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Item 7. Management’s Discussion and Analysis

2024-02-20 compared with 2023-02-21 · 325 added, 394 removed, 266 unchanged (73% of the section changed)

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

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

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.

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

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

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.

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

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

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

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

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

market and sell our solutions to existing and new partners;

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 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;

• 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;

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

2022 Highlights

$0.56 & $0.50

Total Revenue

Basic & Diluted EPS

Cash, cash equivalents, and marketable securities

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

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

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

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

Results of Operations

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 87 partner-initiated programs with downstream participation and have seen a cumulative total 13 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

The following table summarizes our key operating results for the years ended December 31, 2021, 2022, and 2023.

All figures are in U.S.

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

Year Ended December 31,

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

Twelve Months Ended December 31,

Financial Performance 2021 2022 2023

Research fees $ 19,076 $ 40,802 $ 35,556

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Operating expenses:

Research and development expense ( 1)

Royalty fees 45,516 66,436 —

Research and development (1)

62,062 107,879 175,658

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

Total operating expenses 170,790 268,913 275,232

Income from operations

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

Total other (income) (14,736) (22,588) (63,178)

Net earnings before income tax

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

Operating expenses include stock-based compensation as follows:

Year Ended December 31,

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

Basic $ 0.56 $ 0.56 $ (0.51)

Diluted $ 0.48 $ 0.50 $ (0.51)

Operating expenses include stock-based compensation:

Research and development expenses 15,663 24,327 31,781

Other operating expenses

Total stock-based compensation

Recent Developments

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

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

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

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

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

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

In collaboration with the U.S.

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

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

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

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

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

Sales and marketing expenses 2,120 3,134 5,129

General and administrative expenses 12,863 22,020 27,274

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

Cash and cash equivalents $ 386,535 $ 133,320

Marketable securities 499,950 627,265

Total cash, cash equivalents, and marketable securities 886,485 760,585

Total assets 1,540,907 1,488,094

Total shareholders' equity 1,233,277 1,152,318

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

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.

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

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

Securing additional programs under contract.

Our potential to grow revenue, in both the near and long term, is dependent on our ability to secure additional programs under contract from new and existing partners.

For existing partners, we seek to expand our relationships with them to cover multi-year, multi-target programs.

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

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

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

• 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.

• 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 under contract is represented by potential future milestone payments and royalties rather than research fees.

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.

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• Rate and timing of selecting and initiating discovery projects by our partners.

Once programs are secured under contract, partners must select targets and agree on a detailed statement of work before we commence discovery research on any antibodies.

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.

• 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.

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.

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

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

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

Scaling our operations to execute on discovery programs .

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

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

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

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

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.

• 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

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

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

Year Ended December 31,

Cumulative Metrics

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, 2022 December 31, 2023 Change %

Number of discovery partners 40 46 15 %

Programs under contract 174 203 17 %

Partnered program starts

Partner-initiated program starts with downstreams* 75 87 16 %

Molecules in the clinic 8 13 63 %

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

Most advanced stage

Therapy areas

Bamlanivimab (LY-CoV555)

Marketed, EUA

Eli Lilly and Company

Infectious disease – COVID-19

AbCellera Pre-partnered Program - Partnered

Bebtelovimab (LY-CoV1404)

Marketed, EUA

Eli Lilly and Company

Infectious disease – COVID-19

AbCellera Pre-partnered Program - Partnered

TAK-920/DNL919

Denali Therapeutics Inc.

Neurology - Alzheimer's Disease

AbCellera Partner-initiated Discovery

NovaRock Biotherapeutics Inc.

Dermatology, gastrointestinal, immunology

Trianni license

NBL-015/FL-301

NovaRock Biotherapeutics Inc.

Trianni license

IND/CTA authorized

NovaRock Biotherapeutics Inc.

Trianni license

Clinical field study

Animal health

AbCellera Partner-initiated Discovery

* Metric adjusted from prior reporting

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

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

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

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.

