AbCellera Biologics Inc. 10-K

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 AbCellera is a clinical-stage biotechnology company focused on discovering and developing antibody-based medicines for indications with high unmet medical need. 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 drugs and are committed to improving discovery and development. We aim to build a competitive advantage in bringing antibody drugs 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 antibody drug development faster and more efficient. We are leveraging our platform and to develop internal programs and advance a pipeline of AbCellera-led programs with first-in-class potential. We evaluate these programs individually to determine whether to pursue preclinical and clinical development in-house, enter into collaborations with partners, or out-license to optimize their development and clinical and commercial potential. 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; • advance our internal programs in preclinical and clinical development; • 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. 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. During the second quarter of 2025, we achieved a critical regulatory milestone by submitting Clinical Trial Applications (CTAs) to Health Canada for two of our drug candidates: ABCL635 and ABCL575 as described herein. In May 2025, we received No Objection Letters from Health Canada, authorizing both CTAs. We initiated dosing participants in clinical trials for both programs in Canada during the second half of 2025. The Phase 1/2 clinical trial of ABCL635 is a randomized, placebo-controlled, double-blind study in healthy men and postmenopausal women with or without VMS. Its purpose is to evaluate safety, pharmacokinetics, pharmacodynamics, as well as frequency and severity of VMS with subcutaneous doses of ABCL635, and data from this study is expected to be presented in Q3 2026. The Phase 1 clinical trial of ABCL575 is a randomized, placebo-controlled, double-blind study to assess safety and tolerability in healthy participants following subcutaneous doses of ABCL575. We advanced a third program, ABCL688, into IND/CTA-enabling studies in the second quarter of 2025. ABCL688 is an antibody drug candidate for an undisclosed indication in autoimmunity and is the second program from our 83 GPCR and ion channel platform to advance into IND/CTA-enabling studies. We anticipate submission of an IND/CTA for ABCL688 in 2027. The programs align with the Company's strategy of building value, both through partnerships, and through internal discovery and development of potential first-in-class antibody drugs. We have started a cumulative total 104 partner-initiated programs with downstream participation and have seen a cumulative total 19 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, 2024, and 2025. All figures are in U.S. dollars and amounts are expressed in thousands, except loss per share data: 84 Twelve Months Ended December 31, Financial Performance 2024 2025 Revenues: Research fees $ 26,284 $ 27,208 Milestone payments 1,500 1,000 Licensing and royalty revenue 1,049 46,920 Total revenue 28,833 75,128 Operating expenses: Research and development (1) 167,259 186,829 Sales, general, and administrative (1) 85,490 83,231 Depreciation, amortization, and impairment 90,850 22,171 Total operating expenses 343,599 292,231 Loss from operations (314,766) (217,103) Total other income (114,371) (39,508) Loss before income tax (200,395) (177,595) Net loss (162,857) (146,412) Net loss per share Basic $ (0.55) $ (0.49) Diluted $ (0.55) $ (0.49) Operating expenses include stock-based compensation: Research and development expenses 30,779 30,147 Sales, general, and administrative expenses 36,802 25,645 Financial Position December 31, 2024 December 31, 2025 Cash and cash equivalents $ 156,325 $ 128,513 Marketable securities 469,289 405,313 Total cash, cash equivalents, and marketable securities 625,614 533,826 Total assets 1,360,553 1,356,950 Total shareholders' equity 1,056,084 966,904 (1) Exclusive of depreciation, amortization, and impairment. Recent Developments On January 12, 2026, we announced that the first patients had been dosed in the Phase 2 portion of our ongoing Phase 1/2 clinical trial of ABCL635. The Phase 2 portion is a multicenter, randomized, double-blind, placebo-controlled study designed to evaluate the efficacy of ABCL635 in reducing the frequency and severity of VMS in 80 postmenopausal women. With Phase 2 enrollment underway, we anticipate top-line clinical results for both phases in Q3 2026. Key Factors Affecting Our Results of Operations and Future Performance We believe that our financial performance has been, and will continue to be, primarily driven by the factors 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 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 can pursue internally. We plan on investing significant resources in the preclinical and clinical development of internal programs that 85 will impact our financial results. The investments in each program are undertaken at risk and may ultimately not yield a return. • Successfully designing and executing clinical trials. Our long-term financial success is increasingly dependent on our ability to successfully transition drug candidates from our discovery platform through clinical development. The successful execution of our current and future clinical trials requires significant financial investment. We intend to allocate resources to the design and execution of these clinical