What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-21 compared with 2022-02-25 · 261 added, 302 removed, 399 unchanged (59% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with the section titled “Selected Consolidated Financial Data” and our consolidated financial statements and the related notes thereto included elsewhere in this annual report.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes thereto included elsewhere in this annual report.

Some of the information contained in this discussion and analysis or set forth in other parts of this annual report contain forward-looking statements that involve risks, uncertainties and assumptions.

As a result of many factors, including those factors set forth in the section titled “Risk Factors,” our actual results could differ materially from those discussed in or implied by these forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors.” Please also see the section titled “Cautionary Note Regarding Forward Looking Statements.”

We believe that the surest path to a better future is through technological advancement and that the new frontier of technology lies at the interface of computation, engineering and biology.

Our mission is to improve health with technologies that transform the way that antibody-based therapies are discovered.

We aim to become the centralized operating system for next generation antibody discovery.

Our full-stack, artificial intelligence-, or AI, powered antibody discovery platform searches and analyzes the database of natural immune systems to find antibodies that can be developed as drugs.

We believe our technology increases the speed and the probability of success of therapeutic antibody discovery, including enabling discovery against targets that may otherwise be intractable.

We forge partnerships with drug developers of all sizes, from large cap pharmaceutical to small biotechnology companies.

We empower them to move quickly, reduce cost and tackle the toughest problems in drug development.

As of December 31, 2021, we had 156 discovery programs that are either completed, in progress or under contract with 36 partners.

As a recent example, in a collaboration with Eli Lilly and Company, or Lilly, we applied our technology stack to co-develop bamlanivimab, a potential antibody therapy to treat and prevent COVID-19.

Starting from a single blood sample obtained from a convalescent patient, we and our partners identified a viable antibody drug candidate within three weeks that advanced into clinical testing 90 days after initiation of the program.

Lilly progressed into these clinical trials at a greatly accelerated pace as a result of the Coronavirus Treatment Acceleration Program, which is a special emergency program for possible coronavirus therapies created by the FDA in 2020 to expedite the development of potentially safe and effective life-saving treatments to combat the COVID-19 pandemic.

With respect to other or future product candidates, there is no assurance that any of our partners or collaborators will be able to advance a product candidate into clinical development on this timeframe again in the future, or at all.

We initiated our partnering program in 2015 and have only had this one program result in clinical milestone payments to us to date and we have not yet had a program receive marketing approval.

As a result of many factors, including those factors set forth in Part I, Item 1A, Risk Factors, our actual results could differ materially from those discussed in or implied by these forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 1A, Risk Factors.

Please also see the section titled “Cautionary Note Regarding Forward-Looking Statements.”

We are a team of scientists, engineers, creatives, and business professionals addressing the barriers of conventional antibody drug development.

We believe investments in technology will improve the quality, speed, and success of drug development and that long-term value creation begins with building a great company that can create multiple products, repeatedly and successfully.

We focus on the development of antibody-based drugs and are committed to improving discovery and development.

We aim to be the best in the world in bringing antibody therapeutics from target to target to the start of clinical testing by combining expertise, technologies, and infrastructure to build an integrated engine for antibody drug discovery and development .

W e think deeply about capital allocation and strive to maximize long-term value while mitigating the risks that are inherent in drug development and in scaling a company.

We look for opportunities where we believe low-risk investments in building technology and operational efficiency can create a sustained competitive advantage and drive long-term value by making biologics drug development faster and more efficient.

We structure our agreements in a way that is designed to align our partners’ economic interests with our own.

We forge partnerships with large cap pharmaceutical companies, biotechnology companies of all sizes and non-profit and government organizations.

Our partners select a target and define the antibody properties needed for therapeutic development.

We provide discovery solutions to partners that have a range of discovery capabilities, from the highly enabled to the less enabled.

We partner with companies of all sizes and government organizations to propel programs to the clinic, together.

We enable discovery against targets that have traditionally been intractable, and we accelerate programs against less difficult targets.

Our deals emphasize participation in the success and upside of future antibody therapeutics.

Our deals emphasize participation in the success and upside of future antibody therapeutic candidates.

Our partnership agreements include near-term payments for technology access, research and intellectual property rights, and downstream payments in the form of clinical and commercial milestones, and royalties on net sales.

We also participate in alternative investment opportunities including equity in our business partner and various rights for deeper involvement in moving molecules forward.

Longer-term we are eligible to receive additional payments upon satisfaction of clinical and commercial milestones, which we refer to as milestone payments, as well as royalties on sales of products derived from antibodies that we discover for our partners.

We also participate in alternative investment opportunities including equity in our business partners and various rights for deeper involvement in moving molecules forward.

Longer-term we are eligible to receive additional payments upon satisfaction of clinical and commercial milestones, which we refer to as milestone payments, as well as royalties on sales of approved products derived from antibodies that we discover for our partners.

Our discovery partnerships generally include royalty payments on net sales in the single-digit to low-double digit range.

We generated revenue of $233.2 million and $375.2 million for the years ended December 31, 2020 and 2021, respectively.

As of December 31, 2021, we had a total of 36 partners for whom we were conducting antibody discovery activities.

For the year ended December 31, 2020, three of our partners accounted for 35%, 25% and 14% of our research fees revenue and eight partners accounted for the remaining 26% of research fees revenue.

For the year ended December 31, 2020 we recognized our first clinical milestone payments and royalty revenue streams, totaling $213.3 million, exclusively from our partnership with Lilly.

For the year ended December 31, 2021, four of our partners accounted for 29%, 17%, 11% and 10% of our research fees revenue and 12 partners accounted for the remaining 33% of research fees revenue.

For the year ended December 31, 2021, we recognized milestone payments of $7.0 million and royalty revenue of $327.3 million exclusively from our partnership with Lilly.

Our partnership with Lilly constituted one of the partnerships that generated 10% or more of our consolidated revenues during the one or more periods described above.

With respect to the other partners, we do not believe the loss of any one or more of such partners would have a material

adverse effect on us and our subsidiaries taken as a whole.

We have also grown the number of programs that we have under contract with our partners, as illustrated by the following charts.

We incurred sales and marketing expenses of $3.8 million and $6.9 million for the years ended December 31, 2020 and 2021, respectively.

We are increasing investment into our business development team and into marketing our solutions to new and existing partners.

We focus a substantial portion of our resources on research and development efforts towards deepening our technology and expertise along our technology stack, and we expect to continue to make significant investments in this area for the foreseeable future.

We incurred research and development expenses of $29.4 million and $62.1 million for the years ended December 31, 2020 and 2021, respectively.

We incurred general and administrative expenses of $11.9 million and $41.8 million for the years ended December 31, 2020 and 2021, respectively.

We focus a substantial portion of our resources on research and development efforts towards strengthening our discovery and development engine and we expect to continue to make significant investments in this area for the foreseeable future.

We expect to continue to incur significant expenses, and we expect such expenses to increase substantially in connection with our ongoing activities, including as we:

invest in research and development activities to improve our technology stack and platform;

invest in research and development activities to improve our antibody discovery and development engine including investments in building our new headquarters through our joint ventures and building a new small-scale manufacturing facility;

market and sell our solutions to existing and new partners;

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continue to establish, protect and defend our intellectual property and patent portfolio, including our ongoing litigation

operate as a public company.

To date, we have financed our operations primarily from revenue from our antibody discovery partnerships in the form of revenue, government funding from grants, external borrowings, and from the issuance and sale of convertible preferred shares and notes, and common shares.

Our net earnings for the year ended December 31, 2020 was $118.9 million and our net earnings for the year ended December 31, 2021 was $153.5 million.

As of December 31, 2021, we had accumulated earnings of $267.7 million and we had balance of cash, cash equivalents, and marketable securities totaling $723.0 million.

2022 Highlights

$0.56 & $0.50

Total Revenue

Basic & Diluted EPS

Cash, cash equivalents, and marketable securities

To date, we have financed our operations primarily from revenue from our antibody discovery partnerships in the form of royalty revenue, government funding from grants, and from the issuance and sale of convertible preferred shares and notes, and common shares.