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

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

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

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

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.

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.

Summary partnership agreements with pharmaceutical and biotechnology companies that include downstream participation from 2016 to Dec ember 3 1 , 202 2 :

# of Targets & Duration

Therapeutic Indication or Modality

Date Announced

Up to 5 targets, multi-year

December 15, 2022

Rallybio Corporation

Up to 5 targets, multi-year

Rare metabolic disorder and undisclosed

December 1, 2022

Atlas Ventures - stealth stage company

Up to 3 targets, multi-year

August 3, 2022

Undisclosed biotechnology company

Up to 3 targets, multi-year

June 29, 2022

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, 2023:

Molecule Most advanced stage Partner Therapy areas Program type

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;

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

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

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

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

Undisclosed Phase 1* Undisclosed Undisclosed Trianni license

AB-2100 IND open Arsenal Bio Oncology Trianni license

*Expect no further progress

Summary of partnership agreements with pharmaceutical and biotechnology companies that include downstream participation from 2016 to December 31, 2023:

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

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 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

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

2 additional targets Undisclosed May 3, 2022

Everest Medicines Ltd.

Up to 10 targets, multi-year

Oncology and undisclosed

September 22, 2021

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

Multi-target, multi-year

Oncology and immunology (initially)

August 4, 2021

Single target

August 3, 2021

Undisclosed biotechnology company

Up to 4 targets, multi-year

June 30, 2021

Multi-target, multi-year

Ophthalmology

Undisclosed biotechnology company

Multi-target, multi-year

Up to 6 targets, multi-year RNA-encoded antibodies September 15, 2021

Multi-target, multi-year Oncology and immunology (initially) August 4, 2021

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

April 14, 2021

5 targets, multi-year Undisclosed April 14, 2021

Gilead Sciences, Inc.

8 targets, multi-year

April 1, 2021

8 targets, multi-year Undisclosed April 1, 2021

Abdera Therapeutics Inc.

9 targets, multi-year

January 14, 2021

Multi-target, multi-year

Animal Health

November 19, 2020

9 targets, multi-year Oncology January 14, 2021

Multi-target, multi-year Animal Health November 19, 2020

Kodiak Sciences Inc.

Multi-target, multi-year

Ophthalmology

October 29, 2020

Multi-target, multi-year Ophthalmology October 29, 2020

IGM Biosciences, Inc.

Multi-target, multi-year

Oncology and immunology

September 24, 2020

Single target

Eli Lilly and Company

Up to 9 targets, multi-year

COVID-19 program and additional indications

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.

Multi-target, multi-year

Multiple undisclosed

March 16, 2020

Multi-target, multi-year

Animal health

February 23, 2020

Multi-target, multi-year

September 25, 2019

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

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

Single target Infectious disease June 13, 2019

Denali Therapeutics, Inc.

8 targets, multi-year

Neurological diseases

February 28, 2019

Up to 10 targets, multi-year

February 14, 2019

Autolus Therapeutics plc

Single target

Cell therapy (CAR-T)

November 29, 2018

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

January 25, 2018

Teva Pharmaceuticals Industries Ltd.

Single target

Membrane protein

June 13, 2017

Multi-target, multi-year

Membrane protein

January 5, 2017

Undisclosed global biotechnology company

Multi-target, multi-year

November 4, 2016

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

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

Teva Pharmaceuticals Industries Ltd.

February 2, 2016

Single target Ophthalmology August 24, 2016

Teva Pharmaceutical Industries Ltd.

Undisclosed Undisclosed February 2, 2016

* Effective date of agreement

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

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

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

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

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

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

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

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

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

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

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

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

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.

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Sales and marketing expenses.

Our sales and marketing expenses consist primarily of salaries, benefits, incentive compensation and stock-based compensation costs for employees within our commercial sales functions, as well as marketing, travel expenses, and information technology costs that are directly associated with sales and marketing efforts, such as client relationship management tools and other information technology data tools to provide insight into market segments and trends.

