What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-20 · 143 added, 273 removed, 318 unchanged (57% of the section changed)

5 unchanged sentences

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.

To maximize the value and impact of our work, we are advancing a pipeline of programs and strategically partnering with groups with novel science or innovative technology.

We are a team of scientists, engineers, and business professionals focused on discovering and developing first-in-class and best-in-class antibody-based medicines for indications with high unmet medical need.

To address the barriers of conventional antibody drug development, we have built the capabilities to advance innovative, differentiated antibody drug programs, from target to the clinic.

To maximize the value and impact of our work, we are advancing a pipeline of internal programs and strategically partnering with companies that have novel science, innovative technology, or a strong track record of bringing programs through clinical development.

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

We aim to build a competitive advantage in bringing antibody therapeutics from target into 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 aim to build a competitive advantage in bringing antibody therapeutics from target into clinical testing by combining expertise, technologies, and infrastructure to build integrated capabilities 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.

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 are leveraging our capabilities and technology platforms to develop internal programs and advance a pipeline of AbCellera programs with first-in-class and/or best-in-class potential.

We evaluate these programs individually to determine the advisability of entering into preclinical and clinical development ourselves, entering into collaborations with partners, or out-licensing programs to optimize their development and clinical and commercial potential.

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

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

We deliberately partner with companies of all sizes to propel programs pursuing the best ideas for new antibody-based drugs to the clinic, together.

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

As our capabilities have grown, we are also strategically leveraging our engine to develop internal programs to address areas of high unmet medical need and to advance our pipeline of first-in-class and best-in-class medicines.

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.

4 unchanged sentences

We believe that our internal programs, if successfully out-licensed, may generate substantial upfront payments and royalty positions on net sales in the high single-digits to high teens range, in addition to clinical and commercial milestones.

We focus a substantial portion of our resources on research and development efforts towards strengthening our discovery and development engine and developing a pipeline of internal and co-development programs.

We expect to continue to make significant investments in this area for the foreseeable future, over time shifting effort from engine development towards engine application.

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

• invest in research and development activities to improve our antibody discovery and development engine including investments in completing the construction of our small-scale manufacturing facility and our new headquarters through our joint ventures;

We focus a substantial portion of our resources on research and development efforts towards strengthening our discovery and development capabilities and developing a pipeline of internal and co-development programs.

We expect to continue to make significant investments in this area for the foreseeable future and expect to continue to incur significant expenses in connection with our ongoing activities, including as we:

• invest in research and development activities to improve our antibody discovery and development capabilities, including investments in completing the construction of our small-scale manufacturing facility;

• pursue internal and co-development programs in preclinical and eventually clinical development;

• market and sell our solutions to existing and new strategic partners;

• expand and enhance operations to deliver programs, including investments in manufacturing;

• improve and enhance operations to deliver programs, including investments in manufacturing;

• acquire businesses or technologies to support the growth of our business;

6 unchanged sentences

We have started a cumulative total 96 partner-initiated programs with downstream participation and have seen a cumulative total 16 molecules advanced into the clinic, as illustrated by the following chart.

In 2023, we added 29 new programs under contract, started 12 partner-initiated programs with downstream participation, and saw partners advance five molecules into the clinic.

Financial Highlights

1 unchanged sentence

All figures are in U.S.

dollars and amounts are expressed in thousands, except earnings (loss) per share data:

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

Twelve Months Ended December 31,

3 unchanged sentences

Milestone payments 1,500 1,500

Royalty revenue 327,349 443,026 —

Total revenue 38,025 28,833

Operating expenses:

Royalty fees 45,516 66,436 —

Research and development (1)

175,658 167,259

Other operating expenses 63,212 94,598 99,574

Sales, general and administrative (1)

75,179 85,490

Depreciation, amortization, and impairment 24,395 90,850

Total operating expenses 275,232 343,599

Income (loss) from operations 204,413 216,511 (237,207)

Loss from operations (237,207) (314,766)

Total other income (63,178) (114,371)

Net earnings (loss) before income tax 219,149 239,099 (174,029)

Net earnings (loss) 153,464 158,519 (146,398)

Net earnings (loss) per share attributable to common shareholders

Net loss before income tax (174,029) (200,395)

Net loss (146,398) (162,857)

Net loss per share

Basic $ (0.51) $ (0.55)

4 unchanged sentences

General and administrative expenses 27,274 31,021

Financial Position and Liquidity December 31, 2022 December 31, 2023

Financial Position December 31, 2023 December 31, 2024

Cash and cash equivalents $ 133,320 $ 156,325

4 unchanged sentences

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

Recent Developments

On January 13, 2025, we announced the expansion of our collaboration with AbbVie Inc.

to include access to our T-cell engagers platform to develop therapeutic antibodies for tumor targets.

Key Factors Affecting Our Results of Operations and Future Performance

2 unchanged sentences

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

• Engaging with strategic partners.