We have grown the number of programs that we have under contract with our partners, as illustrated by the following chart.

In 2022, we added 18 new programs under contract, started 23 programs, and advanced three molecules in the clinic.

As of December 31, 2022, we had 174 discovery programs that are either completed, in progress or under contract with 40 partners.

Results of Operations

The following table summarizes our key operating results for the years ended December 31, 2020, 2021, and 2022.

All figures are in U.S.

dollars and amounts are expressed in thousands, except share data:

Year Ended December 31,

Research fees

Licensing revenue

Milestone payments

Royalty revenue

Total Revenue

Operating expenses:

Research and development expense ( 1)

Other operating expenses

Total operating expenses

Income from operations

Total other (income)

Net earnings before income tax

( 1) Exclusive of depreciation, amortization, and impairment.

Operating expenses include stock-based compensation as follows:

Year Ended December 31,

Research and development expenses

Other operating expenses

Total stock-based compensation

Recent Developments

In February 2022, we announced that bebtelovimab (LY-CoV1404), the second antibody developed through our collaboration with Lilly, received EUA from the FDA for the treatment of mild-to-moderate COVID-19.

Lilly announced in February 2022 that they entered into a purchase agreement with the U.S.

In February 2022, we announced that bebtelovimab (LY-CoV1404), the second antibody developed through our collaboration with Lilly, received an EUA from the FDA for the treatment of mild-to-moderate COVID-19.

Lilly announced in February 2022 that it entered into a purchase agreement with the U.S.

government to supply up to 600,000 doses of bebtelovimab no later than March 31, 2022, with an option of 500,000 additional doses no later than July 31, 2022, for at least $720 million.

In June 2022, we announced that Lilly modified its purchase agreement with the U.S.

government to supply an additional 150,000 doses of bebtelovimab for consideration of approximately $275 million.

Lilly shipped and we recognized royalty revenue on approximately half of these doses in the quarter ended June 30, 2022.

In collaboration with the U.S.

government, the requirement that bebtelovimab distribution be controlled by the U.S.

government was removed in August 2022, making bebtelovimab commercially available for purchase by U.S.

states/territories, hospitals, and a broad set of other providers.

In November 2022, the FDA announced bebtelovimab is no longer authorized for emergency use in any U.S.

Lilly and its authorized distributors have paused commercial distribution until further notice by the FDA.

Key Factors Affecting Our Results of Operations and Future Performance

We believe that our financial performance has been, and in the foreseeable future will continue to be, primarily driven by multiple factors as described below, each of which presents growth opportunities for our business.

These factors also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations.

Our ability to successfully address these challenges is subject to various risks and uncertainties, including those described in the section of this prospectus titled “Risk Factors.”

These factors also pose important

challenges that we must successfully address to sustain our growth and improve our results of operations.

Our ability to successfully address these challenges is subject to various risks and uncertainties, including those described in Part I, Item 1A, Risk Factors.

Securing additional programs under contract.

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Since our first commercial partnership in 2015, as of December 31, 2022, we had 174 discovery programs that are either completed, in progress or under contract with 40 partners.

We are building our business development team across the major biotechnology geographic hubs in order to bring in new partners and new programs under contract, and we believe that we have a significant opportunity to continue to increase the number of partners who have programs based on our platform.

Our ability to continue to grow our number of programs under contract is dependent upon our ability to educate the market and support the business through investment in our sales and marketing efforts and through further research and development to enhance our technological differentiation.

We are building our business development team across the major biotechnology geographic hubs to bring in new partners and new programs under contract, and we believe that we have a significant opportunity to continue to increase the number of partners who have programs based on our discovery and development engine.

Our partners successfully developing and commercializing the antibodies that we discover.

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The rate and timing of such selection and initiation differs from partner to partner.

Research fees that we recognize under our partnerships depend on our delivery of antibodies for development by our partners and delays by our partners in selecting targets and agreeing on statements of work may impact revenue recognition.

Investing in enhancements to our technology stack.

Our ability to maintain and expand our partnerships is dependent on the advantages our technology stack delivers to our partners.

We intend to maintain our leading position through research and development investments to refine and add capabilities in areas such as computation, protein engineering, immunization technologies, genetically engineered rodents and cell line selection.

We have successfully closed and will continue to look for strategic technology acquisitions to improve, broaden and deepen our capabilities and expertise in antibody discovery and development, or those that offer opportunities to expand our partnership business into adjacent therapeutic modalities.

We intend to devote substantial resources to continue to improve our technological differentiation which will impact our financial performance.

Investing in enhancements to our discovery and development engine.

Our ability to maintain and expand our partnerships is dependent on the advantages our discovery and development engine delivers to our partners.

We intend to maintain our leading position through investments in research and development to refine and add capabilities in areas such as computation, protein engineering, immunization technologies, genetically engineered rodents and cell line selection.

We have successfully executed and will continue to look for strategic technology acquisitions to improve, broaden and deepen our capabilities and expertise in antibody discovery and development, or those that offer opportunities to expand our partnership business into adjacent therapeutic modalities.

We intend to devote substantial resources to continue to improve our discovery differentiation which will impact our financial performance.

Scaling our operations to execute on discovery programs .

As we secure additional programs under contract and as our partners initiate discovery programs, our operational capacity to execute such research activities may become strained.

We are making significant investments in capital and time to increase our ability to address future growth, including building new headquarters through our Dayhu and Beedie joint ventures, building a new small-scale manufacturing plant, investing in research and development and hiring more talented personnel across functions.

We have new facilities under development scheduled to take occupancy in early 2022 and 2023 that are intended to materially expand capacity.

We are making significant investments in capital and time to increase our ability to address future growth, including building new headquarters through our Dayhu and Beedie joint ventures, building a new small-scale manufacturing facility, investing in research and development, and continuing to hire talented personnel across functions.

We have new facilities under development scheduled to take occupancy in 2024 that are intended to materially expand capacity.

As we expand our workforce, we expect a significant increase in our operating expenses, including stock-based compensation.

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We believe that the following metrics are important to understand our current business.

These metrics may change or may be substituted for additional or different metrics as

our business develops.

For example, as our business matures and to the extent programs are discontinued, we anticipate updating these metrics to reflect such changes.

These metrics may change or may be substituted for additional or different metrics as our business develops.

Year Ended December 31,

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Programs under contract

Program starts

Programs in the clinic

Partnered program starts

Molecules in the clinic

The table below outlines the details of molecules in the clinic as of December 31, 2022:

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Bamlanivimab (LY-CoV555)

Marketed, Emergency Use Authorization (EUA)

Marketed, EUA

Eli Lilly and Company

Infectious disease – COVID-19

Discovery partnership

AbCellera Pre-partnered Program - Partnered

Bebtelovimab (LY-CoV1404)

Marketed, EUA

Eli Lilly and Company

Infectious disease – COVID-19

Discovery partnership

AbCellera Pre-partnered Program - Partnered

TAK-920/DNL919

Denali Therapeutics Inc.

Neurology - Alzheimer's Disease

AbCellera Partner-initiated Discovery

NovaRock Biotherapeutics Inc.

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Trianni license

NBL-015/FL-301

NovaRock Biotherapeutics Inc.

Trianni license

IND/CTA authorized

NovaRock Biotherapeutics Inc.

Trianni license

Clinical field study

Animal health

Discovery partnership

AbCellera Partner-initiated Discovery

Number of discovery partners represents the unique number of partners with whom we have executed partnership contracts.

We view this metric as an indication of the competitiveness of our technology stack and our current level of market penetration.

The metric also relates to our opportunities to secure programs under contract from existing customers through repeat business opportunities.

We view this metric as an indication of the competitiveness of our engine and our level of market penetration.

The metric also relates to our opportunities to secure programs under contract .