We expect our sales and marketing expenses to increase in absolute dollars as we expand our commercial sales, marketing and business development teams;

increase our presence globally;

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

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.

General and administrative expenses.

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

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

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

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.

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

Interest and o ther.

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

Grants and incentives.

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

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

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 include benefits from the Canadian Scientific Research and Experimental Development, or SR&ED, program, the Australian R&D Tax Incentive program and U.S.

federal and state research and experimentation tax credits.

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

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

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 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.

Results of Operations

Comparison of the Years Ended December 31, 2022 and 2023

Year Ended December 31,

December 31, Change

2022 2023 Amount %

Research fees $ 40,802 $ 35,556 $ (5,246) (13) %

3 unchanged sentences

Total revenue $ 485,424 $ 38,025 $ (447,399) (92) %

Revenue decreased by $447.4 million from the year ended December 31, 2022, compared to the year ended December 31, 2023 .

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.

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

December 31, Change

2022 2023 Amount %

Research and development $ 107,879 $ 175,658 $ 67,779 63 %

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.

Sales and Marketing

December 31, Change

2022 2023 Amount %

Sales and marketing $ 11,270 $ 14,180 $ 2,910 26 %

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.

General and Administrative

December 31, Change

2022 2023 Amount %

General and administrative $ 55,485 $ 60,999 $ 5,514 10 %

General and administrative expenses increased by $5.5 million, or 10%, from the year ended December 31, 2022, compared to the year ended December 31, 2023.

$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.

Depreciation, Amortization, and Impairment

December 31, Change

2022 2023 Amount %

Depreciation, amortization, and impairment $ 27,843 $ 24,395 $ (3,448) (12) %

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.

Interest (Income)

December 31, Change

2022 2023 Amount %

Interest (income) $ (15,886) $ (42,247) $ (26,361) 166 %

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)

December 31, Change

2022 2023 Amount %

Grants and incentives $ (10,554) $ (14,155) $ (3,601) 34 %

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)

December 31, Change

2022 2023 Amount %

Other $ 4,045 $ (6,776) $ (10,821) (268) %

Other (income) increased by $10.8 million, or 268%, from the year ended December 31, 2022, compared to the year ended December 31, 2023.

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.

dollar exchange rate.

Income Tax (Recovery) Expense

December 31, Change

2022 2023 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.

2 unchanged sentences

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.

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,

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.

1 unchanged sentence

Research and Development

Year Ended December 31,

Year Ended December 31, Change

2021 2022 Amount %

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

4 unchanged sentences

Sales and Marketing

Year Ended December 31,

Year Ended December 31, Change

2021 2022 Amount %

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

3 unchanged sentences

General and Administrative

Year Ended December 31,

Year Ended December 31, Change

2021 2022 Amount %

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

4 unchanged sentences

Depreciation, Amortization, and Impairment

Year Ended December 31,

Year Ended December 31, Change

2021 2022 Amount %

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

5 unchanged sentences

Interest (Income)

Year Ended December 31,

Year Ended December 31, Change

2021 2022 Amount %

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

1 unchanged sentence

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

Interest and Other

Year Ended December 31,

Interest and other

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

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

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

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

Grants and Incentives

Year Ended December 31,

Grants and Incentives (Income)

Year Ended December 31, Change

2021 2022 Amount %

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

1 unchanged sentence

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,

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.

Comparison of the Years Ended December 31, 2020 and 2021

Year Ended December 31,

Research fees

Licensing revenue

Milestone payments

Royalty revenue

Total revenue

Revenue increased by $142.0 million from the year ended December 31, 2020 to the year ended December 31, 2021.

In 2021, we received milestone revenue upon the first commercial sale in Europe by Lilly relating to molecule bamlanivimab for treatment of COVID-19 in the amount of $7.0 million and $1.0 million in milestone payments from Trianni licenses.

