AbCellera Biologics Inc. (ABCL) Earnings Call Transcript & Summary

Great. Hello. Good afternoon, everyone. Welcome to the final day of the Jefferies London Healthcare Conference. It is now my pleasure to introduce AbCellera. We have the CEO, Carl, here with us today. I'll now hand it over to Carl for a short presentation, and time permitting with audience Q&A at the end. So yes.

Thank you. All right. Thank you, everyone, for hanging in there for what is, I think, the second last or the penultimate last presentation of the conference. So I'm Carl Hansen, Founding CEO of AbCellera. Looking forward today to giving you an update on the company for some of you introducing you to our company. I think we're in a really interesting spot, and I will try my best to be brief and leave time for questions. So please, as I go through, if there's anything that's in your mind, save for the end, and we'll have a conversation. The regular disclaimers. So first, a bit of an introduction. AbCellera was founded back in 2012. I founded it out of my academic lab at the University of British Columbia. It was originally founded based on a technology that combined microfluidics and single-cell analysis to do a deep search of natural immune systems in order to find antibodies that look like they have the properties that you would like to develop for therapeutics. Over the first decade of work at AbCellera, we have focused primarily on building out that technology platform, both upstream and downstream. So right from concept through to what is now complete GMP manufacturing capabilities in Vancouver, and also working in a partnership business that I'll talk about on the next slide. Through that time, we've been successful in building the company from what was 6 founders to about 600 employees, 540 of those are located in Vancouver, Canada. That's our headquarters. We also have a significant site doing R&D in Sydney, Australia. One of the big wins we had along the way was in 2020, we were successful in working with Eli Lilly and supported by the Department of Defense in the United States to find the first COVID-19 antibody and then follow that up with the second one, bamlanivimab and bebtelovimab. Those were used through '21, '22 and '23. I think ultimately, for Lilly, that brought in about $4 billion of revenue and brought in a 25% royalty that was about $1 billion into AbCellera. So that, combined with some government funding that we secured over that time, has allowed us to take about $1.5 billion in nondilutive funding into the company that has been used to help advance the platform and get us into what I think is a terrific position to move forward. As of today, we have about $680 million of liquidity. We have built out our capabilities. And as I'll tell you on the subsequent slides, we, in 2023, have decided to move from an existing partnership business into focusing on building an internal pipeline and have taken our first 2 molecules into the clinic and have quite a robust, and I believe a very exciting pipeline coming behind that, we'll be able to show you in the coming years. So AbCellera built -- or I would say, our competitive advantage, because you need something to win in this space, is in tackling very difficult antibody discovery programs. We built that capability over 10 years of running a partnership business. That business was essentially AbCellera acting as discovery for hire for large biopharma and small biotech companies. Through that time, we've worked with about 40 partners. We have worked on over 100 programs, and we needed to build that business by solving the problems that many people were struggling with. That has allowed us to build differentiated capabilities in many areas of antibody discovery on the early side, and in particular, on working on GPCR and ion channel programs. The way that this business was structured was that we got paid early on fee-for-service for the work that we're doing. And then we always got some tail on the molecules as they move forward. So through that work, we have accumulated a portfolio of ownership positions in molecules that are, at various stages of being advanced in preclinical and early clinical work with our partners, which includes some large pharma companies and also some smaller companies. So that has built a valuable asset. It's an asset that takes a long time to mature. And despite a lot of discussions over the years, I think we have resigned ourselves to the fact that the market will not value that until it's actually generating cash flow, but it is part of the business and something that we hold on as a valuable asset that will be increasingly recognized through time. Probably one of the most important things of the partnership business is it allowed us to work with very enabled partners and to direct the platform R&D so that we could solve problems that really matter for the industry. As I mentioned, in