Programs under contract represent the number of antibody development programs that are under contract for delivery of discovery research activities.

A program under contract is counted when a contract is executed with a partner under which we commit to discover antibodies against one selected target.

A program under contract is counted when a contract is executed with a partner under which we commit to discover or deliver antibodies against one selected target.

A target is any relevant antigen for which a partner seeks our support in developing binding antibodies.

We view this metric as an indication of commercial success and technological competitiveness.

It further relates to revenue from technology access fees.

It further relates to revenue from access fees.

The cumulative number of programs under contract with downstream participation is related to our ability to generate future revenue from milestone payments and royalties.

Program starts represent the number of unique programs under contract for which we have commenced the discovery effort.

Partnered program starts represent the number of unique programs under contract for which we have commenced the discovery effort.

The discovery effort commences on the later of (i) the day on which we receive sufficient reagents to start discovery of antibodies against a target and (ii) the day on which the kick-off meeting for the program is held.

We view this metric as an indication of our operational capacity to execute on programs under contract.

It is also an indication of the selection and initiation of discovery projects by our partners and the resulting near-term potential to earn research fees.

Cumulatively, program starts with downstream participation indicate our total opportunities to earn downstream revenue from milestone fees and royalties in the mid- to long-term.

It is also an indication of the selection and initiation of discovery projects by our partners and the resulting potential for near-term payments.

Cumulatively, partnered program starts with downstream participation indicate our total opportunities to earn downstream revenue from milestone fees and royalties in the mid- to long-term .

Molecules in the clinic represent the count of unique molecules for which an Investigational New Drug, or IND, New Animal Drug, or equivalent under other regulatory regimes, application has been approved based on an antibody that was discovered either by us or by a partner using licensed AbCellera technology.

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Date Announced

Everest Medicines

Up to 5 targets, multi-year

December 15, 2022

Rallybio Corporation

Up to 5 targets, multi-year

Rare metabolic disorder and undisclosed

December 1, 2022

Atlas Ventures - stealth stage company

Up to 3 targets, multi-year

August 3, 2022

Undisclosed biotechnology company

Up to 3 targets, multi-year

June 29, 2022

Empirico Inc.

2 additional targets

Everest Medicines Ltd.

Up to 10 targets, multi-year

Oncology and undisclosed

September 22, 2021

Moderna, Inc.

Up to 6 targets, multi-year

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August 3, 2021

Undisclosed biotech

Undisclosed biotechnology company

Up to 4 targets, multi-year

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Ophthalmology

Undisclosed biotech

Undisclosed biotechnology company

Multi-target, multi-year

Up to 5 targets, multi-year

Empirico Inc.

5 targets, multi-year

April 14, 2021

Gilead Sciences

Gilead Sciences, Inc.

8 targets, multi-year

April 1, 2021

Abdera Therapeutics

Abdera Therapeutics Inc.

9 targets, multi-year

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November 19, 2020

Kodiak Sciences

Kodiak Sciences Inc.

Multi-target, multi-year

1 unchanged sentence

October 29, 2020

IGM Biosciences

IGM Biosciences, Inc.

Multi-target, multi-year

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Single target

Eli Lilly and Company

Up to 9 targets, multi-year

COVID-19 program and additional indications

Regeneron Pharmaceuticals

Regeneron Pharmaceuticals, Inc.

Multi-target, multi-year

6 unchanged sentences

September 25, 2019

Gilead Sciences

Gilead Sciences, Inc.

Single target

1 unchanged sentence

June 13, 2019

Denali Therapeutics

Denali Therapeutics, Inc.

8 targets, multi-year

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February 14, 2019

Autolus Therapeutics

Autolus Therapeutics plc

Single target

1 unchanged sentence

November 29, 2018

Denali Therapeutics

Denali Therapeutics, Inc.

Single target

1 unchanged sentence

June 12, 2018

Undisclosed mid-cap biopharma

Undisclosed mid-cap biopharmaceutical company

January 25, 2018

Teva Pharmaceutical Industries

Teva Pharmaceuticals Industries Ltd.

Single target

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January 5, 2017

Undisclosed global biotech

Undisclosed global biotechnology company

Multi-target, multi-year

November 4, 2016

Kodiak Sciences

Kodiak Sciences Inc.

Single target

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August 24, 2016

Teva Pharmaceutical Industries

Teva Pharmaceuticals Industries Ltd.

February 2, 2016

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Our revenue is comprised of partnership research fees, licensing revenue, development milestones, and royalty payments from commercial products.

Research fees consist primarily of technology access fees, which are generally generated upon execution of our partnership agreements, and discovery research fees, which are generated through our performance of antibody discovery research for our partners.

Research fees consist primarily of technology access fees, which are generally generated upon execution of our

partnership agreements, and discovery research fees, which are generated through our performance of antibody discovery research for our partners.

Licensing revenue is primarily from our licensing of our humanized rodent platform, Trianni ™.

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We expect that our revenue, particularly revenue arising from royalties of antibodies sold by our partners, will fluctuate from period to period due to variances in demand for such antibodies and the status of regulatory approvals or emergency use authorizations for such antibodies.

For example, in November 2022, the FDA announced bebtelovimab is no longer authorized for emergency use in the U.S.

Lilly and its authorized distributors have paused commercial distribution until further notice by the FDA.

We expect that our overall revenue will fluctuate from period to period due to the timing of securing additional programs under contract, the inherently uncertain nature of the timing of milestone achievement, our dependence on the program decisions of our partners and uncertainty in sales of our antibodies by our partners that generate royalty revenue.

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Royalty fees are not included in every program.

For royalties received from

Lilly for commercial sales of bamlanivimab , royalty fees were due to collaboration partners in AbCellera’s DARPA P3 (Pandemic Preparedness Program) project focused on rapid pandemic response.

For royalties received from Lilly for commercial sales of bamlanivimab and bebtelovimab, royalty fees were due to collaboration partners in AbCellera’s DARPA P3 (Pandemic Preparedness Program) project focused on rapid pandemic response.

Royalty fees are recorded when the third-party sale occurs.

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Research and development expenses primarily consist of salaries, benefits, incentive compensation, stock-based compensation, laboratory supplies and materials expenses for employees and contractors engaged in research and product development.

These expenses are exclusive of depreciation and amortization.

Research and development activities consist of discovery research for partners as well as our internal platform development.

We derive improvements to our technology stack from both types of activities.

These expenses are exclusive of depreciation, amortization, and impairment.

Research and development activities consist of discovery research for partners as well as internal development of our discovery and development engine.

We derive improvements to our discovery and development engine from both types of activities.

We have not historically tracked our research and development expenses on a partner-by-partner basis or on a product candidate-by-product candidate basis.

We expect to continue to incur substantial research and development expenses as we conduct discovery research for our partners.

In addition, we plan to continue to invest in research and development to enhance our solutions and offerings to our partners, including hiring additional employees and continuing research and development projects obtained through strategic technology acquisitions.

We expect to continue to incur substantial research and development expenses as we conduct discovery research for our partners and our internal programs.

In addition, we plan to continue to invest in research and development to enhance our solutions and offerings to our partners, including continuing to hire additional employees and continuing research and development projects obtained through strategic technology acquisitions.

As a result, we expect that our research and development expenses will continue to increase in absolute dollars in future periods and vary from period to period as a percentage of revenue.

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increase our presence globally;

and increase marketing activities to drive awareness and adoption of our platform.

and increase marketing activities to drive awareness and adoption of our discovery and development engine.

While these expenses may vary from period to period as a percentage of revenue, we expect these expenses to increase as a percentage of sales in the short term as we continue to grow our commercial organization to drive anticipated growth in the business.

General and administrative expenses.

General and administrative expenses primarily consist of salaries, benefits, incentive compensation and stock-based compensation costs for employees in our executive, accounting and finance, project management, corporate development, office administration, legal and human resources functions as well as professional services fees, such as consulting, audit, tax and legal fees, general corporate costs and allocated overhead expenses.