Royalty revenue of $327.3 million for the year ended December 31, 2021 are directly associated with the specified percentage of proceeds that Lilly received from the sales of bamlanivimab.

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

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

Operating Expenses

Year Ended December 31,

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

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

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

Year Ended December 31,

Research and development

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

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

$10.2 million of the increase relates to stock-based compensation expense.

$13.6 million of the increase is attributed to an increase in facilities, research materials, supplies and services consistent with the overall increase in research and development activities.

The overall increase was partly offset by the decrease in IPR&D expense of $4.2 million attributable to the 2020 purchase of the OrthoMab bispecific platform, and licensing fees incurred during the prior period.

Sales and Marketing

Year Ended December 31,

Sales and marketing

Sales and marketing expenses increased by $3.1 million, or 80%, from the year ended December 31, 2020 to the year ended December 31, 2021.

The increase was primarily driven by increased headcount in business development and marketing staff which resulted in an increase of $1.5 million in compensation expenses.

$0.8 million of the increase is attributable to a donation made to Surrey Hospital to fund a study related to bamlanivimab in Canada.

The remaining increase of $0.5 million is attributable to increased recruiting and consulting fees.

General and Administrative

Year Ended December 31,

General and administrative

General and administrative expenses increased by $29.9 million, or 251%, from the year ended December 31, 2020 to the year ended December 31, 2021.

$11.7 million of the increase in general and administrative expense is related to the increased impact of non-cash stock-based compensation expense.

$4.1 million of the increase is related to increased compensation expense, excluding stock-based compensation, which was driven by increased headcount within the general and administrative function.

$7.3 million is attributable to legal fees and other corporate matters relating to being a public company and protecting our intellectual property.

$6.7 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.

Depreciation and Amortization

Year Ended December 31,

Depreciation and amortization

Depreciation and amortization expense increased by $9.6 million, or 199%, from the year ended December 31, 2020 to the year ended December 31, 2021.

Depreciation expense increased by $2.1 million due to the depreciation of equipment and facilities related to capital equipment purchases of $8.4 million in the year.

Amortization expense increased by $7.5 million due to the amortization of acquired intangible assets over their respective useful lives.

Other (Income) Expense

Interest (Income)

Year Ended December 31,

Interest income

Interest income increased by $3.0 million, or 1037%, from the year ended December 31, 2020 to the year ended December 31, 2021.

The increase was primarily driven by a larger average cash and cash equivalents balances maintained in the year ended December 31, 2021 compared to the prior period.

Interest and Other Expense

Year Ended December 31,

Interest and other

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

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

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

Grants and Incentives

Year Ended December 31,

Grants and incentives

Grants and incentives increased by $9.2 million, or 110%, from the year ended December 31, 2020 to the year ended December 31, 2021.

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

Income Tax Expense

Year Ended December 31,

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

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

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.

Liquidity and Capital Resources

As of December 31, 2023, we had $760.6 million of cash, cash equivalents, and marketable securities, comprised of $133.3 million in cash and cash equivalents and $627.3 million in marketable securities.

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

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

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

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

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

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.

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’s Strategic Innovation Fund

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

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

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

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

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

The second stage of the project is intended to fund the expansion of research and development;

building out process development and chemistry, manufacturing and control, or CMC, capabilities;

constructing a facility for GMP manufacturing;

and all related supporting laboratory and office requirements.

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

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

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

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

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

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

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

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

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

On a quarterly basis, we submit claims to the SIF for eligible reimbursable expenses.

For the year ended December 31, 2022, we claimed a total of $18.9 million under 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, 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.

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.

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:

Year Ended December 31,

2021 2022 2023

Net cash provided by (used in):

2 unchanged sentences

Financing activities (3,886) (1,628) 10,356

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents, and restricted cash

Effect of exchange rate fluctuations on cash and cash equivalents (1,425) (9,599) 589

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

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

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

Investing Activities

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

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

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

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

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.