trials, which represent a substantial and ongoing commitment of capital and personnel. Our ability to generate future value from these programs, whether through independent development or strategic out-licensing, will depend on the clinical data generated. • 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 complementary 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 upfront 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 impacted by the degree to which our partners successfully develop and commercialize the antibodies that we have discovered 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. • Engaging with partners. Our potential to grow revenue, in both the near and long-term, is dependent on successfully engaging with partners. We seek to expand our relationships with existing partners also as 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 generate a pipeline of potential first-in-class internal programs and expand our partnerships is dependent on the strength and advantages of our discovery and development capabilities. We intend to maintain our leading position through selective investments in research and development to refine and add capabilities, including in 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. Business Metrics We regularly review the following business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe the following metrics are useful for understanding our business to date. 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, 2024 December 31, 2025 Change % Partner-initiated program starts with downstreams 96 104 8 % Molecules in the clinic 16 19 19 % 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 indicator of our partners' project selection and initiation 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. 86 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. Discussion of Future Changes. We continue to focus our effort on our internal pipeline rather than program starts, and we expect to increasingly drive value from our pipeline of AbCellera-led programs. As such, December 31, 2025, will be the last time we report on partner-initiated program starts with downstreams, as continued discussion of the metric does not provide significant additional insight. We will continue to report on active partner-led programs in our portfolio, on the progress of our internal pipeline, and on molecules in the clinic on a quarterly basis. 87 The table below outlines the details of molecules in the clinic as of December 31, 2025: Molecule Most advanced stage Partner 1 Therapeutic area Program type ABCL635 Phase 1/2 n/a Endocrinology / Women’s Health AbCellera-led ABCL575 Phase 1 n/a Immunology & Inflammation AbCellera-led Bamlanivimab Marketed, EUA 2 Eli Lilly and Company Infectious disease - COVID-19 Partner-led Bebtelovimab Marketed, EUA 2 Eli Lilly and Company Infectious disease - COVID-19 Partner-led ABD-147 Phase 1 (Fast Track- and orphan drug-designated) Abdera Therapeutics Inc. Oncology Partner-led Undisclosed Phase 1 Teva Pharmaceutical Industries Ltd. Neuroscience Partner-led TAK-920/DNL919 Phase 1 2 Denali Therapeutics Inc. Neurology Partner-led Undisclosed Pivotal studies Dechra Pharmaceuticals/Invetx, Inc. Animal Health Partner-led IVX-01 Clinical field study Dechra Pharmaceuticals/Invetx, Inc. Animal Health Partner-led Undisclosed Clinical field study Dechra Pharmaceuticals/Invetx, Inc. Animal Health Partner-led AB-2100 Phase 1/2 Arsenal Bio Oncology Trianni license AB-3028 IND authorized Arsenal Bio Oncology Trianni license Undisclosed Phase 1/2 Undisclosed Oncology Trianni license GIGA-564 Phase 1 GigaGen, Inc. Oncology Trianni license NBL-012 Phase 1 (paused) NovaRock Biotherapeutics Inc. Dermatology, Gastrointestinal, Immunology Trianni license NBL-015/FL-301 Phase 1 (paused) NovaRock Biotherapeutics Inc. Oncology Trianni license NBL-020 Phase 1 (paused) NovaRock Biotherapeutics Inc. Oncology Trianni license NBL-028 Phase 1 (paused) NovaRock Biotherapeutics Inc. Oncology Trianni license Undisclosed Phase 1 2 Undisclosed Undisclosed Trianni license 1 If partner-led 2 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, 2025: Partner # of Targets & Duration Therapeutic Area Date Announced AbbVie Inc. Multi-target, multi-year Oncology January 13, 2025 Eli Lilly and Company Multi-target, multi-year Immunology, cardiovascular disease, and neuroscience July 31, 2024 Viking Global Investors & ArrowMark Partners Multi-target, multi-year Immunology May 1, 2024 Biogen Inc. Single target Neuroscience March 11, 2024 Undisclosed Multi-target, multi-year Undisclosed December 28, 2023 88 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 Teva Pharmaceutical Industries Ltd. Undisclosed Undisclosed February 2, 2016 * Effective date of agreement 89 Components of Results of Operations Revenue Our revenue comprises partnership research fees, development milestone payments, and licensing and royalty revenue. Research fees consist of technology access fees, which are generally generated upon execution of our partnership agreements, and discovery research fees. We are also entitled to payments upon the satisfaction of clinical, regulatory, and commercial milestones. Licensing and royalty revenue is derived from the transfer of intellectual property rights and the commercialization of our technology and molecules. This includes upfront payments for the grant of platform licenses, the sale of licensed research tools, and royalties earned on commercial sales of molecules or technology incorporating our IP. We expect that our overall revenue will fluctuate from period to period due to the scope and timing of activities with current and potential future partners, 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 may generate royalty revenue. In December, 2025, we entered into a settlement and patent license agreement with Bruker, resolving patent infringement claims previously asserted by us, resulting in a $36.0 million upfront payment as well as future royalty payments on sales of Bruker's Beacon® Optofluidic platform products worldwide through the life of the Bruker-licensed patents. We expect to receive future royalties under the agreement, but the amount and timing is unpredictable. Operating Expenses 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 discovery, preclinical and clinical development, and other research programs. These expenses are exclusive of depreciation, amortization, and impairment. Research and development activities consist of investments made in co-development and internal programs, discovery research for partners, clinical trial costs, 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 drug candidate-by-drug candidate basis. As we advance our clinical programs, the estimation of accrued research and development expenses will become increasingly significant. While these accruals have not been material to our historical financial statements, we expect the magnitude and complexity of these estimates to increase as we scale our clinical operations. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to CROs and CDMOs in connection with clinical trials and the production of clinical trial materials. We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with our service providers that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows and expense recognition. We expect to continue to incur substantial research and development expenses as we grow and progress our internal pipeline, including through clinical trials, and conduct discovery research for our partners. In addition, we plan to continue to selectively invest in our discovery and development capabilities, including in manufacturing and continue research and development on our pipeline of internal programs. As a result, we expect our research and development expenses to continue to vary from period to period as we execute our strategy to build our pipeline of first-in-class drug candidates. Sales, general, and administrative expenses. Sales, 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, marketing, 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 our core sales, general, and administrative expenses to remain consistent in the near term while we anticipate a decrease in total expenses driven by lower legal fees following the resolution of our patent litigation. Depreciation, amortization, and impairment. Depreciation expense consists of the depreciation of property and equipment used actively in the business, including our manufacturing facility which was placed in service and began depreciating in the fourth quarter of 2025. Amortization expense and impairment includes the amortization of intangible 90 assets over their respective useful lives and impairment of IPR&D as further described in our notes to the consolidated financial statements. Other (Income) Expense Interest income. Interest income consists primarily of interest earned on cash, cash 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 provide benefits 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, 2024 and 2025. A comparison of the years ended December 31, 2023 and 2024, can be found in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025 and is incorporated herein by reference. Comparison of the Years Ended December 31, 2024 and 2025 Revenue December 31, Change 2024 2025 Amount % Revenue: Research fees $ 26,284 $ 27,208 $ 924 4% Milestone payments 1,500 1,000 (500) (33)% Licensing and royalty revenue $ 1,049 $ 46,920 $ 45,871 4373% Total revenue $ 28,833 $ 75,128 $ 46,295 161% Revenue increased by $46.3 million from the year ended December 31, 2024, compared to the year ended December 31, 2025 . The increase in revenue in 2025 was primarily attributable to $10.8 million in licensing revenue 91 recognized and a $36.0 million payment as part of our settlement of patent litigation. See Note 3 of our consolidated financial statements for further details on the settlement. Operating Expenses Research and Development December 31, Change 2024 2025 Amount % Research and development $ 167,259 $ 186,829 $ 19,570 12% Research and development expenses increased by $19.6 million, or 12%, from the year ended December 31, 2024, to the year ended December 31, 2025. Total compensation expense, inclusive of stock-based compensation, was $82.8 million for the year ended December 31, 2024, compared to $89.9 million for the year ended December 31, 2025. The increase in compensation expense was consistent with an increase in the size of our research and development teams as the company continues forward integration and advancing its internal pipeline. Third-party research and development expenses were $36.0 million for the year ended December 31, 2024, compared to $33.4 million for the year ended December 31, 2025 driven by the timing of work performed primarily on our lead clinical and preclinical pipeline. The Company also made specific investments in two internal programs totaling $21.0 million in the year ended December 31, 2025. Other research and development expenses related to facilities and supplies were $48.4 million for the year ended December 31, 2024, compared to $42.5 million for the year ended December 31, 2025. Changes in the period were due to the timing of discovery, preclinical development, and other research program activities. Sales, General, and Administrative December 31, Change 2024 2025 Amount % Sales, general, and administrative $ 85,490 $ 83,231 $ (2,259) (3)% Sales, general, and administrative expenses decreased by $2.3 million, or (3)%, from the year ended December 31, 2024, compared to the year ended December 31, 2025. Total compensation expense, inclusive of stock-based compensation, was $59.7 million for the year ended December 31, 2024, compared to $42.9 million for the year ended December 31, 2025. The decrease in compensation expense is a result of our continued workforce alignment to support operations as a clinical stage company, along with the impact of the composition of our equity award compensation recognized in 2025. Legal, software, and other general administrative costs were $24.5 million for the year ended December 31, 2024, compared to $39.1 million for the year ended December 31, 2025. The increase was primarily due to the defense of our intellectual property in the Bruker litigation, which was settled in December 2025. The increase in legal fees in 2025 was partially offset by a reduction in software expenses. Depreciation, Amortization, and Impairment December 31, Change 2024 2025 Amount % Depreciation, amortization, and impairment $ 90,850 $ 22,171 $ (68,679) (76)% Depreciation, amortization, and impairment expenses decreased by $68.7 million, or (76)%, from the year ended December 31, 2024, compared to the year ended December 31, 2025. The decrease is primarily attributable to the 2024 recognition of 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 and 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 variance in depreciation and amortization expense was driven by the mix of the useful lives of our assets, including our manufacturing facility which began depreciating in the fourth quarter of 2025. 92 Interest Income December 31, Change 2024 2025 Amount % Interest income $ (38,473) $ (28,329) $ 10,144 (26)% Interest income decreased by $10.1 million, or (26)%, from the year ended December 31, 2024, compared to the year ended December 31, 2025. The decrease was primarily driven by a decrease in our cash, cash equivalents, and marketable securities balances, and interest yields in 2025. Grants and Incentives December 31, Change 2024 2025 Amount % Grants and incentives $ (13,620) $ (13,890) $ (270) 2% Grants and incentives increased by $0.3 million, or 2%, from the year ended December 31, 2024, compared to the year ended December 31, 2025. The amount was primarily driven by research and development expenditures eligible for reimbursement under government programs for the period. Other (Income) Expense December 31, Change 2024 2025 Amount % Other $ (62,278) $ 2,711 $ 64,989 (104)% Other income decreased by $65.0 million, or 104%, from the year ended December 31, 2024, to other expenses of $2.7 million in the year ended December 31, 2025. Further to the TetraGenetics intangible asset impairment discussion above, in 2024, 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 in 2024. The remaining decrease was attributable to a $16.5 million recognized gain on the disposal of a non-marketable security in 2024, 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 2024 2025 Amount % Income tax recovery $ (37,538) $ (31,183) $ 6,355 (17)% Income tax recovery decreased by $6.4 million, or (17)%, from the year ended December 31, 2024 compared to the year ended December 31, 2025. The income tax recovery in each period was primarily attributable to the carry back of current year tax losses to recover income taxes paid in prior years. Liquidity and Capital Resources As of December 31, 2025, we had $533.8 million of cash, cash equivalents, and marketable securities, comprised $128.5 million in cash and cash equivalents and $405.3 million in marketable securities. The decrease of $91.8 million since December 31, 2024, was from a combination of cash flow used in operations due to our continued research and development activity for internal programs in discovery, preclinical, and clinical development as well as for partnered 93 programs, and investments in our corporate headquarters and clinical manufacturing facility, partially offset by government contributions, distributions received through our Dayhu joint venture, and repayment of the loan we previously made to our JV partner Dayhu in the year ended December 31, 2025. See Note 8 of our consolidated financial statements for further details on the distribution. We intend to continue 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, grow and advance our internal pipeline. Simultaneously, we intend to optimize our long-term office-lease arrangements and intend to assign or fully sublease the office and laboratory space constructed through the Beedie JV. In 2025, we substantially completed 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 reduction in investing cash outflows, shifting our capital allocation from building capabilities to using them as we execute our strategy of building on our internal pipeline. Based on our current business plan, we believe that our available liquidity from existing cash, cash equivalents, marketable securities, loan receivables, and government contributions, will be sufficient to meet our working capital and capital expenditure needs and do not anticipate the need for 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 Response Fund (SRF), previously the Strategic Innovation Fund (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 drugs against future pandemic threats. The Company has made the full investment and has received the maximum available funding under the agreement as of December 31, 2025. 