General and administrative expenses primarily consist of salaries, benefits, incentive compensation and stock-based compensation costs for employees in our executive, accounting and finance, office administration, legal and human resources functions as well as professional services fees, such as consulting, audit, tax and legal fees, general corporate costs and allocated overhead expenses.

General and administrative expenses also include all rent and facilities expenses for all employees, regardless of department or function.

We expect that our general and administrative expenses will continue to increase in absolute dollars in future periods, primarily due to increased headcount to support anticipated growth in the business and due to incremental costs associated with operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC and stock exchange listing standards, public relations, insurance and professional services.

We expect that our general and administrative expenses will continue to increase in absolute dollars in future periods, primarily due to increased headcount to support continued growth in the business.

We expect these expenses to vary from period to period as a percentage of revenue.

Depreciation and amortization.

Depreciation expense consists of the depreciation of property and equipment used actively in the business, primarily by research and development activities.

Amortization expense includes the amortization of intangible assets over their respective useful lives.

Depreciation, amortization, and impairment.

Depreciation expense consists of the depreciation of property and equipment used actively in the business.

Amortization expense and impairment includes the amortization of intangible assets over their respective useful lives and impairment of certain IPR&D as further described in our notes to the consolidated financial statements.

Other (Income) Expense

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Interest income consists primarily of interest earned on cash, cash equivalent, and marketable securities balances.

Interest and other expense.

Interest expense consists primarily of financing fees, fair value adjustments of contingent consideration and investments, and includes interest on borrowings under any credit agreements.

Foreign exchange (gain) loss, net.

Foreign exchange (gain) loss, net, consists of income or loss due to fluctuation in exchange rates in the foreign jurisdictions that we operate in.

All of our historical revenue has been generated in U.S.

Interest and o ther.

Interest and other consists primarily of financing fees , fair value adjustments of contingent consideration and marketable securities , and includes foreign exchange gains or losses due to fluctuations in exchange rates from the jurisdictions that we operate in against the U.S.

Grants and incentives.

Grants and incentives include cost recovery on activities that qualified for approved projects supported by grant funding or tax credits.

Grants primarily include the benefit from programs administered by the Canadian government’s Ministry of Innovation, Science and Economic Development, Strategic Innovation Fund.

Grants primarily include the benefit from programs administered by the Canadian government’s Ministry of Innovation, Science and Economic Development, and Strategic Innovation Fund.

To the extent that grant funding covers capital expenditures, a deferred credit is recorded on the balance sheet and recognized ratably over the benefit period of the related expenditure for which the grant was intended to compensate.

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Where we qualify for refundable tax credits, these are included in grants and incentives in the year the qualifying expenditure is made.

Non-refundable tax

credits are recognized as a reduction to income tax expense in the year they are earned and are included in a note in the financial statements.

Non-refundable tax credits are recognized as a reduction to income tax expense in the year they are earned and are included in a note in the consolidated financial statements.

We expect to continue to benefit from these tax programs in the future.

Results of Operations

The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this annual report.

The following tables set forth our results of operations for the periods presented:

Comparison of the Years Ended December 31, 2021 and 2022

Year Ended December 31,

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Total revenue

Revenue increased by $110.2 million from the year ended December 31, 2021, compared to the year ended December 31, 2022.

The increase was driven primarily by a $115.7 million increase in royalty revenue that is directly associated with the specified percentage of proceeds that Lilly received from the sales of bebtelovimab to the U.S.

Government and commercially.

Further, significant growth in partnered program starts and a continued increase in programs under contract contributed to an increase of $21.7 million in non-COVID discovery programs.

The increase in revenue was partially offset by a decrease of $20.1 million in licensing revenue related to the Trianni platform and reduced milestone achievements within the year.

Operating Expenses

Year Ended December 31,

Royalty fees were $45.5 million and $66.4 million for the years ended December 31, 2021, and December 31, 2022, respectively.

Royalty fees were attributable to the royalty revenues received by the Company from sales of bamlanivimab and bebtelovimab by Lilly due to AbCellera’s collaborations in pandemic response.

Research and Development

Year Ended December 31,

Research and development

Research and development expenses increased by $45.8 million, or 74%, from the year ended December 31, 2021, compared to the year ended December 31, 2022, reflecting continuing strong investments in the capacity and capabilities of AbCellera’s discovery and development engine.

$17.0 million of the increase is due to the increase in compensation expense consistent with increased

headcount and $ 8.8 million of the increase relates to stock-based compensation expense .

$ 2 0.0 million of the increase is attributed to an increase in research materials, supplies , software, facilities, and services used to execute on our research and development activities and strengthen our discovery and development engine .

Sales and Marketing

Year Ended December 31,

Sales and marketing

Sales and marketing expenses increased by $4.4 million, or 63%, from the year ended December 31, 2021, compared to the year ended December 31, 2022.

The increase was primarily driven by $4.0 million in total compensation expenses related to an increased headcount in business development and marketing teams and $1.4 million in increased travel, advertising, and consulting costs.

The increase was partially offset by $0.8 million for a donation made in 2021 to Surrey Hospital to fund a study related to bamlanivimab in Canada.

General and Administrative

Depreciation and amortization

Total operating expenses

Income (loss) from operations

Year Ended December 31,

General and administrative

General and administrative expenses increased by $13.6 million, or 33%, from the year ended December 31, 2021, compared to the year ended December 31, 2022.

$9.1 million of the increase in general and administrative expense is related exclusively to the increase in stock-based compensation expense and a further $5.3 million is related to increased compensation expense which was driven by increased headcount within the general and administrative function.

$2.6 million of the increase in general and administrative expense is due to increased expenditures related to rent and facilities expense, software, insurance premiums, and increased general office and expenses to support the growth of the Company.

The increase was partially offset by a decrease of $3.4 million in legal and accounting fees.

Depreciation, Amortization, and Impairment

Year Ended December 31,

Depreciation, amortization, and impairment

Depreciation, amortization, and impairment expense increased by $13.4 million, or 93%, from the year ended December 31, 2021, compared to the year ended December 31, 2022.

An increase of $8.4 million (or $6.3 million, net of deferred income tax) relates to a full impairment charge of the carrying value of one distinct program from our suite of next-generation mice acquired through our 2020 Trianni acquisition.

The discontinuance of this specific mouse program does not have an impact on the validity and continued development of our remaining suite of next-generation transgenic humanized mice and does not impact our business model and ability to deliver on our antibody discovery and development engine.

The remaining $5.0 million increase relates to additions of $14.3 million of property and equipment and intangible assets purchased in the year, depreciating and amortizing over their respective useful lives.

Other (Income) Expense

Interest (Income)

Interest and other expense

Foreign exchange (gain) loss

Year Ended December 31,

Interest (income)

Interest income increased by $12.7 million, or 383%, from the year ended December 31, 2021, compared to the year ended December 31, 2022.

The increase was primarily driven by an increase in interest rates, a larger average cash and cash equivalents and marketable securities balances maintained in the year ended December 31, 2022, compared to the prior period.

Interest and Other

Year Ended December 31,

Interest and other

Interest and other decreased by $2.0 million, or 33% from the year ended December 31, 2021, compared to the year ended December 31, 2022.

The $1.9 million decrease was attributed to a decrease in other expenses and an increase in other income.

F oreign exchange gains due to fluctuations in the Canadian and U.S.

dollar exchange rate was offset by fair value adjustments related to contingent consideration and held-for-trading marketable securities due to an increase in interest rates in the period.

Grants and Incentives

Total other income

Net earnings (loss) before income tax

Year Ended December 31,

Grants and incentives

Grants and incentives decreased by $6.9 million, or 40%, from the year ended December 31, 2021, compared to the year ended December 31, 2022.

The decrease was primarily driven by a decrease in activity relating to research and development expenditures that are eligible for the SIF project.

Income Tax Expense

Net earnings (loss)

Foreign currency translation adjustment

Comprehensive income (loss)

Net earnings (loss) per share attributable to common shareholders

Weighted-average common shares outstanding

Amounts are exclusive of depreciation and amortization.