Our potential to grow revenue, in both the near and long term, is dependent on successfully engaging with strategic partners.

For existing strategic partners, we seek to expand

our relationships with them to collaborate on additional programs initiated by them as well as to create a basis for potentially out-licensing some of our internal programs.

Our teams are selective in determining which partners we choose to engage with, focusing on the opportunities with the strong potential to generate significant value in the long term.

• Pursuing drug discovery and development opportunities internally .

As our discovery and development capabilities have matured, we are increasingly in a position to pursue attractive, well-validated targets

ourselves, e.g.

in the GPCR, ion channel, and TCE spaces.

Such programs have the potential to yield first-in-class drug candidates in indications with substantial unmet medical need which we would wholly own.

We plan on investing significant resources in the preclinical and, eventually, clinical development of internal programs which will impact our financial results.

The investments in each program are undertaken at risk and may ultimately not yield a return.

• Successfully out-licensing drug candidates from our internal programs.

We believe that our internal programs may result in drug candidates of interest to other drug developers with capabilities complimentary to our own.

Where these capabilities can be expected to enhance the value of our drug candidate, we may seek to out-license.

Successful out-licensing agreements could generate substantial up-front payments in addition to later milestone payments and royalties.

Our financial performance may therefore be impacted by our ability to produce and out-license such drug candidates from our internal programs.

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

6 unchanged sentences

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 will impact revenue recognition.

• Successfully out-licensing drug candidates from our internal programs.

We believe that our internal programs may result in drug candidates of interest to other drug developers with capabilities complimentary to our own.

Where these capabilities can be expected to enhance the value of our drug candidate, we may seek to out-license.

Successful out-licensing agreements could generate substantial up-front payments in addition to later milestone payments and royalties.

Our financial performance may therefore be impacted by our ability to produce and out-license such drug candidates from our internal programs.

• 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 and our internal programs.

• Engaging with strategic partners.

Our potential to grow revenue, in both the near and long term, is dependent on successfully engaging with strategic partners.

For existing strategic partners, we seek to expand our relationships with them to collaborate on additional programs initiated by them as well as to create a basis for potentially out-licensing some of our internal programs.

Our teams are selective in determining which partners we choose to engage with, focusing on the opportunities with the strong potential to generate significant value in the long term.

• Investing in enhancements to our discovery and development capabilities.

Our ability to maintain and expand our partnerships is dependent on the advantages our discovery and development capabilities deliver to our partners and our internal programs.

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.

2 unchanged sentences

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

• Pursuing drug discovery and development opportunities internally .

As the capabilities of our discovery and development engine have matured we are increasingly in a position to pursue attractive, well-validated targets ourselves, e.g.

in the GPCR, ion channel, and TCE spaces.

Such programs have the potential to yield first-in-class drug candidates in indications with substantial unmet medical need which we would wholly own.

We plan on investing significant resources in the preclinical and, eventually, clinical development of internal programs which will impact our financial results.

The investments in each program are undertaken at risk and may ultimately not yield a return.

Key Business Metrics

3 unchanged sentences

Cumulative Metrics December 31, 2023 December 31, 2024 Change %

Number of discovery partners 40 46 15 %

Programs under contract 174 203 17 %

Partner-initiated program starts with downstreams 87 96 10 %

Molecules in the clinic 13 16 23 %

* Metric adjusted from prior reporting

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 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 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 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.

Partner-initiated program starts with downstreams represent the number of unique partner-initiated programs where we stand to participate financially in downstream success 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.

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 the selection and initiation of projects by our partners and the resulting potential for near-term payments.

Cumulatively, partner-initiated program starts with downstream participation indicate our total opportunities to earn downstream revenue from milestone fees and royalties (or royalty equivalents) in the mid- to long-term.

This is the first time we disclose this metric.

See discussion below for additional explanation.

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 reached "open" status or has otherwise been approved based on an antibody that was discovered either by us or by a partner using licensed AbCellera technology.

1 unchanged sentence

We view this metric as an indication of our near- and mid-term potential revenue from milestone fees and potential royalty payments in the long term.

Discussion of Current and Future Changes .

For the year ended December 31, 2023 we have made a change to our Key Business Metric relating to program starts, which we describe below.

In addition, we are changing the set of metrics we will include within our 2024 disclosures which is also outlined below.

Number of Discovery Partners and Programs Under Contract

As our business has matured, we no longer consider the Number of Discovery Partners or Programs Under Contract meaningful metrics to evaluate our business.

We continue to focus on strategic partnerships rather than on deal volume in partnering, and we expect to increasingly drive value from our pipeline of internal and co-development programs.

Both of these activities are best reported and viewed on an individual basis and not well represented by these two business metrics.

As such, going forward, we will no longer be reporting on the Number of Discovery Partners and Programs Under Contract as continued discussion of the metrics provides no significant additional insight.

Program Starts

We have also adjusted the business metric definition for program starts by (a) removing AbCellera-initiated programs that have been out-licensed or partnered and (b) excluding programs without downstream participation.

Removal of AbCellera-initiated programs .

In future, we expect to strike deals on more of our own programs, e.g.

on the basis of our T-cell-engager platform, and will report on these separately, which is why we have made this modification.

Historically, that has happened once, when we partnered our COVID-19 program to Lilly.

Under the previous definition of Partnered Program Starts, this program was included, and the total cumulative number of Partnered Program Starts at the end of December 2023 correspondingly would have been one higher:

113 cumulative total partnered program starts compared to 112 partner-initiated program starts.

Exclusion of programs without downstream participation .

Of the cumulative total 112 partner-initiated program starts, 87 programs included a position for downstream participation.

When we first chose Program Starts as a business metric, we wanted to reflect both the near-term aspects of our antibody-discovery partnerships – such as operational capacity and potential for near-term payments – as well as the opportunities to earn downstream revenue from the resulting portfolio of downstream stakes in the mid-to-long term.

As our strategy is unfolding, our main focus for partner-initiated programs is on adding value to the portfolio.

Consequently, we are now including only programs with downstream participation.

If we had reported on our original metric of cumulative partnered program starts, the number would have been 101 for December 31, 2022.

The table below outlines the details of molecules in the clinic as of December 31, 2024:

1 unchanged sentence

Bamlanivimab (LY-CoV555) Marketed, EUA* Eli Lilly and Company Infectious disease – COVID-19 AbCellera-initiated;

Bebtelovimab (LY-CoV1404) Marketed, EUA* Eli Lilly and Company Infectious disease – COVID-19 AbCellera-initiated;

(LY-CoV1404) Marketed, EUA* Eli Lilly and Company Infectious disease – COVID-19 AbCellera-initiated;

TAK-920/DNL919 Phase 1* Denali Therapeutics Inc.

2 unchanged sentences

Neuroscience AbCellera partner-initiated discovery

IVX-01 Clinical field study Invetx Animal Health AbCellera partner-initiated discovery

Undisclosed Clinical field study Undisclosed Animal Health AbCellera partner-initiated discovery

ABD-147 Phase 1 (Fast Track- and Orphan drug- designated) Abdera Therapeutics Inc.

Oncology AbCellera partner-initiated discovery

IVX-01 Clinical field study Invetx, Inc.

Animal Health AbCellera partner-initiated discovery

Undisclosed Clinical field study Invetx, Inc.

Animal Health AbCellera partner-initiated discovery

Undisclosed Clinical field study Invetx, Inc.

Animal Health AbCellera partner-initiated discovery

AB-2100 Phase 1/2 Arsenal Bio Oncology Trianni license

Undisclosed Phase 1/2 Undisclosed Oncology Trianni license

NBL-012 Phase 1 NovaRock Biotherapeutics Inc.

6 unchanged sentences

Oncology Trianni license

GIGA-564 Phase 1 GigaGen, Inc.

Oncology Trianni license

Undisclosed Phase 1* Undisclosed Undisclosed Trianni license

AB-2100 IND open Arsenal Bio Oncology Trianni license

*Expect no further progress

*Expect no further progress/no ultimate approval.

Summary of partnership agreements with pharmaceutical and biotechnology companies that include downstream participation from 2016 to December 31, 2024:

Partner # of Targets & Duration Therapeutic Indication or Modality Date Announced

Eli Lilly and Company Multi-target, multi-year Immunology, cardiovascular disease, and neuroscience July 31, 2024

Viking Global Investors & ArrowMark Partners Multi-target, multi-year Immunology May 1, 2024

Single target Neuroscience March 11, 2024

Undisclosed Multi-target, multi-year Undisclosed December 28, 2023

1 unchanged sentence

Undisclosed biotechnology company Multi-target, multi-year Undisclosed December 4, 2023 *

Prelude Up to 5 targets, multi-year Oncology November 1, 2023

Prelude Therapeutics Up to 5 targets, multi-year Oncology November 1, 2023

Regeneron Pharmaceuticals, Inc.

32 unchanged sentences

Regeneron Pharmaceuticals, Inc.

Up to 4 targets, multi-year Multiple undisclosed March 16, 2020 *

4 targets, multi-year Multiple undisclosed March 16, 2020 *

Multi-target, multi-year Animal health February 23, 2020

23 unchanged sentences

Our partnership agreements also entitle us to receive payments upon the satisfaction of clinical, approval, and commercial milestones as well as royalties on our partners’ commercial sales of the molecules that we discover.

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.

We expect that our overall revenue will fluctuate from period to period due to the timing of securing additional programs under contract and the progress of our internal programs, 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.

For example, our revenue from bebtelovimab stopped in 2022 when the FDA announced bebtelovimab was no longer authorized for emergency use in the U.S.

We expect that our overall revenue will fluctuate from period to period due to the timing of securing additional programs under contract and the progress of our internal programs, 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.

Operating Expenses

2 unchanged sentences

Royalty fees are not included in every program.

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.

For royalties received from Lilly for commercial sales of bebtelovimab in 2022, 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.

Research and development expenses.

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.

Research and development expenses primarily consist of salaries, benefits, incentive compensation, stock-based compensation, laboratory supplies and materials expenses for employees and third-party research and development expenses for preclinical, discovery, and other research programs.

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

Research and development activities consist of discovery research for partners, investments made in co-development and internal programs, and internal development of our discovery and development engine.

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 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.

We expect to continue to incur substantial research and development expenses as we execute on our internal pipeline and 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 manufacturing, and continue research and development on our pipeline of internal programs.

As a result, we expect that our research and development expenses will continue to vary from period to period in future periods as we continue to execute our strategy of building our pipeline of first-in-class and best-in-class medicines.

Sales and marketing expenses.

Our sales and marketing expenses consist primarily of salaries, benefits, incentive compensation, stock-based compensation costs for employees within our commercial sales functions, and marketing and travel expenses.

We expect our sales and marketing expenses to increase in absolute dollars as we expand our commercial sales, increase our presence globally, 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.

We expect these expenses to remain consistent in the short term as we focus on our internal pipeline.

General and administrative expenses.

General and administrative expenses primarily consist of salaries, benefits, incentive compensation, 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.

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

We expect these expenses to remain consistent in the short term as we focus on our internal pipeline.

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.

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

Other (Income) Expense

Interest income.

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

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

Grants and incentives.

5 unchanged sentences

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

Other consists primarily of 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.

Other consists primarily of fair value adjustments of contingent considerations, marketable and non-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.

Results of Operations

The following information includes a comparison of our results of operations and liquidity and capital resources for the years ended December 31, 2023 and 2024.

A comparison of the years ended December 31, 2022 and 2023, can be found in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 20, 2024 and is incorporated herein by reference.

Comparison of the Years Ended December 31, 2023 and 2024

4 unchanged sentences

Milestone payments 1,500 1,500 — —%

Royalty revenue 443,026 — (443,026) (100) %

Total revenue $ 38,025 $ 28,833 $ (9,192) (24)%

Revenue decreased by $9.2 million from the year ended December 31, 2023, compared to the year ended December 31, 2024 .

The decrease was driven primarily by the absence of royalty revenue recognized in the period since the FDA announced that bebtelovimab is no longer authorized for emergency use in any U.S.

region in the fourth quarter of 2022.

Research fees decreased by $5.2 million due to the timing and mix of programs executed for our partners.

The decrease in research fees in 2024 was attributable to the timing and progress of our research and development efforts.

Operating Expenses

December 31, Change

2022 2023 Amount %

Royalty fees $ 66,436 $ — $ (66,436) (100) %

Royalty fees for the year ended December 31, 2022 and December 31, 2023 were $66.4 million and nil, respectively.

Royalty fees in 2022 were attributable to the royalty revenues received by the Company from sales of bamlanivimab and bebtelovimab by Lilly.

Research and Development

2 unchanged sentences

Research and development $ 175,658 $ 167,259 $ (8,399) (5)%

Research and development expenses increased by $67.8 million, or 63%, from the year ended December 31, 2022, compared to the year ended December 31, 2023.

Research and development expenses reflect the continued growth in program execution, platform development, forward integration, and investment in partnered and internal programs.

Approximately $31.6 million of the increase is related to a specific one time payment in our investment in internal programs in 2023.

The remaining increase includes a $19.9 million increase in compensation-related expenses consistent

with the increase in headcount, of which $7.5 million relates to stock-based compensation.

In addition, there is a $16.3 million increase in facilities, supplies and services expenditure consistent with the overall growth of the Company.

Research and development expenses decreased by $8.4 million, or (5)%, from the year ended December 31, 2023, compared to the year ended December 31, 2024.

Research and development expenses reflect the continued progress in program execution, platform development, forward integration, and investment in partnered and internal programs.

Approximately $31.6 million of the decrease is related to a specific one-time payment in our investment in internal programs in 2023.

The decrease is partially offset by an increase of $4.5 million in salary and benefits, an increase of $10.9 million in third-party research and development expenses for preclinical, discovery and other research programs, and a $7.8 million increase in facilities, supplies and other unallocated research and development expenses.

Sales and Marketing

2 unchanged sentences

Sales and marketing $ 14,180 $ 12,779 $ (1,401) (10)%

Sales and marketing expenses increased by $2.9 million, or 26%, from the year ended December 31, 2022, compared to the year ended December 31, 2023.

The increase was attributable to compensation costs and other expenses related to our business development activity.

Sales and marketing expenses decreased by $1.4 million, or (10)%, from the year ended December 31, 2023, compared to the year ended December 31, 2024.

The decrease was attributable to a reduction in consulting fees and other expenses related to our business development activity.

General and Administrative

3 unchanged sentences

General and administrative expenses increased by $11.7 million, or 19%, from the year ended December 31, 2023, compared to the year ended December 31, 2024.

$4.8 million of the increase in general and administrative expense is compensation-related and driven by the increase in headcount.

The remaining expenses incurred to support the growth of the Company was offset by a decrease in legal and consulting fees.

The increase was driven by a $2.2 million increase in compensation-related costs and a $9.5 million increase in legal, software, and other general administrative costs.

Depreciation, Amortization, and Impairment

2 unchanged sentences

Depreciation, amortization, and impairment $ 24,395 $ 90,850 $ 66,455 272%

Depreciation, amortization, and impairment expenses decreased by $3.4 million in 2023, or (12)% compared to the year ended December 31, 2022.

An increase in depreciation expense of $4.9 million from an increase in equipment in use, facilities, and capital equipment purchases was offset by an impairment charge of $8.4 million (or $6.3 million, net of deferred income tax) recognized in 2022 where the Company recognized 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.

Depreciation, amortization, and impairment expenses increased by $66.5 million, or 272%, from the year ended December 31, 2023, compared to the year ended December 31, 2024.

The increase is primarily attributable to recognizing a full impairment charge of the carrying value of $32.0 million (or $23.3 million, net of deferred income tax) associated with the IPR&D acquired through the 2020 acquisition of Trianni, due to discontinuing the development of the next-generation transgenic mice.

The Company also recognized a full impairment charge of the carrying value of $32.0 million (or $23.3 million, net of deferred income tax) associated with the IPR&D acquired through the 2021 acquisition of TetraGenetics.

Both impairment charges were a result of the Company's ongoing internal program prioritization.

The remaining increase was due to the re-assessment of the useful life of certain technology assets, partially offset by a decrease in license amortization in 2024.

Interest Income

2 unchanged sentences

Interest income $ (42,247) $ (38,473) $ 3,774 (9)%

Interest income increased by $26.4 million, or 166%, from the year ended December 31, 2022, compared to the year ended December 31, 2023.

The increase was primarily driven by an increase in interest rates on our cash and cash

equivalents and marketable securities balances in the year ended December 31, 2023, compared to the year ended December 31, 2022.

Grants and Incentives (Income)

Interest income decreased by $3.8 million, or (9)%, from the year ended December 31, 2023, compared to the year ended December 31, 2024.

The decrease was primarily driven by a decrease in our average cash, cash equivalents, and marketable securities balances, and a decrease in interest rates in 2024.

Grants and Incentives

December 31, Change

1 unchanged sentence

Grants and incentives $ (14,155) $ (13,620) $ 535 (4)%

Grants and incentives increased by $3.6 million, or 34%, from the year ended December 31, 2022, compared to the year ended December 31, 2023.

This increase was primarily driven by activity relating to research and development expenditures that are eligible for reimbursement under government programs for the period.

Other (Income)

Grants and incentives decreased by $0.5 million, or (4)%, from the year ended December 31, 2023, compared to the year ended December 31, 2024.

The decrease was primarily driven by activity relating to research and development expenditures that are eligible for reimbursement under government programs for the period.

December 31, Change

2 unchanged sentences

Other income increased by $55.5 million, or 819%, from the year ended December 31, 2023, compared to the year ended December 31, 2024.

The increase included other income and a gain on fair value adjustments related to held-for-trading marketable securities and contingent consideration of $11.0 million and a foreign exchange gain of $0.4 million due to fluctuations in the Canadian and U.S.

Further to the TetraGenetics intangible asset impairment discussion above, the TetraGenetics and Trianni contingent consideration was adjusted to reflect the expected value due to the impact from the Company's ongoing internal program prioritization and expected achievement of a milestone required for an earn-out payment associated with a specific license.

The Company recorded a non-cash fair value gain of $47.3 million related to the contingent consideration adjustments.

The remaining increase was attributable to a $16.5 million recognized gain on the disposal of a non-marketable security, partially offset by a decrease in fair value adjustments, including marketable securities, and a foreign exchange loss due to fluctuations in the Canadian and U.S.

dollar exchange rate.

Income Tax (Recovery) Expense

Income Tax Recovery

December 31, Change

2023 2024 Amount %

Income tax (recovery) expense $ 80,580 $ (27,631) $ (108,211) (134) %

Income tax expense decreased by $108.2 million, or (134)%, from the year ended December 31, 2022 compared to the year ended December 31, 2023.

The decrease was driven by the current net loss in the year.

Comparison of the Years Ended December 31, 2021 and 2022

Year Ended December 31, Change

2021 2022 Amount %

Research fees $ 19,076 $ 40,802 $ 21,726 114 %

Licensing revenue 20,778 696 (20,082) (97) %

Milestone payments 8,000 900 (7,100) (89) %

Royalty revenue 327,349 443,026 115,677 35 %

Total revenue $ 375,203 $ 485,424 $ 110,221 29 %

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, Change

2021 2022 Amount %

Royalty fees $ 45,516 $ 66,436 $ 20,920 46 %

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, Change

2021 2022 Amount %

Research and development $ 62,062 $ 107,879 $ 45,817 74 %

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.