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, 2025, the Company has incurred CAD $121.5 million ($88.5 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, 2024 2025 Net cash provided by (used in): Operating activities $ (108,556) $ (131,295) Investing activities 121,409 87,750 Financing activities 12,769 14,082 Effect of exchange rate fluctuations on cash and cash equivalents (2,617) 1,097 Net increase (decrease) in cash and cash equivalents $ 23,005 $ (28,366) 94 Operating Activities Net cash used in operating activities increased from $108.6 million in the year ended December 31, 2024, to $131.3 million in the year ended December 31, 2025. 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 a reduction in government contributions received in the year ended December 31, 2025. Investing Activities Net cash provided by investing activities decreased from $121.4 million in the year ended December 31, 2024, to $87.8 million in the year ended December 31, 2025. The decrease in cash provided by investing activities in 2025 was primarily attributable to a reduction in grant funding received in the period, fewer proceeds from sale of marketable securities, and payment of specific program investments, partially offset by distributions from loan repayments by equity-accounted investees in the year ended December 31, 2025. Financing Activities For the year ended December 31, 2024 , net cash provided by financing activities was $12.8 million and was primarily due to proceeds from other long-term liabilities. Net cash provided by financing activities was $14.1 million for the year ended December 31, 2025 and included primarily proceeds from other long-term liabilities, partially offset by a contingent consideration payment made in the second quarter of 2025. Contractual Obligations and Commitments Other than leases which are recognized as operating lease liabilities in our consolidated balance sheets, the Company has $12.2 million of commitmen ts as of December 31, 2025 related to ongoing clinical trials with third-party organizations, contract research organizations, and internal manufacturing capabilities which the Company expects to incur within one year. The commitment amounts 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 services. These contracts generally do not contain minimum purchase commitments and are cancellable contracts. These payments are not included in the total above as the amount and timing of such payments are not known as of December 31, 2025. The Company may enter into certain agreements with 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 percent based on certain net sales targets. These future payments are not included 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 drug sales. Bruker Cellular Analysis Litigation In December 2025, the Company entered into a settlement and patent license agreement with Bruker, resolving the patent litigation between the two companies globally. As part of the settlement, Bruker will pay AbCellera $36.0 million up front as well as future royalty payments on sales of Bruker's Beacon® Optofluidic platform products worldwide through the life of the Bruker licensed patents. See Item 3 “Legal Proceedings” for detailed information. 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 95 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. 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 and estimates 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. Licensing and Royalty 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. Royalty revenue is recognized in the period in which the obligation is satisfied and the corresponding sales by our partner or licensee occur. The sales are based on sales data reported by our partners and licensees. 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. 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. Goodwill and Intangible Assets From previous acquisitions, 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, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of the Company’s indefinite-lived intangible assets exceeds their 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. 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 96 fair value. As of October 1, 2025 , the Company we performed a qualitative assessment for our annual impairment test of goodwill after concluding that it was not more likely than not that the fair value of the reporting unit was less than its carrying value. Consequently, the quantitative impairment test was not required. The Company concluded that there were no impairment indicators related to goodwill during the remainder of 2025. 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. 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 loss and comprehensive 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 limited historical public trading data since our IPO, we determine the volatility for awards granted with reference to an analysis of publicly reported data for a group of preclinical, and clinical-stage 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. 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. 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, 2023, 2024, and 2025. 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. 97