Amounts include stock-based compensation as follows:

Year Ended December 31,

Research and development expenses

Sales and marketing expenses

General and administrative expenses

Total stock-based compensation

Income tax expense

Income taxes increased by $14.9 million, or 23%, from the year ended December 31, 2021, compared to the year ended December 31, 2022.

For the year ended December 31, 2022, our provision for income taxes is $80.6 million primarily relating to current net earnings and partly offset by deferred income taxes due to timing of differences between accounting net income and taxable income.

Comparison of the Years Ended December 31, 2020 and 2021

Year Ended December 31,

(in thousands, except percentages)

Research fees

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We earned $20.8 million in licensing revenue related to the Trianni humanized rodent platform business.

The significant growth we delivered in program starts drove higher research fees in the year on non-COVID-19 discovery programs, offset by fees earned last year against our COVID-19 discovery program leading to a net decrease in research fees of $0.8 million.

The significant growth we delivered in partnered program starts drove higher research fees in the year on non-COVID-19 discovery programs, offset by fees earned last year against our COVID-19 discovery program leading to a net decrease in research fees of $0.8 million.

Operating Expenses

Year Ended December 31,

(in thousands, except percentages)

Royalty fees increased by $18.4 million from the year ended December 31, 2020 to the year ended December 31, 2021.

Royalty fees are directly attributable to the royalty revenues received by the Company from sales of bamlanivimab by Lilly due to AbCellera’s collaborators in pandemic response.

Research and Development, Exclusive of Depreciation and Amortization

Research and Development, Exclusive of Depreciation, Amortization, and Impairment

Year Ended December 31,

(in thousands, except percentages)

Research and development

Research and development expenses increased by $32.7 million, or 111%, from the year ended December 31, 2020 to the year ended December 31, 2021 reflecting continuing strong investments in the capacity and capabilities of AbCellera’s antibody discovery and development platform.

$13.2 million of the increase is due to the increase in compensation expense consistent with increased headcount.

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Year Ended December 31,

(in thousands, except percentages)

Sales and marketing

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Year Ended December 31,

(in thousands, except percentages)

General and administrative

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Year Ended December 31,

(in thousands, except percentages)

Depreciation and amortization

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Year Ended December 31,

(in thousands, except percentages)

Interest income

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Year Ended December 31,

(in thousands, except percentages)

Interest and other expense

Interest and other

Interest and other expense decreased by $0.7 million, or 11% from the year ended December 31, 2020, to the year ended December 31, 2021.

$4.9 million of the decrease relates to combined interest, and cancellation fees and legal fees on early retirement of the OrbiMed credit agreement in July 2020, in addition to interest expense on the credit facility for the period before retirement.

This was offset by a $3.4 million increase in fair value adjustments of contingent consideration and investments.

Foreign Exchange (Gain) Loss

Year Ended December 31,

(in thousands, except percentages)

Foreign exchange (gain) loss

Foreign exchange (gain) loss increased by $0.6 million from the year ended December 31, 2020 to the year ended December 31, 2021.

Foreign exchange gains and losses are driven primarily by foreign denominated cash balances that we maintain and the relative exchange rates against the U.S.

This was offset by a $3.4 million increase in fair value adjustments of contingent consideration and investments and $0.6 million foreign exchange (gain) loss driven primarily by foreign denominated cash balances that we maintain and the relative exchange rates against the U.S.

Grants and Incentives

Year Ended December 31,

(in thousands, except percentages)

Grants and incentives

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Year Ended December 31,

(in thousands, except percentages)

Income tax expense

Income taxes increased by $26.8 million, or 69%, from the year ended December 31, 2020, to the year ended December 31, 2021.

For the year ended December 31, 2021, our provision for income taxes is $65.7 million primarily relating to current net earnings and partly offset by deferred income taxes due to timing of differences between accounting net income and taxable income.

Comparison of the Years Ended December 31, 2019 and 2020

Year Ended December 31,

(in thousands, except percentages)

Research fees

Licensing revenue

Milestone payments

Royalty revenue

Total revenue

Revenue increased by $221.5 million from the year ended December 31, 2019 to the year ended December 31, 2020.

We received milestone payments upon achieving Phase 1, Phase 2, and Phase 3 clinical milestones and for the first commercial sale in the United States by Lilly relating to molecule bamlanivimab for treatment of COVID-19 in the amount of $15.0 million.

Royalty payments of $198.3 million are directly associated with the specified percentage of proceeds that Lilly received from the sales of bamlanivimab.

Research fees recognized increased by $8.2 million, or 71%.

$5.3 million of the increase is associated with research fees from new partnerships agreements entered into in 2020.

The remaining increase is attributable to additional targets and project activities from ongoing projects or new projects with existing partners.

Operating Expenses

Year Ended December 31,

(in thousands, except percentages)

Royalty fees for the year ended December 31, 2020 were $27.1 million.

These were directly attributable to the royalty revenues received by the Company from sales of bamlanivimab by Lilly due to AbCellera’s collaborators in pandemic response.

Research and Development, Exclusive of Depreciation and Amortization

Year Ended December 31,

(in thousands, except percentages)

Research and development

Research and development expenses increased by $19.3 million, or 191%, from the year ended December 31, 2019 to the year ended December 31, 2020.

$5.1 million of the increase relates to licensing fees due in relation to research activity.

$5.1 million of the increase is due to the increase in compensation expense consistent with increased headcount.

$4.3 million of the increase relates to stock-based compensation expense related to Liability Classified Options (LCOs).

This $4.3 million in LCOs will be settled with equity when the employees exercise the associated options.

In June 2020, the Company acquired the OrthoMab bispecific platform from Dualogics in the amount of $4.0 million.

This transaction is accounted for as an acquisition of an asset and was expensed upon completion of the transaction, as the platform acquired is intended to be further utilized and expanded in our research and development efforts.

The remaining increase is attributed to research materials and supplies consistent with increased research and development activities.

Sales and Marketing

Year Ended December 31,

(in thousands, except percentages)

Sales and marketing

Sales and marketing expenses increased by $2.6 million, or 204%, from the year ended December 31, 2019 to the year ended December 31, 2020.

The increase was primarily driven by increased headcount in business development and marketing staff which resulted in an increase of $2.4 million in compensation expenses, including increased expenditures on new hires, external consultants for public relations and graphic design activities.

Sales and marketing expenses related to travel were significantly lower for the year ended December 31, 2020 due to COVID-19 related travel restrictions.

General and Administrative

Year Ended December 31,

(in thousands, except percentages)

General and administrative

General and administrative expenses increased by $9.2 million, or 333%, from the year ended December 31, 2019 to the year ended December 31, 2020.

$1.9 million of the increase is related to the closing of our 2020 preferred share financing and IPO including legal, accounting and other professional services which are not expected to recur in future periods.

$2.9 million of the increase was driven by increased headcount within the general and administrative function and the associated compensation expenses.

This investment in the general and administrative function was necessary to support both the overall growth of the Company as well as to prepare for being a listed company.

$2.1 million is attributable to legal fees incurred with respect to Berkeley litigation and legal IP matters.

Depreciation and Amortization

Year Ended December 31,

(in thousands, except percentages)

Depreciation and amortization

Depreciation and amortization expense increased by $3.2 million, or 201%, from the year ended December 31, 2019 to the year ended December 31, 2020.

Depreciation expense increased by $0.7 million due to the depreciation of equipment and facilities related to capital equipment purchases of $9.7 million in the year.

Amortization expense increased by $2.5 million due to the amortization of acquired intangible assets over their respective useful lives.

Other (Income) Expense

Interest Income

Year Ended December 31,

(in thousands, except percentages)

Interest income

Interest income increased by $0.1 million, or 89%, from the year ended December 31, 2019 to the year ended December 31, 2020.