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.

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

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

Contractual Obligations and Commitments

1 unchanged sentence

Payments Due by Period

Total Less than

1 year 1 to 3 Years 3 to 5 Years More than

Commitments (1)

Royalty fees payable

238,805 — 88,226 150,579 —

Contingent consideration payable (2)

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

55,388 50,474 1,575 1,593 1,746

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

(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, 2023.

(2) As of December 31, 2023, the contingent consideration payable had an estimated fair value of approximately $55.4 million, which has been included as a liability on our consolidated balance sheets.

8 unchanged sentences

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.

Berkeley Lights Litigation

Bruker Cellular Analysis Litigation

See Item 3 “Legal Proceedings” for detailed information.

13 unchanged sentences

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;

25 unchanged sentences

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.

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.

9 unchanged sentences

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, 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 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 ending on April 9, 2024.

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

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

Contingent consideration payable is a

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

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.

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.

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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 20 to our consolidated financial statements for further information related to the accounting for the above acquisitions.

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

Stock-Based Compensation

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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 and comprehensive income based on the function to which the related services are provided.

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.

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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.

Prior to our IPO, as there was no public market for our common shares, we determined the volatility for awards granted with reference to an analysis of reported data for a group of guideline 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 reported data for a group of biotechnology 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.

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

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

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

In accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation , third-party valuation firms prepared valuations of our common shares.

From November 2019 until March 2020, such valuations used a discounted cash flow, or DCF, analysis, which is based on management’s projection of future revenues and costs.

The future cash flows are adjusted to arrive at a risk-adjusted present-day value of the future cash flows and fair value of equity.

From March 2020 to July 2020, such valuations used a methodology that calculated the implied total value of an enterprise by accounting for all share class rights and preferences, as of the date of the latest financing.

The total equity value implied by this transaction was then applied in the context of an option pricing model to determine the value of each class of our shares.

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

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

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

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

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

Based on the timing

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

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

Our third-party valuation reports estimated a valuation of our common shares of $1.24 per share as of June 30, 2020, $2.37 per share as of September 30, 2020, and $2.71 per share as of October 31, 2020.

No third-party valuation report was prepared for any period after October 31, 2020.

In addition to considering the results of the third-party valuations, our board of directors considered various objective and subjective factors to determine the fair value of our common shares as of each grant date, which may be a date other than the most recent third-party valuation date, including:

the prices at which we most-recently sold preferred shares and the superior rights and preferences of the preferred shares relative to our common shares at the time of each grant;

the lack of liquidity of our equity as a private company;

our stage of development and business strategy and the material risks related to our business and industry;

our financial condition and operating results, including our levels of available capital resources and forecasted results;

developments in our business, including the achievement of milestones such as entering into partnering agreements;

the valuation of publicly traded companies in the life sciences, biopharmaceutical and healthcare technology sectors, as well as recently completed mergers and acquisitions of peer companies;

any external market conditions affecting our industry, and trends within our industry;

the likelihood of achieving a liquidity event for the holders of our preferred shares and holders of our common shares, such as an initial public offering, or IPO, or a sale of our company, given prevailing market conditions;

the analysis of IPOs and the market performance of similar companies in our industry.

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

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

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

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

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

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

The process of acquiring Trianni, Inc.

was not assigned a probability weighting because the proposed acquisition was to be made at fair value of the net assets acquired, the acquisition was not completed until November 3, 2020, and not publicly announced until November 18, 2020.

Until such announcement, we had no insight into market reaction to this acquisition and its perceived impact on our valuation.

The assumptions underlying these valuations represented management’s best estimates, which involved inherent uncertainties and the application of management’s judgment.

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

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

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

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

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

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

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, 2021, 2022, and 2023.

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.

Impact of COVID-19

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

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

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

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

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis