Item 7. Management’s Discussion and Analysis
Item 7. 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 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 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.”
Overview
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 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. 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 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 partnerships generally include royalty payments (or equivalents) on net sales. For discovery agreements, these are typically in the single-digit to low-double digit range. 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 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;
• improve and enhance operations to deliver programs, including investments in manufacturing;
• acquire businesses or technologies to support the growth of our business;
• attract, hire and retain qualified personnel; and
• continue to establish, protect and defend our intellectual property and patent portfolio, including our ongoing litigation .
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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. Additionally, we have twice secured significant government co-investments in the form of non-dilutive capital to help fund research and development, including internal programs, and facility construction.
The Company has advanced two AbCellera-led programs into IND-enabling studies. The programs align with the Company's strategy of building value, both through strategic partnerships, and through internal discovery and development of potential first-in-class and best-in-class antibody therapies. 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.
Financial Highlights
The following table summarizes our key operating results for the years ended December 31, 2022, 2023, and 2024. All figures are in U.S. dollars and amounts are expressed in thousands, except loss per share data:
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Twelve Months Ended December 31,
Financial Performance 2023 2024
Revenues:
Research fees $ 35,556 $ 26,284
Licensing revenue 969 1,049
Milestone payments 1,500 1,500
Total revenue 38,025 28,833
Operating expenses:
Research and development (1)
175,658 167,259
Sales, general and administrative (1)
75,179 85,490
Depreciation, amortization, and impairment 24,395 90,850
Total operating expenses 275,232 343,599
Loss from operations (237,207) (314,766)
Total other income (63,178) (114,371)
Net loss before income tax (174,029) (200,395)
Net loss (146,398) (162,857)
Net loss per share
Basic $ (0.51) $ (0.55)
Diluted $ (0.51) $ (0.55)
Operating expenses include stock-based compensation:
Research and development expenses 31,781 30,779
Sales and marketing expenses 5,129 5,781
General and administrative expenses 27,274 31,021
Financial Position December 31, 2023 December 31, 2024
Cash and cash equivalents $ 133,320 $ 156,325
Marketable securities 627,265 469,289
Total cash, cash equivalents, and marketable securities 760,585 625,614
Total assets 1,488,094 1,360,553
Total shareholders' equity 1,152,318 1,056,084
(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
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 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.
• 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
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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. We estimate that, based on the terms of our existing contracts and estimates of historical rates of success of antibody drug development, the vast majority of the potential value for each program is represented by potential future milestone payments and royalties rather than research fees. As a result, we believe our business and our future results of operations will be highly reliant on the degree to which our partners successfully develop and commercialize the antibodies that we discover based on contracts with our partners. As our partners continue to advance development of the antibodies that we have discovered, we expect to start receiving additional milestone payments and royalties if any partners commence commercial sales of such antibodies.
• Rate and timing of selecting and initiating discovery projects by our partners. Once programs are secured under contract, partners must propose targets and agree on a detailed statement of work before we commence discovery research on any antibodies. 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 will impact revenue recognition.
• 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. Specifically, we are currently completing our investments in integrated preclinical development and antibody manufacturing. We have also 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 business into adjacent therapeutic modalities. We intend to continue to devote resources to continue to improve our discovery differentiation which will impact our financial performance.
Key Business Metrics
We regularly review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. 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 as further described below with respect to changes in this and upcoming reports.
Cumulative Metrics December 31, 2023 December 31, 2024 Change %
Partner-initiated program starts with downstreams 87 96 10 %
Molecules in the clinic 13 16 23 %
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
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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.
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. Where the date of such application approval is not known to us, the date of the first public announcement of a clinical trial will be used for the purpose of this metric. 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.
The table below outlines the details of molecules in the clinic as of December 31, 2024:
Molecule Most advanced stage Partner Therapy areas Program type
Bamlanivimab (LY-CoV555) Marketed, EUA* Eli Lilly and Company Infectious disease – COVID-19 AbCellera-initiated; partner-led
Bebtelovimab
(LY-CoV1404) Marketed, EUA* Eli Lilly and Company Infectious disease – COVID-19 AbCellera-initiated; partner-led
TAK-920/DNL919 Phase 1* Denali Therapeutics Inc. Neurology - Alzheimer's Disease AbCellera partner-initiated discovery
Undisclosed Phase 1 Teva Pharmaceutical Industries Ltd. Neuroscience 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. Dermatology, gastrointestinal, immunology Trianni license
NBL-015/FL-301 Phase 1 NovaRock Biotherapeutics Inc. Oncology Trianni license
NBL-020 Phase 1 NovaRock Biotherapeutics Inc. Oncology Trianni license
NBL-028 Phase 1 NovaRock Biotherapeutics Inc. Oncology Trianni license
GIGA-564 Phase 1 GigaGen, Inc. Oncology Trianni license
Undisclosed Phase 1* Undisclosed Undisclosed Trianni license
*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
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Viking Global Investors & ArrowMark Partners Multi-target, multi-year Immunology May 1, 2024
Biogen Inc. Single target Neuroscience March 11, 2024
Undisclosed Multi-target, multi-year Undisclosed December 28, 2023
Undisclosed biotechnology company Multi-target, multi-year Undisclosed December 20, 2023 *
Undisclosed biotechnology company Multi-target, multi-year Undisclosed December 4, 2023 *
Prelude Therapeutics Up to 5 targets, multi-year Oncology November 1, 2023
Regeneron Pharmaceuticals, Inc. Up to 4 targets, multi-year Undisclosed September 20, 2023
Incyte Corporation Undisclosed Oncology September 13, 2023
RQ Biotechnology Ltd. Up to 3 targets, multi-year Infectious disease March 22, 2023
AbbVie Inc. Up to 5 targets, multi-year Undisclosed December 15, 2022
Rallybio Corporation Up to 5 targets, multi-year Rare metabolic disorder and undisclosed December 1, 2022
Atlas' stealth stage company Up to 3 targets, multi-year Undisclosed August 3, 2022
Undisclosed biotechnology company Up to 3 targets, multi-year Undisclosed June 29, 2022 *
Empirico Inc. 2 additional targets Undisclosed May 3, 2022
Everest Medicines Ltd. Up to 10 targets, multi-year Oncology and undisclosed September 22, 2021
Moderna, Inc. Up to 6 targets, multi-year RNA-encoded antibodies September 15, 2021
EQRx, Inc. Multi-target, multi-year Oncology and immunology (initially) August 4, 2021
Tachyon Inc. Single target Oncology August 3, 2021
Undisclosed biotechnology company Up to 4 targets, multi-year Undisclosed June 30, 2021 *
Angios Multi-target, multi-year Ophthalmology May 6, 2021
Undisclosed biotechnology company Multi-target, multi-year Oncology May 6, 2021 *
Empirico Inc. 5 targets, multi-year Undisclosed April 14, 2021
Gilead Sciences, Inc. 8 targets, multi-year Undisclosed April 1, 2021
Abdera Therapeutics Inc. 9 targets, multi-year Oncology January 14, 2021
Invetx, Inc. Multi-target, multi-year Animal Health November 19, 2020
Kodiak Sciences Inc. Multi-target, multi-year Ophthalmology October 29, 2020
IGM Biosciences, Inc. Multi-target, multi-year Oncology and immunology September 24, 2020
Undisclosed Single target Bispecific June 3, 2020 *
Eli Lilly and Company Up to 9 targets, multi-year COVID-19 program and additional indications May 22, 2020 *
Regeneron Pharmaceuticals, Inc. 4 targets, multi-year Multiple undisclosed March 16, 2020 *
Invetx, Inc. Multi-target, multi-year Animal health February 23, 2020
Undisclosed Multi-target, multi-year Cell therapy September 25, 2019 *
Gilead Sciences, Inc. Single target Infectious disease June 13, 2019
Denali Therapeutics, Inc. 8 targets, multi-year Neurological diseases February 28, 2019
Novartis AG Up to 10 targets, multi-year Undisclosed February 14, 2019
Autolus Therapeutics plc Single target Cell therapy (CAR-T) November 29, 2018
Denali Therapeutics, Inc. Single target Neurological diseases June 12, 2018
Undisclosed mid-cap biopharmaceutical company Undisclosed Undisclosed January 25, 2018
Teva Pharmaceutical Industries Ltd. Single target Membrane protein June 13, 2017
Pfizer Inc. Multi-target, multi-year Membrane protein January 5, 2017
Undisclosed global biotechnology company Multi-target, multi-year Undisclosed November 4, 2016
Kodiak Sciences Inc. Single target Ophthalmology August 24, 2016
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Teva Pharmaceutical Industries Ltd. Undisclosed Undisclosed February 2, 2016
* Effective date of agreement
Components of Results of Operations
Revenue
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. Licensing revenue is primarily from our licensing of our humanized rodent platform, Trianni™. 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. 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
Royalty fees. Royalty fees consist of certain contractual royalty payments to our strategic partners upon receipt of royalty revenue based on our customers third-party net sales. Royalty fees are not included in every program. 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 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 capabilities. 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 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 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 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 IPR&D as further described in our notes to the consolidated financial statements.
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Other (Income) Expense
Interest income. Interest income consists primarily of interest earned on cash, cash equivalents, and marketable securities balances.
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 federal and provincial governments. 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.
Tax credits primarily include benefits from the Canadian and Australian federal and local research and development programs and are non-refundable. Non-refundable tax credits are recognized as a reduction to income tax expense in the year they are earned. We expect to continue to benefit from these tax programs in the future.
Other. 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. dollar.
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
Revenue
December 31, Change
2023 2024 Amount %
Revenue:
Research fees $ 35,556 $ 26,284 $ (9,272) (26)%
Licensing revenue 969 1,049 80 8%
Milestone payments 1,500 1,500 — —%
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 in research fees in 2024 was attributable to the timing and progress of our research and development efforts.
Operating Expenses
Research and Development
December 31, Change
2023 2024 Amount %
Research and development $ 175,658 $ 167,259 $ (8,399) (5)%
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.
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Sales and Marketing
December 31, Change
2023 2024 Amount %
Sales and marketing $ 14,180 $ 12,779 $ (1,401) (10)%
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
December 31, Change
2023 2024 Amount %
General and administrative $ 60,999 $ 72,711 $ 11,712 19%
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. 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
December 31, Change
2023 2024 Amount %
Depreciation, amortization, and impairment $ 24,395 $ 90,850 $ 66,455 272%
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
December 31, Change
2023 2024 Amount %
Interest income $ (42,247) $ (38,473) $ 3,774 (9)%
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.
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Grants and Incentives
December 31, Change
2023 2024 Amount %
Grants and incentives $ (14,155) $ (13,620) $ 535 (4)%
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.
Other Income
December 31, Change
2023 2024 Amount %
Other $ (6,776) $ (62,278) $ (55,502) 819%
Other income increased by $55.5 million, or 819%, from the year ended December 31, 2023, compared to the year ended December 31, 2024. 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
December 31, Change
2023 2024 Amount %
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 $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,
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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
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.
Government of Canada and Government of British Columbia Contributions
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 ($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, 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. 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.
Cash Flows
The following table summarizes our cash flows for the periods presented:
December 31,
2023 2024
Net cash provided by (used in):
Operating activities $ (43,877) $ (108,556)
Investing activities (221,108) 121,409
Financing activities 10,356 12,769
Effect of exchange rate fluctuations on cash and cash equivalents 589 (2,617)
Net increase (decrease) in cash and cash equivalents $ (254,040) $ 23,005
Operating Activities
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 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.
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Financing Activities
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
The following table summarizes our commitments to settle contractual obligations as of December 31, 2024, other than leases which are recognized as operating lease liabilities in our consolidated balance sheets:
Payments Due by Period
Total Less than
1 year 1 to 3 Years 3 to 5 Years More than
5 years
Commitments (1)
180,836 36,210 11,982 11,982 120,662
Contingent consideration payable (2)
8,087 8,087 — — —
Total (3)
$ 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.
(2) As of December 31, 2024, the contingent consideration payable had an estimated fair value of approximately $8.1 million, which has been included as a liability on our consolidated balance sheets.
(3) Excludes financial arrangements disclosed in Note 8 and Note 12 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.
Purchase and Other Obligations
In the normal course of business, we enter into contracts with third parties for research and development supplies and other services. These contracts generally do not contain minimum purchase commitments and are cancellable contracts. These payments are not included in the table above as the amount and timing of such payments are not known as of December 31, 2024.
The Company may enter into certain agreements with strategic partners in the ordinary course of operations that may include contractual milestone payments related to the achievement of pre-specified research, development, regulatory and commercialization events and indemnification provisions, which are common in such agreements. Pursuant to the agreements, the Company may be obligated to make research and development and regulatory milestone payments upon the occurrence of certain events and upon receipt of royalty payments in the low single-digits to mid-twenties based on certain net sales targets. Other than the amounts included in the above table, these contingent future payments are not included in the table above as they entail uncertainties in relation to the amount and timing of such payments as they are contingent upon future events, such as achieving certain commercial milestones or generating future product sales.
Bruker Cellular Analysis Litigation
See Item 3 “Legal Proceedings” for detailed information. The timing of the incurrence of legal expenses relating to pending litigation is difficult to predict and the outcome of litigation is inherently uncertain. Related costs and outcomes could materially affect our financial condition and operating results in future periods.
Critical Accounting Policies and Estimates
We have prepared our consolidated financial statements in accordance with U.S. GAAP. Our preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from these estimates under different assumptions or conditions.
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While our significant accounting policies are described in more detail in Note 3 to our audited consolidated financial statements, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements.
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. Promised deliverables to our global partners include research and development and licenses. The Company applied ASC 606 to all arrangements to date.
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. Where there is not a directly observable output to measure progress, an input which serves as a reasonable proxy for measuring progress is used.
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; estimating timing of completion of performance obligations; and assessing the recognition and possible future reversal of variable consideration.
Research Fees
The transaction price generally includes fixed fees due at contract inception as well as fixed fees payable at the beginning and end of different phases of the discovery research services performed. Revenue is recognized based on the amount of the transaction price that is allocated to each respective performance obligation when or as the performance obligation is satisfied by transferring a promised good and/or service to the customer. 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
At the inception of the arrangement and at each reporting date thereafter, we evaluate whether the associated event is considered probable of achievement and estimate the amount to be included in the transaction price using the most likely amount method. Whether the criteria for achieving the milestone payments will be met in the future is highly uncertain. Consequently, there is a significant risk that we may not earn all of the milestone payments from each of our arrangements. This uncertainty is considered resolved when the associated event giving rise to the milestone payment occurs.
Royalty Revenue
Royalty revenue is recognized in the period in which the obligation is satisfied and the corresponding sales by our corporate partners occur. The sales are based on sales data reported by our partners. 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.
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. 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. 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.
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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 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.
See Note 15 to our consolidated financial statements for further information related to the contingent considerations.
Stock-Based Compensation
We measure stock-based compensation based on the grant date fair value of the stock-based awards and recognize stock-based compensation expense on a straight-line basis over the requisite service period of the awards, which is generally the vesting period of the respective award. For non-employee awards, compensation expense is recognized as the services are provided, which is generally ratably over the vesting 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. We recognize stock-based compensation expense for the portion of awards that have vested. Forfeitures are accounted for as they occur.
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 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. The risk-free interest rate is determined by reference to government treasury yield curves in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected term represents the period that the stock-based awards are expected to be outstanding. We use the simplified method to determine the expected term, which is based on the average of the time-to-vesting and the contractual life of the options. We have not paid, and do not anticipate paying, dividends on our common shares; therefore, the expected dividend yield is assumed to be zero.
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See Note 10 to our consolidated financial statements for additional information regarding stock-based compensation expense and the 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, 2022, 2023, and 2024.
Recent Accounting Pronouncements
See Note 3 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.
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