September of 2023, we made the decision to start to wind down the partnership business. We still have activity, and we still have valuable partnerships because we had some multiyear programs or partnerships going on, but we are no longer out searching for additional partnerships, and instead to use the capital that we have and our capabilities and turn that internally to build an internal portfolio. Within the portfolio, we are emphasizing differentiation. We want to make sure that we get into some clean space. And our advantages are in GPCR and ion channel targets that represents about half of the 20-or-so preclinical programs that we have. Also working on novel modalities, including antibody drug conjugates, and we are doing that in an indication-agnostic way, really taking a broad platform capability, and looking for the most attractive opportunities that we can take in-house and move forward into the clinic. Since that decision, we have been successful in taking our first 2 programs into clinical development. Our lead program is ABCL635. That is a first-in-class antibody for the treatment of vasomotor symptoms or hot flashes associated with menopause or with androgen deprivation therapy given for cancers, including breast cancer and prostate cancer. I'll spend most of today's talk going over the details of that and why we're so excited about that program. Our second program is a follower. It's a program in OX40 ligand. I'll mention that briefly at the end of the talk. And a couple of quarters ago, we announced that a third candidate, ABCL688, has moved into IND-enabling studies. This is another program from our ion channel and GPCR capability, and one where we have not yet disclosed the target, except that it's in the area of autoimmune conditions. And we expect to have that one move into CTA or IND filings near the end of next year. For our lead program, as I mentioned, is ABCL635, this is a first-in-class antibody that targets NK3R or the Neurokinin 3 receptor is being developed. That's a GPCR protein. So a good example of applying our differentiated discovery capability to solve a difficult problem on the antibody side. It's being advanced for the nonhormonal treatment of menopausal hot flashes. And so obviously, that is in the area of endocrinology and women's health. And that one is currently in Phase I and should be moving into a proof-of-concept study sometime early next year. This slide here, just to give you a sense of how we think about programs. I do think that ABCL635 is a great example of the type of program that we are trying to prioritize within the pipeline. So we have 4 dimensions we look at. One is the science. We want to take as little scientific risk as possible. So we are looking, in particular, for things with good human genetics and ideally where there's both robust preclinical evidence as well as clinical evidence often for GPCRs and other targets like that, that comes from small molecules that have already been through the clinic. We're looking for a good commercial opportunity, obviously, differentiation and a development path that is relatively straightforward. And I'll touch on all of these on the subsequent slides. So first, menopausal hot flashes. This is a condition that affects an immense number of women. It's estimated there's about 40 million women in the U.S. of menopausal age, and roughly 1/3 of those will have moderate to severe hot flashes. For a long time, I think this was underrecognized as how important -- how disruptive this is to people's lives. It causes a lack of sleep, it causes chronic fatigue, a loss of employment opportunity and general reduction in quality of life. We believe that there's roughly 6 million women that seek -- that would seek treatment that have moderate to severe hot flashes, and of those, roughly 20% are contraindicated for the use of hormone therapy. So menopausal hormone therapy is a first-line therapy. We believe it's an excellent option for most women. And just recently in the news, the black box warnings that were put in place as part of the women's health initiative have been removed. So we expect that there'll be an increasing awareness and increasing activity of women seeking treatment with hormone therapy. Yet, there are still 20% of women that are either hard contraindicated, about 12% or 8% that end up discontinuing menopausal hormone therapy within a year because they can't tolerate it well. So if you do those numbers, we believe that a conservative estimate is that there's 1.2 million women in the U.S. that are contraindicated that have moderate to severe hot flashes and that need options outside of hormone therapy. The most validated pathway for treating hot flashes is the NK3R pathway. NK3R is a GPCR, and it's expressed on neurons called KNDy neurons. So kisspeptin, neurokinin, dynorphin neurons, KNDy neurons that are in a part of the brain called the infundibular nucleus