The increase was primarily driven by a larger average cash balance maintained in the year ended December 31, 2020 compared to the prior period.

Interest and Other Expense

Year Ended December 31,

(in thousands, except percentages)

Interest and other expense

Interest and other expense increased by $6.3 million, or 3015% from the year ended December 31, 2019 to the year ended December 31, 2020.

$4.2 million of the increase relates to combined interest, and cancellation fees and legal fees on early retirement of the OrbiMed credit agreement in July 2020, in addition to interest expense on the credit facility for the period before retirement.

Given the nature of these cancellation costs and the Company not having any material debt due to its strong liquidity position at the end of 2020, these expenses are not expected to recur in future periods.

Foreign Exchange (Gain) Loss

Year Ended December 31,

(in thousands, except percentages)

Foreign exchange (gain) loss

Foreign exchange (gain) loss increased by $0.5 million from the year ended December 31, 2019 to the year ended December 31, 2020.

Foreign exchange gains and losses are driven primarily by the Canadian dollar cash balances that we maintain and the relative exchange rates between Canadian dollars and U.S.

Grants and Incentives

Year Ended December 31,

(in thousands, except percentages)

Grants and incentives

Grants and incentives increased by $6.5 million, or 369%, from the year ended December 31, 2019 to the year ended December 31, 2020.

The increase was primarily driven by expenses for which there was cost recovery related to the SIF project

entered into between us and the Government of Canada in April 2020, in the amount of $6.8 million.

Any additional cash from the SIF project that we receive for eligible capital expenditure activities will result in recognition of a deferred credit on the balance sheet.

Subsequent to the third quarter , a number of expenditures incurred were identified as not being eligible under the SIF project which directly impacted the grant and incentives recovery amounts recognized in the year.

These expenditures did not impact the commitment under the SIF project for $125 .6 million of funding from the Government of Canada to AbCellera .

Future eligible expenditures for the project and associated reimbursement will be recognized in a subsequent reporting period .

Liquidity and Capital Resources

As of December 31, 2021, we had $723.0 million of cash, cash equivalents, and marketable securities, comprising $476.1 million in cash and cash equivalents and $246.8 million in marketable securities.

The increase of $128.9 million since December 30, 2020 was primarily from cash flow from operations and driven by the receipt of accounts receivable relating to royalties from bamlanivimab in the year ended December 31, 2021.

As of December 31, 2022, we had $886.5 million of cash, cash equivalents, and marketable securities, comprised of $386.5 million in cash and cash equivalents and $500.0 million in marketable securities.

The increase of $163.5 million since December 30, 2021, was primarily from cash flow from operations and driven by the receipt of accounts receivable relating to royalties from bamlanivimab and bebtelovimab in the year ended December 31, 2022.

We have generated positive operating cash flow cumulatively since our inception in 2012 and in every year since 2018.

We intend to significantly invest in our business, and as a result may incur operating losses in future periods.

We will continue to invest in research and development efforts towards expanding our capabilities and expertise along our technology stack, the building of our business development team and marketing our solutions to new and existing partners, and the expansion of our future office headquarters, and related infrastructure, including execution of long-term office-lease arrangements.

Based on our current business plan, we believe that our existing cash and cash equivalents and anticipated cash flows from operations, will be sufficient to meet our working capital and capital expenditure needs over at least the next 24 months following the date of this report.

We will continue to invest in research and development efforts towards expanding our capabilities and expertise along our discovery and development engine , the building of our business development team and marketing our solutions to new and existing partners, and the expansion of our future office headquarters, and related infrastructure, including execution of long-term office-lease arrangements.

Based on our current business plan, we believe that our existing cash, cash equivalents, marketable securities, and anticipated cash flows from operations, will be sufficient to meet our working capital and capital expenditure needs and do not anticipate the need of external funding over at least the next 36 months following the date of this report.

Sources of Liquidity

Since our inception, we have financed our operations primarily from revenue in the form of research fees, milestone payments, and royalty payments from partners, government grants, and debt and equity financings.

Financings and Option Exercises

As of December 31, 2020, we raised a total of $688.4 million from the issuance of common shares in our IPO, the issuance and sale of convertible preferred shares and notes, common shares, net of costs associated with such financings, and exercises of employee share options.

As of December 31, 2021, we raised proceeds of $4.0 million from the exercise of employee share options.

Government of Canada’s Strategic Innovation Fund

In April 2020, we entered into a multi-year agreement with the Canadian government’s Strategic Innovation Fund, or SIF.

Under this agreement, up to CAD $175.6 million ($125.6 million) was committed by the Government of Canada to be directed towards two key stages of a project.

In 2020, we entered into a multi-year agreement with the Canadian government’s Strategic Innovation Fund, or SIF.

Under this agreement, up to CAD $175.6 million ($129.7 million as of December 31, 2022) was committed by the Government of Canada to be directed towards two key stages of a project.

The first stage will provide financial support to our operations during the work that we perform for the discovery of antibodies against COVID-19.

The funding supports investment into equipment, teams and physical space to advance our platform for future pandemic preparedness.

The Canadian government has committed up to CAD $63.9 million ($45.7 million) towards this stage of the project, based on costs incurred and paid and such funding is non-repayable.

The funding supports investment into equipment, teams and physical space to advance our discovery and development engine for future pandemic preparedness.

The Canadian government has committed up to CAD $63.9 million ($47.2 million as of December 31, 2022) towards this stage of the project, based on costs incurred and paid and such funding is non-repayable.

As of December 31, 2022, we have claimed a total of $46.1 million under this first stage of the project.

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The project related budget includes project costs for the land and building, the fit out for offices, labs, GMP cleanrooms as well as the equipment required to develop fully functional CMC and GMP capabilities as required to support clinical trials.

The Canadian government has committed up to CAD $111.7 million ($79.9 million) for this project, contingent upon costs incurred and paid, with the rest to be co-funded by us through partnering with a developer and taking a co-ownership position in the resulting facilities.

SIF funding for this project is expected to occur between 2021 and 2025.

Repayment of SIF assistance received for this stage of the project will be calculated as a percentage rate of AbCellera’s revenue, with payment made to the Government of Canada on an annual basis during the repayment period of fifteen years starting in 2027.

Repayment on this stage of the project is conditional on revenue thresholds being achieved in seven years, a year following the completion of the project and over the subsequent ten-year period.

The Canadian government has committed up to CAD $111.7 million ($82.5 million as of December 31, 2022) for this project, contingent upon costs incurred and paid, with the rest to be co-funded by us through partnering with a developer and taking a co-ownership position in the resulting facilities.

SIF funding for this project started in 2021 and is expected to continue through to 2025.

Repayment is conditional on achieving certain revenue threshold over a seven year period from the time of completion of the funded project and is calculated as a percentage rate of the Company’s revenue, with payment made to the Government of Canada on an annual basis during the repayment period of fifteen years.

If the revenue threshold is not met, the SIF funding contribution will be non-repayable.

This funding and its associated conditional repayment is not secured by any of our assets or that of the project, and includes certain non-financial covenants and restrictive covenants on dividend payments or other shareholder distributions that would prevent the Company in satisfying its obligations under the arrangement.

As of December 31, 2021, we have claimed a total of $21.6 million under this

second stage of the project.

No amounts have been accrued related to the repayment terms as the conditions are estimated to be non-probable at December 31, 2021.

As of December 31, 2022, we have claimed a total of $33.2 million under this second stage of the project.

No amounts have been accrued related to the repayment terms as the conditions are estimated to be non-probable as of December 31, 2022.

We conduct work, incur expenses, and fund all costs from our own cash resources.

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Net cash provided by operating activities increased from $244.6 million in the year ended December 31, 2021, to $277.4 million in the year ended December 31, 2022.

The increase resulted primarily from increased revenue from royalty and licensing streams, satisfaction of clinical milestones under our partnership with Eli Lilly, and continued discovery research activities, as well as upfront payments from securing new multi-year, multi-target contracts with partners.

