AbCellera shares sell off despite posting record earnings on rapid COVID-19 antibody sales

Carl Hansen, CEO of AbCellera Biologics Inc., in Vancouver on December 2, 2020.DARRYL DYCK/The Globe and Mail

AbCellera Biologics Inc. ABCL-Q generated record revenue in its first quarter as the Vancouver-based company’s COVID-19 antibodies continued to provide a bounty of what CEO Carl Hansen called “non-dilutive capital.” during a difficult period for the biotechnology sector.

But its stock sold 14% on Wednesday, reflecting another tough day for the sector as the Nasdaq Biotechnology index closed down 3.6%. Analysts also cut their estimates after AbCellera reported higher-than-expected operating expenses.

AbCellera said after market close Tuesday that it generated $316.6 million in revenue in the first quarter, compared to $375.2 million for all of 2021. All but 3% revenue came from royalties on sales of Eli Lilly & Co., its partner in bringing to market their co-developed COVID-19 antibodies, bamlanivimab and bebtelovimab.

AbCellera posted net income of US$168.6 million, or 59 US cents per share on a diluted basis. It generated $202.7 million in revenue and $117.2 million in net profit during the same period in 2021.

Analysts had expected a strong performance after Eli Lilly announced it generated $1.5 billion in quarterly antibody sales. “The quarter went about as expected,” Bloom Burton analyst Antonia Borovina said. “The fundamentals have not changed. AbCellera continues to execute on its long-term strategy to develop a best-in-class antibody discovery platform. »

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AbCellera uses a unique blend of technologies to rapidly produce antibody after antibody in partnership with pharmaceutical companies. It speeds up the process of isolating and identifying antibodies created by the immune system to fight infections.

The company was built around technology developed at an interdisciplinary biomedical research laboratory at the University of British Columbia, where Mr. Hansen taught, which combines data science, protein engineering, machine learning, bioinformatics and genomics.

A key step is to pass cells from a person or animal, which has mounted an immune response to a disease, through a device with hundreds of thousands of tiny chambers. Using artificial intelligence, it simultaneously tests the antibodies produced by the cells in each chamber to determine which could become drugs.

AbCellera worked on developing rapid medical responses for future pandemics through a contract with the U.S. Department of Defense’s Defense Advanced Research Projects Agency in the late 2010s. This left him ready to respond as the virus COVID-19 was spreading in early 2020. He quickly obtained a blood sample from a recovered patient, partnering with Eli Lilly and by the end of that year the duo had obtained emergency clearance from the US Food and Drug Administration to sell their drug.

This exceptionally time-limited success often overshadows AbCellera’s other work, which is expected to produce results over a longer period of time. AbCellera has signed partnership deals for 158 programs with 36 companies ranging from startups to pharma giants and launched 84 of them, including six in the first quarter.

Six molecules discovered by AbCellera entered the clinical research phase, compared to one – bamlanivimab – in 2020. The agreements are structured to give AbCellera initial research and development fees, as well as milestone payments as drugs enter the clinic and pass trials, and finally, royalties on product sales.

Mr Hansen went so far as to say “we are not a COVID-19 company” to draw attention to AbCellera’s other drugs in development, although none are expected to hit the market until 2029. Meanwhile , Ms. Borovina expects COVID-19 related sales to fall to US$32 million in 2023 and US$21 million in 2024.

Despite AbCellera’s success to date – including the largest IPO of a Canadian biotech company in December 2020 – its stock has fallen along with other biotech stocks; it is 84% ​​below its 52-week high.

Ms Borovina said “platform” companies like AbCellera were not popular with investors “because they are capital-intensive, associated with long time frames and there are no short-term catalysts. that could boost the title” like the results of the trials.

But AbCellera’s windfall from its COVID antibodies, which left it with $786.1 million in cash, cash equivalents and marketable securities on March 31, “essentially protects them from what’s happening in the biotech sector in the sense wide,” she said.

Analysts also cut their stock price targets after AbCellera said it spent US$26 million on research and development in the quarter, millions more than expected. Ms Borovina cut her share price target to US$30 from US$33 while Piper Sandler analyst Do Kim lowered her target to US$21 from US$28.

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Sallie R. Loera