$20.0 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, Change

2021 2022 Amount %

Sales and marketing $ 6,913 $ 11,270 $ 4,357 63 %

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

Year Ended December 31, Change

2021 2022 Amount %

General and administrative $ 41,848 $ 55,485 $ 13,637 33 %

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, Change

2021 2022 Amount %

Depreciation, amortization, and impairment $ 14,451 $ 27,843 $ 13,392 93 %

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 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)

Year Ended December 31, Change

2021 2022 Amount %

Interest (income) $ (3,330) $ (16,079) $ (12,749) 383 %

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.

Grants and Incentives (Income)

Year Ended December 31, Change

2021 2022 Amount %

Grants and incentives $ (17,486) $ (10,554) $ 6,932 (40) %

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.

Other (Income)

Year Ended December 31, Change

2021 2022 Amount %

$ 6,080 $ 4,045 $ (2,035) (33) %

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.

Foreign 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.

Income Tax Expense

Year Ended December 31, Change

2021 2022 Amount %

Income tax expense $ 65,685 $ 80,580 $ 14,895 23 %

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.

Income tax recovery $ (27,631) $ (37,538) $ (9,907) 36%

Income tax recovery increased by $9.9 million, or 36%, from the year ended December 31, 2023 compared to the year ended December 31, 2024.

The movement in each period was driven by the current net loss and a change in effective income tax rates.

Liquidity and Capital Resources

As of December 31, 2024, we had $625.6 million of cash, cash equivalents, and marketable securities, comprised of $156.3 million in cash and cash equivalents and $469.3 million in marketable securities.

The decrease of $125.9 million since December 31, 2022 was from a combination of cash flow from operations with an increase in research and development activity, investment in long term assets and our internal pipeline, and continued investment in the capacity and capabilities of AbCellera’s discovery and development engine in the year ended December 31, 2023.

We have generated positive operating cash flow cumulatively since our inception in 2012 and in every year from 2018 to 2022.

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

We will continue to invest in research and development efforts towards expanding our capabilities and expertise along our discovery and development engine, continued investments in partnered and internal programs, 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 available liquidity from existing cash, cash equivalents, marketable securities, receivables, and anticipated cash flows from operations and government contributions, will be sufficient to meet our working capital, capital expenditure needs, and expenditures required for later stage development of our internal pipeline.

We do not anticipate the need of additional external funding over at least the next 36 months following the date of this report.

The decrease of $135.0 million since December 31, 2023, was from a combination of cash flow used in operations and investing activities due to our continued research and development activity, investments in partnered and internal programs, in our internal pipeline, and in our corporate headquarters and GMP facility under construction, offset by government contributions received in the year ended December 31, 2024.

While we have generated positive operating cash flows in the past, we intend to significantly invest in our business, and as a result may continue to incur operating losses in future periods.

We will continue to use our significant available liquidity from our cash, cash equivalents, and marketable securities to fund and invest in research and development efforts towards expanding our capabilities and expertise, execute and build our internal pipeline, and the expansion of our corporate headquarters, clinical manufacturing facility and related infrastructure, including optimization of long-term office-lease arrangements.

Moving into 2025, we are on track to complete our final large platform investments in our clinical manufacturing facility and our corporate headquarters.

With the completion of these large platform investments, we expect a significant reduction in investing cash flows, shifting our capital allocation from building capabilities to using them as we execute our strategy of building on our pipeline of first-in-class and best-in-class medicines.

Based on our current business plan, we believe that our available liquidity from existing cash, cash equivalents,

marketable securities, loan receivables, and government contributions, will be sufficient to meet our working capital and capital expenditure needs and do not anticipate the need of additional external funding over at least the next 36 months following the date of this report.

Sources of Liquidity

3 unchanged sentences

Under this agreement, up to CAD $175.6 million ($125.6 million) was committed by the Government of Canada to support research and development efforts related to the discovery of antibodies to treat COVID-19, and to build technology and manufacturing infrastructure for antibody therapeutics against future pandemic threats.

From inception to December 31, 2023, the Company has recorded CAD $140.8 million ($109.1 million) of the funding, of which CAD $58.7 million ($46.1 million) relates to the maximum claim amount under phase 1 of the agreement and CAD $82.1 million ($63.1 million) in respect of phase 2 of the funding commitment.

From inception to December 31, 2024, the Company has incurred CAD $175.6 million ($134.6 million) of expenditures, of which CAD $58.7 million ($46.1 million) relates to the maximum claim amount under phase 1 of the agreement and CAD $116.9 million ($88.5 million) in respect of phase 2 of the funding commitment.