Net cash provided by operating activities increased by $20.0 million from $2.7 million in the year ended December 31, 2019 to $22.7 million in the year ended December 31, 2020.

The increase resulted primarily from increased revenue from discovery research activities, securing new multi-year, multi-target contracts with partners that involved up front technology access fees upon execution of the contract, and payments resulting from the satisfaction of clinical milestones under our partnership with Lilly.

The increase resulted primarily from increased royalty revenues and receipt of accrued royalties receivable in the period, partially offset by an increase in expenditures that reflect AbCellera’s investment in research and development and growth of the Company, in addition to payment for the Company’s income taxes liability.

Net cash provided by operating activities increased from $22.7 million in the year ended December 31, 2020, to $244.6 million in the year ended December 31, 2021.

The increase resulted primarily from increased revenue from royalty and licensing streams, satisfaction of clinical milestones under our partnership with Lilly, and continued discovery research activities, as well as upfront payments from securing new multi-year, multi-target contracts with partners.

Investing Activities

Net cash used in investing activities increased from $332.2 million in the year ended December 31, 2021, to $352.6 million in the year ended December 31, 2022.

The increase in investing activities in 2022 was attributed to the purchase of property and equipment to facilitate the growth of the Company, including the purchase of land related to our future GMP facility, in addition to the purchase of intangible assets and marketable securities.

There were no acquisitions in the period and a decrease in the total receipt of grant funding in the 2022 from the prior year due to a decrease in SIF-eligible research and development activities performed in the period.

Net cash used in investing activities increased from $119.8 million in the year ended December 31, 2020, to $332.2 million in the year ended December 31, 2021.

The increase in investing activities during 2021 were directly attributed to our investment in marketable securities in addition to real estate, particularly our land purchase related to our future GMP facility.

Additional investing activities during the period were related to facilities and equipment expenditures in our Vancouver offices, the acquisition of TetraGenetics, and investment in equity accounted investees, offset by grant funding received in the period.

Net cash used in investing activities was $5.8 million in the year ended December 31, 2019 compared to $119.8 million in the year ended December 31, 2020.

The increase in cash used was primarily driven by the acquisition of Trianni, an investment in equity investees related to future facility expansion and investment in a fully paid up license for access to a humanized rodent platform for discovery projects with Alloy Therapeutics.

By contrast, in the year ended December 31, 2019, investments were limited to equipment used primarily in our research and development activities.

Financing Activities

Net cash used in financing activities decreased from $3.9 million for the year ended December 31, 2021, to net cash used in financing activities of $1.6 million for the year ended December 31, 2022.

This was primarily due to no contingent consideration payments made or long-term debt repaid in 2022.

Net cash provided by financing activities decreased from $683.7 million for the year ended December 31, 2020, to net cash used by financing activities of $3.9 million for the year ended December 31, 2021.

This was primarily due to proceeds from Series A2 financing, convertible debentures, and common stock from the IPO in 2020.

Net cash provided by financing activities was $0.2 million for the year ended December 31, 2019 compared to net cash provided by financing activities of $683.7 million for the year ended December 31, 2020.

Net cash provided by financing activities for the year ended December 31, 2020 related primarily to the IPO, SIF funding, convertible note, and the Series A2 financing round closed in March 2020.

By contrast, no major equity financing was completed in 2019.

Contractual Obligations and Commitments

The following table summarizes our commitments to settle contractual obligations at December 31, 2021, other than leases which are recognized as operating lease liabilities in our consolidated balance sheet:

The following table summarizes our commitments to settle contractual obligations as of December 31, 2022, other than leases which are recognized as operating lease liabilities in our consolidated balance sheets:

Payments Due by Period

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Contingent consideration payable ( 2)

Includes several leased facilities where the lease commencement dates are subsequent to December 31, 2021.

As of December 31, 2021, the contingent consideration payable had an estimated fair value of approximately $58.8 million, which has been included as a liability on our consolidated balance sheet.

Includes leased facility where the lease commencement date is subsequent to December 31, 2022.

As of December 31, 2022, the contingent consideration payable had an estimated fair value of approximately $60.3 million, which has been included as a liability on our consolidated balance sheets.

Excludes financial arrangements disclosed in Note 9 and Note 13 to our audited consolidated financial statements.

The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts.

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Revenue Recognition

Our revenue primarily consists of research fees, milestone payments and royalty revenue, which are generated through our performance of antibody discovery research for our partners, and licensing revenue, which we generated from our Trianni humanized

rodent platform .

Our revenue primarily consists of research fees, licensing revenue, milestone payments and royalty revenue, which are generated through our performance of antibody discovery research for our partners, and licensing revenue, which we generated from our Trianni humanized rodent platform.

Promised deliverables to our global partners include research and development and licenses.

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We recognize revenue when we satisfy the performance obligations under the terms of a contract and control of our services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those services.

When applying the revenue recognition criteria of ASC 606 to research fees and milestone payments, management applies significant judgment when evaluating whether contractual obligations represent distinct performance obligations, including whether options for additional goods or services represent a material right;

When applying the revenue recognition criteria of ASC 606 to research fees and milestone payments, management may apply significant judgment when evaluating whether contractual obligations represent distinct performance obligations, including whether options for additional goods or services represent a material right;

allocating the transaction price to performance obligations within a contract;

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We allocate the transaction price to each distinct performance obligation identified in the contract based on relative observable standalone selling prices.

Licensing Revenue.

For the licenses of our intellectual property the Company recognizes revenue from non-refundable, upfront fees when the license is transferred to the customer and the customer is able to use and benefit from the license.

Milestone Payments.

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As part of our acquisitions of Trianni in 2020, and TetraGenetics in 2021, Goodwill, License, Technology and In-Process Research and Development Intangible (“IPR&D”) intangible assets were recognized.

The fair value of the aggregate intangible assets was determined to be $103.6 million and $43.3 million and goodwill was $30.9 million and $16.9 million at the acquisition dates related to Trianni and TetraGenetics, respectively.

IPR&D is classified as indefinite-lived, is not amortized, and is evaluated for impairment on an annual basis on October 1 or more frequently if an indicator of impairment is present.

IPR&D becomes definite-lived upon the completion or abandonment of the associated research and development efforts.

At December 31, 2021, our IPR&D was $72.4 million.

To test our IPR&D for impairment we first perform a qualitative assessment to determine if it is more likely than not that the carrying amount of our indefinite-lived intangible assets exceeds its fair value.

If it is, a quantitative assessment is required.

Based on our qualitative assessment, we determined there were no potential indicators of impairment of our indefinite-lived intangible assets at October 1, 2021 and during the remainder of 2021.

Based on our qualitative assessment, other than for an impairment associated to one of our IPR&D assets as described in the notes to the consolidated financial statements, we determined there were no potential indicators of impairment of our remaining indefinite-lived intangible assets as of October 1, 2022 and during the remainder of 2022.

For our annual goodwill impairment test, we begin with a qualitative assessment to determine whether a quantitative impairment test is necessary.

If we determine, after performing an assessment based on the qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, or that a fair value of the reporting unit substantially in excess of the carrying amount cannot be assured, then a quantitative impairment test would be performed.

The quantitative test for impairment

requires us to make judgments relating to future cash flows, growth rates and economic and market conditions.

The quantitative test for impairment requires us to make judgments relating to future cash flows, growth rates and economic and market conditions.

These evaluations are based on determining the fair value of the reporting unit using a valuation method such as discounted cash flow or a relative, market-based approach.

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In connection with our acquisition of Trianni, we may be required to make future payments to former shareholders of Trianni upon the achievement of certain earn-out provisions related to a specific customer license ending on April 9, 2024.

As of December 31, 2021, the contingent consideration payable had an estimated fair value of approximately $22.9 million, which has been included as a current liability on our consolidated balance sheet.

In connection with our acquisition of TetraGenetics, contingent consideration payable at December 31, 2021 is 35.9 million, all of which is a long-term liability.