or the arcuate nucleus. KNDy neurons are suppressed by estrogen, and they are activated by NKB, which is the ligand for NK3R. During menopause, estrogen falls, which results in hypertrophy of those neurons, they grow, and that's been shown through studies of cadavers of women as they pass through perimenopause and into menopause. And what happens there is you get a dysregulation where you have too much signaling through NK3R that leads to the firing of those neurons, which have protrusions that go through the blood-brain barrier into a part of the brain called the preoptic nucleus, and that triggers the thermal regulatory effect or the flushing. So the concept is and what has been shown both preclinically and clinically is that if you block NK3R, you can normalize that activity and suppress the initiation of hot flashes. So our molecule is designed to be injected as a once-monthly subcutaneous injection to penetrate the part of the brain where it needs to engage with KNDy neurons to block NK3R and then to suppress the triggering of those neurons that then triggers hot flashes. And that has been shown clinically with a couple of molecules. So just in the last couple of years, there are 2 small molecules that have been now approved for the treatment -- for the nonhormonal treatment of BMS. The first of them is fezolinetant, brand named VEOZAH that is in its second year on the market by Astellas and tracking, I think, this year to roughly $320 million in sales. And the second, just recently approved is elinzanetant. I believe there was a talk just an hour ago by Bayer, where that one has now been launched, which is not an NK3R -- strict NK3R antagonist, but rather an NK3R and NK1R antagonist. Both of those have recently provided options for women that cannot use or choose not to use hormone therapy, and we think that's a wonderful thing for women and also a wonderful thing for our product, as this will provide some time for these bigger companies to start to build the market. So our drug that we're developing, we believe, has 3 potential angles of differentiation. The first of which, as I mentioned before, is that it's designed to be a once-monthly subcutaneous injection. We have done a market study with women asking them, given equal efficacy and side effects if they would prefer a once-monthly injectable or an oral. And in that study, we found that a majority, 55% said that they would prefer the once-monthly injectable. And amongst women that were experienced with injectables, that number went up to 75%. And I think that is a reflection of what has happened with the GLP-1s and the general improvement of auto-injectors and acceptance of that as a way to inject. So there's an advantage in convenience for many women. We also think that we will have -- or we have an excellent chance at having a product that has a cleaner safety profile. Wait a second, sorry. We also believe we'll have a cleaner safety profile for a couple of reasons. So fezolinetant was launched without a box warning, but ultimately ended up having a box warning for liver injury. And so it has -- and that was consistent with the early clinical development where you saw elevated liver enzymes during development. Elinzanetant has a warning, but not a box warning for somnolence, and we believe that the somnolence is a result of antagonism of NK1R. NK1R is also expressed on KNDy neurons. There's not strong evidence that, that is a pathway that results in a suppression or activation of vasomotor symptoms, but it has been explored before for mood disorders, and we believe that, that is an on-target side effect for NK1R. That is potentially advantageous since sleep is also a problem, but we think it's something that should not be combined with NK1R as a product. The last area where we think we may have differentiation is in efficacy. And that's something we haven't said much about, but we believe that is true based on looking at the clinical development, particularly the Phase IIa and IIb for fezolinetant, where they showed a better suppression of biomarkers and better efficacy, particularly in severity when they dosed at higher levels, so 90 BID or 180 milligrams per day. Due to the liver toxicity, that drug actually was developed in Phase III at 45 milligrams per day, and we believe there's still room for better in target engagement with an antibody and engagement that would not fluctuate through the day because the antibody has a long half-life. So we are developing this with the intent of having a drug that is more convenient, has a cleaner safety profile, and potentially even has higher efficacy, although, of course, we need to prove that in clinical studies. So ABCL635 began clinical development in, I think, the first or second quarter of this past year. That study is set up to start, as you might expect, with a MAD and then a SAD version. As part of that evaluation, we have included healthy male volunteers. And the reason for that is that suppression of testosterone in males is the most reliable biomarker of target engagement for this particular pathway. Based on successfully demonstrating target engagement with these neurons, we'll then move this forward into a proof-of-concept study that we are optimistic we will start enrolling and dosing patients in early next year. That study is designed essentially like a Phase II. So it's 80 patients in a double-blind, placebo-controlled study in postmenopausal women with moderate to severe hot flashes with endpoints of severity and frequency, which are the approvable endpoints. So for us, this will be a very important readout for AbCellera. I'd say in 2026. If you're looking for a catalyst, the biggest catalyst will be a full readout of both the MAD, SAD and the proof-of-concept part of this Phase I. If all goes as we hope, touch wood, we will know whether or not we have a drug, and we are certainly getting ready and doing preparations to take that quickly into a pivotal trial. Just briefly on our second program. The second one is a follower. It's ABCL575, and it's a half-life extended best-in-class antagonist of OX40 ligand that has applications in atopic dermatitis and a variety of other autoimmune conditions. This is a program that's somewhat off-brand for AbCellera. We're focused on areas where our technological differentiation can get us into some white space. The OX40 ligand class has become somewhat crowded. There are 2 incumbents. One is amlitelimab by Sanofi, the other one rocatinlimab, which is the same access, but on a different protein, OX40 by Amgen. Behind that, there is, maybe half a dozen or so molecules that are in a similar stage to ours. Our excitement about this program largely relates to what we think is the immense potential of the class. So OX40 ligand has read out positive in atopic dermatitis. It has also been advanced into Phase III by Sanofi for asthma. And there are ongoing studies in other indications, which include alopecia and celiac disease and scleroderma. So we think this class has immense potential. In our hands, we are focused right now on executing on the Phase I. We expect to read that out sometime next year. And I don't expect any surprises. So I expect that this molecule will prove to be as advertised, as potent as amlitelimab, a half-life of around 2 months and a clean safety profile. And the biggest catalysts for this program are going to be what happened outside of our shop with additional readouts from Sanofi and from other players that are validating the OX40/OX40 ligand access in different disease indications. At this point, given our conviction in ABCL635 and also the pipeline that's coming behind it that we're very excited about, we think it's unlikely that we would make the investment to put this ourselves into Phase II. And so we are on the lookout and setting up to hand this off to a larger company with investments in dermatology or other areas where this makes more sense with their portfolio. And lastly, just to summarize where we are as a company. On the screen here are our corporate goals for 2025. We have now hit all of those. So we brought our first 2 molecules into the clinic. We are definitely focused on ABCL635 as the most important near-term catalyst. We have already nominated an additional candidate, ABCL688, again, from our GPCR and ion channel platform. And we do expect to nominate an additional candidate before the end of the year that we'll probably report on at the full year earnings sometime early next year. The other thing I didn't mention much is that we've -- after 13 years of investments in the technology and the platform, we have completed those investments. That now includes over 300,000 square feet of laboratory facilities, a GMP manufacturing facility, and of course, all the technologies and know-how that sit behind it. And we have just recently started activities manufacturing our own drugs in Vancouver. So we're in a terrific place as a company. We have a fully built capability for discovery that we believe is best-in-world, particularly in these areas that I highlighted. We still have $680 million of liquidity, and we have our first 2 molecules going into the clinic, and we expect to be bringing 1 or 2 additional candidates into that pipeline every year moving forward, at least for the next year or 2. And the name of the game right now is to get that compelling data that shows that we have a drug. If we do that, I think we're off in a way, and we can continue this path into the future. The vision of the company here is to start from scratch and have an organic ability to generate differentiated assets and to finally integrate into being a global biopharma. A lot of water between here and there, but I think we're in a great spot to try. So with that, I'll end. And if there's any questions, I would welcome them. Thank you.

