you kind of mentioned diagnostics in your comments as well? I'm curious just broadly how you feel about that opportunity for Totient.

So the diagnostic piece is not one that that we've thought too deeply about at this point. We've just noted that there's definitely an opportunity there for us should we ever want to move in that direction. And then in terms of the development of the assets that are coming out of that pipeline, that's something that we're definitely internally evaluating exactly how far we want to take those things. Obviously there's more value the further along we take them kind of down the validation and toward IND, but there's also more investment involved in that. So it's kind of striking a balance there. We don't we don't see ourselves taking things through the clinic by ourselves at any time in the near future. But just how far you know how close to the clinic do we need to take things before we partners those assets office is something that we're exploring.

And Tycho, in regards to the target validation itself we can either take partners data that they have and work with them on doing a targeted discovery program, or we can take patients samples from hospital collaborations that we have and validate those targets internally and we are planning on executing on both of those strategies.

Okay. That's helpful. Sean, are you able to say anything more about it EQRx? I know you mentioned the multiple therapeutic areas, oncology, immunology, and your plan your first target work in here, but can you just talk a little bit about your priorities under that partnership and other downstream economics on this one.

Yes there are downstream economics on this deal. Currently, at this time, we can't talk about the targets themselves, but we can't say that it is a multi-target, multi-program deal that we're very excited about.

Okay. And then last one for Greg. Just a question around visibility into project revenue streams. You come up a little bit like in this quarter in the street. If I look at next year the street's got you down about 13.5 million. Anything you're willing to say on numbers for next year given how things are played out these last two quarters.

So guidance -- it's preliminary for us to give guidance for next year. We have been impacted this year we indicated early timing related where we have seen the interest from our partners moving from cell line development into discovery, and those deals took longer to close than our original estimates would have been for us cell line development deal. And that's caused some timing differences on revenue. I don't think we're ready to update next year guidance at this point, but we're feeling very good about the program for bringing on board. We'll start executing those programs and the timing issues, the chance that we have will be behind us.

Okay. Thank you.

Thank you. Our next question comes from the line of Dan Arias with Stifel. Your line is open. Please go ahead.

Good morning, guys. Thanks for the questions. Sean, I want to just ask a couple on a few of the partnerships. On the Astellas partnership that you've mentioned any insight into the discovery work that you guys are doing with them and the prospects that they might have for advancing to preclinical with you guys. And then relatedly advancing the preclinical program to the clinical program? And then that's -- so that's one. And then the second one we should be on PhaseBio. Obviously, we don't know exactly what drug you're working on with them but if we were to sort of take a stab and assume it was Bentracimab, would that -- I think that would make the timeline something like mid 2022 for a BLA filing. If that were to happen, would that make royalties in 2023 a decent assumption?

Yes I'll start with the PhaseBio question first, Dan. So given that we can't disclose what asset we're working on, we can't opine on that at the current moment. PhaseBio is in a much better position to answer that question of that at this point in time. And regarding Astellas, it is a molecule optimization discovery program and it's not de novo drug discovery. So they had given us a molecule to optimize for them. And in regards to preclinical development and taken it into the clinic, again, we cannot opine that at the current moment, but I will say that the program is progressing well.

Okay. If I could just sort of ask a follow up on PhaseBio. I think the idea by once you get past to BLA, they will go from using another provider to you guys in terms of in terms of producing the active compound. Do you have a sense for the timing that might transpire with respect to that, in other words that quickly after you see the BLA, success with BLA, is there an evaluation period down the road do you think needs to take place? I'm just sort of trying to understand the cadence of the events that would just sort of lead you to evidence of the progress that you guys are making with some of these really good partnerships.

Yes. With progressing to the BLA and then you know implementing after post BLA, amendment again, PhaseBio would be the party to opine on that, and from a regulatory standpoint what needs to be done as well.

Okay. I understand I'm asking questions that are hard to answer so thanks for indulging me on that. Just last one for maybe for Greg on the pipeline and the mix of the early and the late stage negotiations that you have there. I think the plan earlier this year was for the pipeline to be skewed toward discovery projects. Is that still true and when you look at 2022 and to some of the comments that you made before, do you think that you see the mix shift toward discovery more in terms of signed deals next year?

I would say yes. I mean, this year three of the five deals that we -- indicated was our goal this year will be a discovery deal. And the last three that we will look to find are all discovery deals. And if we continue to follow that trend I would say it would be heavily biased to discovery deals next year, and I think that's our assumption based on the discussions and feedback we're getting from the partners we're having dialogues with.

I would say the markets very excited about our discovery platform. And just to clarify the discovery programs do include the cell line developments so discovering the molecule as well as the cell line development. And as Greg noted, a majority of the pipeline that we currently have is discovery, and we're very excited about again how the marketplace has been receiving and our discovery platform.

Okay. Thank you guys.

Thank you. And our next question comes from the line of Max Masucci with Cowen and Company. Your line is open. Please go ahead.

Hi, thanks for taking the questions. So the pace of hiring continues a fast clip. They give 146 new hires this year. Whereas the recent hires then focus, is it more toward the four initiatives in R&D or more on the commercial side. Looks like SG&A came in a bit above our expectations in Q3. And then within the commercial organization, do you see more of the near-term low-hanging fruit coming in the form of expanding your presence within existing customer or finding new customers?

Sure. Let me have a discussion around the cost and then let Matthew or Sean talk about the second one. The majority of the headcount that we are bringing on board is associated with our lab and operations group. The SG&A was above expectations for the quarter, but a large portion of that was associated with non-stock compensation, which there was a lot of uncertainty exactly what any of that would be when we were thinking about that prior to an IPO, and we had $3 million of the $9 million was associated just with that cost. Many you had about $2 million associated with recruiting and public company costs coming on board. And so the headcount itself and the expenses that we have really have been growing in the lab operations, its skills enabling us to be able to do to some of the discovery work and that's what we're bringing some additional talent on board. We do expect that to continue to grow in Q4 but moderate substantially next year. We will build out an infrastructure that could execute on far more deals than we are executing on today. And at this point in time, I feel really good about what our ability to attract the talent that we brought on board, what it's enabling us to do and have positioned us to go forward. But we would expect to see a lot of the work that we're investing in today, which is building out some of the infrastructure capability moving over into operations.

And I will say that in regards to the AI and data sciences team, we've expanded that team as well and really recruited world class AI talent, which is extremely difficult to find no matter where you're at. And I would say that we've done a very good job of attracting that talent. And the reason because of the data that we have that no one else has access to. The billions of different data points on drug functionality and manufacturer ability, which again has led us to attract this top AI talent along with top biologists and send bio experts in the world.

Great. And then just on the commercial side. Just curious you know where the focus is no more square. Is it more in the same customer expansion or winning new customers?

Yes. So are our existing partnerships are really key for us expanding into the future. So we see growth within our existing partners signing new multi program deals, but then also attracting new partners just like we saw with EQRx about our multi program, multi target sorts of partnerships moving forward. But both are important to us. But the trend that we're seeing is that the fact that we're signing these multi program deals with one partner.

That makes sense. Then if understanding you, you can't go into deep into any specifics, but if you look at the nine total active programs, most being in earlier stages. If you think about the timelines and your technology or what to enable for partners compared to a conventional approach, does late 2023 or 2024 sound like a more reasonable time when we could start to see a more smoothing out of programs that are approaching or triggering pre commercial milestone payments, just another question well into visibility.

Yes. I think you know first and that's when I want to highlight that we have no specific information from any partner that shares with us the exact details of their clinical programs and where they're at. And so really just based upon interactions that we have and what you traditionally see in a clinical program, but I think the timing for that is probably appropriate when we look at where we are in the early stage programs. And we tend to think it's 10-year time period from that start to where you typically see a therapeutic move through to eventual approval. And again, those are just typical timelines. We don't have any specific insights we will get that insight probably at the same time that you do when we start seeing the programs being publicly announced in terms of the clinical programs. And we know that we're being used in that program.

Great. Thanks for taking the questions.

Thank you. And our next question comes from the line of Michael Ryskin with Bank of America. Your line is open. Please go ahead.

Great. Thanks. Just a couple of quick ones for me. One on the five programs target for 2020. I just want to be clear. Would EQRx count as one of those or potentially multiple if you're talking about multiple targets -- just want to clarify-- programs versus deals, sort of how you talk to those KPIs.

So EQRx is a multiple program and said it would be more than one. I think from that standpoint, that's probably how we would think of it. We're very confident we will be achieving the five this year. I think Sean indicated that in his comments earlier in the call. And at this point, we feel we're well positioned to hit that goal.

Okay. Great. And then just another point sort of on future pipeline. Obviously not getting the specifics, but maybe you could talk about potential programs starts next year. How do you think about visibility? Could you just talk us through what the pipeline is there in terms of additional programs with other partners? How long those conversations take and so you get something signed three months, six months? Just walk us through the process and what happens is you build that backlog for next year and the year beyond.

Let me just maybe give an intro and then I'll turn it over to Sean. One of them, we've been building that backlog over the past four or five months. We brought it on and have expanded our business development group that's working with the partners bringing on the deal. We've seen now the EQRx deal closed. We've got others that are getting -- we believe very close to signing. And you really have a pipeline that you've started to build up that will continue, and so from that standpoint where we had a little bit of a lag on signing a few deal, it really would that shift going from cell line development to discovery. But you've been building up a partner up a pipeline beyond just the couple that were in the deal that we announced to an EQRx that the others that are about to be signed with is a pipeline going toward next year already been established. And then I'll turn over to Sean.

Yes. We've got a really strong pipeline right now especially on the discovery programs and with the IPO that continued to give us credibility, being able to close and press release EQRx. It just continues to build out our credibility and drive our pipeline within the marketplace. And so going into next year, it's an extremely robust pipeline that we're really excited about. But as you indicated, it does take time to build that and that's what we've been doing is really building that and leading us to have a really strong 2022.

Great. Thanks so much.

Thank you. [Operator instructions]. And I'm showing no further questions, and I'd like to turn the conference back over to Sean for any further remarks.

Thank you. Out outside, we have experienced significant achievement this year creating and integrating new technologies to drive our business opportunities. We have also had success in recruiting and building a world class team of unlimiters, raising the needed capital to allow us to execute on our stated objectives and building out and moving to a terrific new campus. And all of this was accomplished while executing on our partnerships and signing our first major multi program discovery deal. And we are confident in our ability to in this year having hit our goal for the number of new programs we set forth. Before closing, I want to acknowledge and thank our team at Absi for their limitless dedication and extraordinary work this year. And I'm excited for what the future holds. We look forward to continuing to engage in dialogue with you all. And as a reminder we'll be presenting at the Credit Suisse Healthcare Conference later today and the Stifel Healthcare Conference next week. Thank you all for listening, and we look forward to speaking to you all again.

This concludes today’s conference call. Thank you for participating. You may now disconnect. Everyone have a great day.