In May of 2023, we entered into multi-year contribution agreements of CAD $300.0 million ($222.3 million), of which CAD $225.0 million ($166.7 million) is with the Government of Canada and CAD $75.0 million ($55.6 million) is with the Government of British Columbia.

These investments are intended to build new capabilities in Canada to develop, manufacture, and deliver antibody medicines to patients through Phase 1 clinical trials and build expertise in translational science, technical operations, and clinical operations and research.

For the year ended December 31, 2023, the Company has recorded CAD $29.0 million ($21.6 million) in respect of the funding from the Government of Cananda and CAD $18.8 million ($14.1 million) from the Government of British Columbia.

From inception to December 31, 2024, the Company has incurred CAD $67.3 million ($49.4 million) and CAD $37.5 million ($27.8 million) in expenditures with respect of the funding from the Government of Canada and the Government of British Columbia, respectively.

Further information with respect to these contributions are outlined in Note 12 to the consolidated financial statements.

The following table summarizes our cash flows for the periods presented:

2021 2022 2023

Net cash provided by (used in):

3 unchanged sentences

Effect of exchange rate fluctuations on cash and cash equivalents 589 (2,617)

Net decrease in cash and cash equivalents $ (92,974) $ (86,492) $ (254,040)

Net increase (decrease) in cash and cash equivalents $ (254,040) $ 23,005

Operating Activities

Net cash provided by operating activities decreased from $277.4 million generated in the year ended December 31, 2022, to $43.9 million cash used by operating activities in the year ended December 31, 2023.

The decrease in cash flows from operations is attributable to no royalty revenue and a reduction in royalty-related payments in the period, in addition to an increase in expenditures that reflect AbCellera’s investment in research and development activities and growth of the Company.

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 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 used in operating activities increased from $43.9 million in the year ended December 31, 2023, to $108.6 million in the year ended December 31, 2024.

The increase in cash flows used in operations was attributable to research and development activity, program execution, and investment in partnered and internal programs in addition to working capital movements including higher levels of accounts and grants receivable in the year ended December 31, 2024.

Investing Activities

Net cash used in investing activities decreased from $352.6 million in the year ended December 31, 2022, to $221.1 million in the year ended December 31, 2023.

Investing activities during the twelve months ended December 31, 2022 and 2023 were primarily attributable to purchases of property and equipment, marketable securities, and purchases of long-term investments.

The decrease in investing activities for the twelve months ended December 31, 2023 was primarily due to the purchase of and proceeds from marketable securities.

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 2022 from the prior year due to a decrease in SIF-eligible research and development activities performed in the period.

Net cash associated with investing activities changed from $221.1 million used in investing activities in the year ended December 31, 2023, to $121.4 million provided by investing activities in the year ended December 31, 2024.

The increase in cash provided by investing activities in 2024 was primarily attributable to absence of a specific one-time investment that occurred in the first quarter of 2023, receipt of grant funding, and proceeds from marketable securities in the year ended December 31, 2024.

Financing Activities

Net cash used in financing activities decreased from $1.6 million for the year ended December 31, 2022, to net cash provided by financing activities of $10.4 million for the year ended December 31, 2023.

This was primarily due to the receipt of repayable government contributions.

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.

For the year ended December 31, 2023 , net cash provided by financing activities was $10.4 million and included $11.6 million in proceeds from other long-term liabilities and the exercise of options for common shares, partially offset by a contingent consideration payment.

Net cash provided by financing activities was $12.8 million for the year ended December 31, 2024 primarily due to proceeds from other long-term liabilities and the exercise of stock options.

Contractual Obligations and Commitments

7 unchanged sentences

8,087 8,087 — — —

Total $ 294,193 $ 50,474 $ 89,801 $ 152,172 $ 1,746

$ 188,923 $ 44,297 $ 11,982 $ 11,982 $ 120,662

(1) Includes commitments, primarily related to the construction of our new facilities, in addition to our leased facility where the lease commencement date is subsequent to December 31, 2024.

21 unchanged sentences

Revenue Recognition

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.

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.

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

4 unchanged sentences

allocating the transaction price to performance obligations within a contract;

estimating timing of completion of performance obligations;

and assessing the recognition and possible future reversal of variable consideration.

14 unchanged sentences

Differences between actual and estimated royalty revenue will be adjusted for in the period in which they become known, which is generally expected to be the following quarter.

Business Combination, Goodwill and Intangible Assets

Acquisitions of businesses are accounted for using the acquisition method.

The consideration of a business combination is measured, at the date of the exchange, as the aggregate of the fair value of assets given, liabilities incurred or assumed and equity instruments issued by us to the former owners of the acquiree in exchange for control of the acquiree.

Acquisition related costs incurred for the business combination are expensed.

The acquiree’s identifiable assets, liabilities and contingent liabilities are recognized at their fair value at the acquisition date.

Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the consideration of the acquisition over our interest in the fair value of the net identifiable assets, liabilities and contingent liabilities recognized.

If our interest in the fair value of the acquiree’s net identifiable assets, liabilities and contingent liabilities exceeds the cost of the acquisition, the excess is recognized in earnings or loss immediately.

Goodwill, which is not amortized, will be evaluated for impairment on an annual basis on October 1 or more frequently if an indicator of impairment is present.

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.

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.

Goodwill and Intangible Assets

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

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.

1 unchanged sentence

If it is, a quantitative assessment is required.

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, 2023 and during the remainder of 2023.

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.

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.

At October 1, 2023, we performed a qualitative assessment for our annual impairment test of goodwill after concluding that it was not more likely than not that the fair value of the reporting unit was less than its carrying value.

Consequently, the quantitative impairment test was not required.

The Company concluded that there were no impairment indicators related to goodwill during the remainder of 2023.

As part of our ongoing planned research and development and execution of our programs under contract and internal programs, changes to our plans due to internal and external factors out of our control could impact the amount and timing of projected future cash flows.

As a result, these unplanned changes could result in us performing a quantitative impairment test in the future, which could result in a potential non-cash impairment charge associated with our goodwill or intangible assets, which would reduce our future earnings.

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.

As of December 31, 2023, the contingent consideration payable had an estimated fair value of approximately $18.7 million , all of which is a short-term liability on our consolidated balance sheet.

In connection with our acquisition of TetraGenetics, the contingent consideration payable at December 31, 2023 is $36.7 million , of which $31.8 million is a short-term liability and $4.9 million is a long-term liability on our consolidated balance sheet.

In 2024, a full impairment charge of the carrying value associated with our IPR&D assets was recognized due to our ongoing internal program prioritization, as further described in the notes to the consolidated financial statements.

Goodwill is evaluated for impairment on an annual basis as of October 1, or more frequently if an indicator of impairment is present.

We have one operating segment and reporting unit, therefore our review of goodwill impairment is performed at the entity-wide level.

As part of the impairment evaluation, the Company may elect to perform an assessment of qualitative factors.

If this qualitative assessment indicates that it is more likely than not that the fair value of the reporting unit that includes the goodwill is less than its carrying value, then a quantitative impairment test would be prepared to compare this fair value to the carrying value and record an impairment charge if the carrying value exceeds the fair value.

As of October 1, 2024 , the Company updated its quantitative assessment for its annual impairment test of goodwill and concluded that the fair value of the reporting unit was more than its carrying value.

The quantitative test for impairment requires us to make judgments relating to future cash flows, probability of success of our research and development activities, growth rates and economic and market conditions.

The Company further assessed the fair value of the reporting unit to the market capitalization of the Company to assess the reasonableness of the valuation approach.

The Company also concluded that there were no impairment indicators related to goodwill during the remainder of 2024 .

The nature of the biotechnology business is high-risk and requires that we invest significantly in research and development.

As part of our ongoing planned research and development activities, significant adverse changes to our plans due to internal and external factors out of our control (including general and industry economic conditions, further prolonged decline in the market value of our common shares, and the success of our internal and partner-initiated programs) would increase the likelihood that we would record an impairment charge to our goodwill and/or intangible assets, which could materially and adversely affect our operations and the market value of our common shares.

Contingent Consideration

In connection with our previous acquisitions, we may be required to make future payments related to potential earn-out payments and future successful milestone payouts.

Contingent consideration is recorded at fair value on the acquisition date and adjusted on a recurring basis for changes in its fair value.

Changes in the fair value of contingent consideration liabilities can result from changes in anticipated payments and changes in assumed discount periods and rates and are included in other income on the consolidated statements of income (loss).

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 statements of income (loss) and comprehensive income (loss).

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.

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

The key assumptions include the amount and timing of revenues, success probability, and discount rates.

A 10% change in these key assumptions associated with the recognition of intangible assets and contingent consideration would not have a material impact on the amounts recognized.

See Note 15 and 19 to our consolidated financial statements for further information related to the contingent considerations and Tetragenetics acquisition, respectively.

See Note 15 to our consolidated financial statements for further information related to the contingent considerations.

Stock-Based Compensation

1 unchanged sentence

For non-employee awards, compensation expense is recognized as the services are provided, which is generally ratably over the vesting period.

Awards with an exercise price which is not denominated in:

(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.

As of December 31, 2021, 2022, and 2023, there were no liability classified options outstanding.

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.

2 unchanged sentences

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected share price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and our expected dividend yield.

With no public market for our common shares prior to our IPO and limited historical data since, we determine the volatility for awards granted with reference to an analysis of reported data for a group of biotechnology companies that issued options with substantially similar terms.

With no public market for our common shares prior to our IPO and limited historical data since, we determine the volatility for awards granted with reference to an analysis of publicly reported data for a group of biotechnology and preclinical companies that issued options with substantially similar terms.

We expect to continue to do so until we have adequate historical data regarding the volatility of the trading price of our common shares on the Nasdaq Stock Market.

8 unchanged sentences

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