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Right. So as I mentioned, we are hopeful that we'll be dosing patients in the POC part. That's really where the rubber hits the road early next year. And we anticipate having data on 4-week efficacy for all patients recruited by Q3 of next year. So that's relatively quick. And enrollment, obviously, is not that challenging because it turns out that there's a very large number of people that are looking for solutions here. In terms of the later-stage studies, I wouldn't put a number on it, but you would expect that you're going to run 2 Phase IIs at about 500 patients and then have at least a year of exposure. So that's probably a 2-, 2.5-year study. Please keep it coming.

This is working now? Great. For 575, a lot of interest in that space. As you say, it's quite crowded. Is the molecule suitable for combination with or whatever?

Absolutely. So the question is for 575 is a molecule suitable for combination? Absolutely. I think that's one of the very attractive things about OX40 ligand as a target. And in the recent readout from Sanofi in atopic dermatitis, one of the highlights was it definitely worked. Perhaps the efficacy was not what people expected, but I'm less bearish on that because we don't know what the patient population is that they tested, and there may well have been a significant number of patients that were post-JAK or post-Dupixent in there. So the fact that it didn't have the same efficacy that it had in the Phase IIb when it went in naive patients is understandable, but the other thing I was going to say is it was very, very clean. And so given the trend towards combination therapy, I think OX40 ligand today, based on what we know, is an outstanding candidate that could be combined with many, many different modalities. 575, by my reckoning in terms of metrics is unmatched by other assets that we know. So it's high formulation, very stable, long half-life, potent molecule. And the Sanofi data has also shown that you don't need all that much to have a lasting effect. So even if you wanted to do a co-formulation, I think something like this would lend itself to that very well. And as far as I know, the most advanced development of OX40 ligand in combination that's not a bispecific is by Apogee, and so we'll be watching that with the IL-13 and see if that reads out. If it does, we may well get interest from other players.

And I think you've said on earnings calls that you are active in discussions on that front. Is that correct?

We have definitely talked to many groups. I think right now, our focus is really on 635. On the 575, we're running it through, and we want to wait to see what happens with some of the other readouts that are coming up, both in atopic dermatitis and other indications. And it's really a matter of, hey, we're positioned to move quickly if someone needs one. And the interest is going to depend on catalysts that sit outside of the company. So we're ready. And if that comes to pass, then we can engage quickly. And we have those relationships, both from talking about 575 and also from the partnership business. We've built connections across the industry there.

Are there any more questions?

Great slide, very, very good scientific communication, top-notch in industry. I wanted to maybe ask you to tell us more about your strategic shift from focusing on platform to more of a pipeline business, and you've been widely successful in your platform partnerships. And how do you think about that shift now that 2 years, 3 years after, what could have done differently? How -- why did you decided to wind down one rather than having them both going?

Sure. So the question is, can you say a little bit about why you made that shift and how it's going? Is that basically right?

Yes. And why are you winding it down rather than having both going in parallel?

Those are great questions. So first, I think from the outside, the shift probably looked more abrupt than it felt inside because we were working on internal programs in parallel to doing the partnership business for some years. So that -- you can't start that from nothing. You have to be building that up for some time. In '23, a few things came together. One, we are getting close to finishing the capabilities. We had moved assets forward that we had a lot of conviction in, particularly 635. We're like, hey, we're excited about this. This could be a blockbuster drug. And at the same time, the partnership business was getting more difficult mostly because of the macro, what was happening to biotech. So if you're partnering, you're engaging with companies that are starting new things. When the market is rough, people are starting fewer things and that gets tougher. So at that point, we decided, okay, we need to really focus on doing the drug development. In the past, we had tried to do both. I think it's a cliche, but it's very difficult to get a company to do two things simultaneously. You have to have an identity, and it's definitely been my experience that by focusing on the internal programs, a lot of the tension in priorities and resource allocation dissolves and you make much faster progress on the programs. And if you had asked us even at the very beginning of the company, where would AbCellera ultimately end up? I would have told you we're an -- we want to be an integrated biopharma from the beginning. The partnership business is the right way to get there, but I'm very -- I was convinced in '23 and everything I've seen since has made me even more convinced that the path forward right now is to bring drugs forward and own them and control our destiny to generate the most value. So that's where that. The last part of your question was how is it going? I do think when you make that transition, you get some skepticism because there's a lot of examples of companies that are platform companies that struggle to make that transition, and it's definitely not easy. So we had a bit of a -- there was some reorganization. You have to shift priorities, you have to communicate differently. I'd say we're fully through that. So the company is through that. We have the first 2 programs. We're executing well. And while we still have work to do on the development side, we're feeling very well positioned and very on track to deliver over the coming years.

Any more questions? Okay. Thanks, everyone.

Thank you very much.

Thank you very much.