Contingent consideration payable is a financial liability and measured at its fair value at each reporting period, with any changes in fair value from the previous reporting period recorded in the statement of income (loss) and comprehensive income (loss).

As of December 31, 2022, the contingent consideration payable had an estimated fair value of approximately $23.5 million, of which $12.9 million is a short-term liability and 10.6 million is a long-term liability on our consolidated balance sheets.

In connection with our acquisition of TetraGenetics, contingent consideration payable at December 31, 2022, is $36.8 million, of which $31.3 million is a short-term liability and $5.5 million is a long-term liability on our consolidated balance sheets.

Contingent consideration payable is a

financial liability and measured at its fair value at each reporting period, with any changes in fair value from the previous reporting period recorded in the statement s of income and comprehensive incom e .

In estimating the fair value of the intangible assets and contingent consideration, we applied an income approach based on the present value of the relevant future estimated after-tax cash flows.

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(a) the currency of a market in which a substantial portion of our equity securities are traded, (b) the currency in which the individual’s pay is denominated, or (c) our functional currency, are classified as liabilities, and are subsequently re-measured to fair value at each balance sheet date until exercised or cancelled, with changes in fair value recognized as compensation cost for the period.

Stock-based compensation expense is classified in our consolidated statements of income (loss) and comprehensive income (loss) based on the function to which the related services are provided.

As of December 31, 2021, and 2022, there were no liability classified options outstanding.

Stock-based compensation expense is classified in our consolidated statements of income and comprehensive income based on the function to which the related services are provided.

We recognize stock-based compensation expense for the portion of awards that have vested.

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therefore, the expected dividend yield is assumed to be zero.

As there has been no public market for our common shares prior to our IPO, the historical estimated fair value of our common shares has been approved by our board of directors.

As there had been no public market for our common shares prior to our IPO, the historical estimated fair value of our common shares has been approved by our board of directors.

Our board of directors determined the per-share fair value of our common shares in connection with option grants as equal to the per-share issuance price of our common shares in the then-most recent arms’ length financing transaction, and when appropriate, considered our most recently available independent third-party valuations of common shares and our operating results and financial performance.

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The analysis used an option pricing method, or OPM, which treats common shares and preferred shares as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes.

The OPM takes into account the preferred shareholders’ liquidation preferences, participation rights, dividend policy and conversion rights to determine how proceeds from a liquidity event will be distributed among various ownership classes at a future date.

The OPM considers the preferred shareholders’ liquidation preferences, participation rights, dividend policy and conversion rights to determine how proceeds from a liquidity event will be distributed among various ownership classes at a future date.

A discount for lack of marketability of the common shares is then applied to arrive at an indication of value for the common shares.

After July 2020, in contemplation of this offering, such valuations estimated the enterprise value of our business using a hybrid approach in determining the fair value of our common shares that includes a probability-weighted expected return method, or PWERM and the OPM.

After July 2020, but prior to our IPO, such valuations estimated the enterprise value of our business using a hybrid approach in determining the fair value of our common shares that includes a probability-weighted expected return method, or PWERM and the OPM.

Under a PWERM, the fair market value of our common shares is estimated based upon an analysis of future values for the enterprise assuming various future outcomes.

Based on the timing and nature of an assumed liquidity event in each scenario, a discount for lack of marketability would be applied to each scenario, as appropriate.

Based on the timing

and nature of an assumed liquidity event in each scenario, a discount for lack of marketability would be applied to each scenario, as appropriate.

The probability-weighted the value of each expected outcome would then be used to arrive at an estimate of fair value per common share.

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For purposes of determining the fair value of our common shares for the awards granted in October 2020, we also considered the applicability of the following factors and determined not to assign probability weightings to the potential occurrence of such events for the reasons discussed below:

The application by Eli Lilly on October 7, 2020 for EUA for the bamlanivimab single agent therapy to the FDA was not assigned a probability weighting due to the significant general risks and uncertainties in drug therapy applications with the FDA, in addition to the binary nature and outcome of the EUA application assessment.

The application by Lilly on October 7, 2020, of the EUA for the bamlanivimab single agent therapy to the FDA was not assigned a probability weighting due to the significant general risks and uncertainties in drug therapy applications with the FDA, in addition to the binary nature and outcome of the EUA application assessment.

While we were aware that an EUA application was submitted to the FDA, we were not a party to the application, nor did we have control over its contents.

In addition, we were not involved in any interactions with the FDA in relation to this application and therefore had little insight into the status of the application, the nature of any questions or comments raised by the agency in its review or any likelihood of the grant of the EUA.

The October 28, 2020 announcement by Eli Lilly of an agreement with the U.S.

The October 28, 2020 announcement by Lilly of an agreement with the U.S.

government to supply 300,000 vials of bamlanivimab for $375.0 million for which we are eligible to receive royalties in the low- to mid-twenties was not assigned a probability weighting due to the substantial uncertainty as to the likelihood of receipt of the EUA that is a precondition for any sales of the antibody to occur and upon which our eligibility to receive royalties depends.

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As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, the fair value of our common shares and our stock-based compensation expense could be materially different.

Stock options granted after October 2020 and prior to our IPO, the awards had a per-share exercise price based on the factors described above.

The EUA application for the bamlanivimab single agent therapy was granted by the FDA on November 9, 2020 and on December 2, 2020, the U.S government announced the purchase of an additional 650,000 doses of bamlanivimab for $812.5 million.

Following the completion of our IPO, the fair value of our common shares are determined based on the quoted market price of our common shares.

Stock options granted after October 2020 and prior to our IPO, had a per-share exercise price based on the factors described above.

The EUA application for the bamlanivimab single agent therapy was granted by the FDA on November 9, 2020, and on December 2, 2020, the U.S.

government announced the purchase of an additional 650,000 doses of bamlanivimab for $812.5 million.

Following the completion of our IPO, the fair value of our common shares is determined based on the quoted market price of our common shares.

See Note 11 to our consolidated financial statements concerning additional stock-based compensation expense and certain specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted in the years ended December 31, 2020, 2021 and 2022.

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See Note 4 to our annual consolidated financial statements appearing elsewhere in this Annual Report for a description of recent accounting pronouncements applicable to our consolidated financial statements.

Impact of the COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus, or COVID-19, as a pandemic, which continues to spread throughout the world.

As with many companies around the world, our day to day operations evolved to include work from home policies and requirements for physical distancing for any personnel present in our offices and laboratories.

The pandemic impacted our business development activities as shelter-in-place orders, quarantines, travel restrictions and other public health safety measures limited our ability to interact with our existing and potential partners.

The impact of the pandemic continues to raise uncertainties which may impact our business going forward.

We could be materially and adversely affected by the risks, or the public perception of the risks, related to the COVID-19 pandemic or similar public health crises.

Such crises could adversely impact our ability to conduct on-site laboratory activities, expand our laboratory facilities, secure critical supplies such as reagents, laboratory tools or immunized animals required for discovery research activities, and hire and retain key personnel.

In addition, the sustainability of an economic recovery remains unclear as inflationary pressures have increased in Canada, U.S.

and globally and efforts to combat the virus have been complicated by new variants.

The ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, among others.

Accordingly, we cannot predict the extent to which our business, financial condition and results of operations will be affected.

We remain focused on maintaining our operations, liquidity and financial flexibility and continue to monitor developments as we deal with the disruptions and uncertainties from the COVID-19 pandemic.

Impact of COVID-19

Since the start of the COVID-19 pandemic, we have taken steps to protect our employees, business partners, vendors, and contractors.

To address the multiple dimensions of the pandemic, we have been continuously monitoring the global situation, executing mitigation activities whenever and wherever required, and following guidance from provincial and federal health authorities.

The full extent to which the ongoing COVID-19 pandemic and related developments may affect the Company’s future financial results and operations will depend on future developments which are difficult to predict .

As of the date of these consolidated financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities.

Actual results could differ from these estimates, and any such differences may be material to the Company’s consolidated financial statements .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis