Good afternoon, and welcome to AbCellera’s Second Quarter 2021 Financial Results Conference Call. My name is Mel, and I will facilitate the audio portion of today's interactive broadcast. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] And please be advised that this conference is being recorded. At this time, I would like to turn the call over to Mr. Tryn Stimart, AbCellera’s Chief Legal Officer and Chief Compliance Officer. Sir, please go ahead.

Thank you. Good afternoon, everyone, and welcome to AbCellera’s second quarter 2021 business update. We are pleased to have you with us today where we will discuss the results announced in our press release issued after the market closed today, which you can find in our Investor Relations website. With me on the call are Dr. Carl Lars Hansen, AbCellera’s Chief Executive Officer and President; Andrew Booth, AbCellera’s Chief Financial Officer. The webcast portion of this call contains a slide presentation that we will refer to during the call. Those of you following along on the phone who wish to access the slide portion of this presentation may do so on the Investor Relations section of our website. For those who have access to streaming portion of the webcast, please note that there may be a delay and that you will not be able to post questions via the Web. This presentation may contain forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements are based on management's current expectations and are subject to certain risks and uncertainties. Please review our SEC filings for risk factors that could impact our future performance. Our presentation and SEC filings are available on our Investor Relations website. Note that all dollars referred to during our call today are US dollars. Now, I’m pleased to turn the call over to our CEO, Carl Hansen.

Thank you, Tryn, and thank you to everyone for joining us today. It's my pleasure to provide an update of the second quarter of 2021 in which we continue to execute on our long-term strategy for growth. First, we closed the quarter with nearly $800 million in cash and over $60 million in accounts receivable and accrued accounts receivable. In addition to our strong liquidity position, we maintained our forward momentum, showing strong growth in our core business across key performance indicators, including 19 new programs under contract bringing our total number of programs to 138; 16 programs starts, bringing the total number of starts to 60; and three new molecules that have entered into the clinic, bringing the total number of molecules in the clinic to four. Two of those molecules are from our COVID-19 program with Eli Lilly, which continues to be both a proof point for our technology capabilities and business model and a source of non-dilutive funding. Unfortunately, and despite vaccine rollout, we are seeing a strong uptick in COVID-19 cases globally with well over 100,000 cases reported daily in the U.S. alone. Our first COVID-19 therapeutic antibody is bamlanivimab. Bamlanivimab administered together with etesevimab was paused in June because at the time, the beta and gamma variants, which are resistant to this combination were prevalent in the U.S. Today, the most prevalent variant, both in the U.S. and globally is the Delta variant. Preclinical data demonstrate that bamlanivimab and etesevimab administered together retain utilization activity against the Delta variant, as well as other variants currently in circulation in many countries. I note that there is an existing supply of bamlanivimab and etesevimab that we believe could be used effectively to help patients today, both in the U.S. and around the world. Our second therapeutic anybody…

Thanks, Carl. Let me start by highlighting our key business metrics. We ended the first half of 2021 with 138 programs under contract with 33 different partners. That's an 82% increase in programs under contract as compared to the end of Q2 in 2020. We continue to see the combined positive impacts of investment in our business development team and the increasing awareness of our platform on our business development activity. In the quarter, we added Tachyon and EQRx, as well as two other new undisclosed partners to our partnership portfolio. As is the case for all new programs under contract after 2018, the 19 new programs in Q2 include downstream participation for AbCellera. Reflecting the substantial value we bring to both Tachyon and EQRx programs, we have negotiated the ability to deepen our position in the participation of the success of the molecules we discover. We are doing this through auctions to invest in the molecules for a greater share of the resulting product sales. Also in the quarter, we started six more programs to take us to 60 cumulative starts, eight of which occurred during the first half of 2021. We continue to build capacity and to engage with many partners on preparations for their program starts. We expect a robust number of programs starts in the second half of 2021 as a part of this general -- generally accelerating trend. And while starts will always be somewhat irregular, the increase in programs under contract is a leading indicator of the longer-term trajectory expected for programs starting. Starting this quarter, we will share with you our new business metric, molecules in the clinic. Molecules in the clinic represent the number of unique molecules for which an IND or equivalent application has been approved based on an antibody that…

Thank you. [Operator Instructions] And the first question comes from the line of Tiago Fauth with Credit Suisse. Your line is now open. You may ask the question.

Hi. Thanks for taking the question, and congrats on the progress. So just a couple of questions for me on the business development context here. So you've added another 19 programs under contract, which again combined with your Q1 results kind of puts you well ahead – well, at least for our modelling. But I'm curious if you can provide any comments on the actual pipeline and what does it look in terms of leads? Is this space a new phase that is actually sustainable over the remainder of the year? And similar question then from new program starts, again, you went from two on the first order to six and you provided some comments around that area. But is this increase also something that is sustainable as you grow the programs under contract portfolio? Thanks.

Thanks, Tiago. Carl here, and I’ll take those questions. So first, with respect to the addition of 19 programs under contract and whether or not that's sustainable. Our view is that every indication is that there’s very strong demand for offering and we have only just begun to really build out the commercial force. When we launched into the year, the strategy was to build out capacity and to start to build up the business development team. The addition of Neil has been a great boost there as well as other senior members that we've brought onto the team recently. That, combined with a growing recognition of our leading position in the industry and the expansion of our technology base, and particularly the Trianni platform and the OrthoMab platform, I think, are all strong tailwinds for the future. I'll just temper that by saying that we do expect there to be variability from quarter-to-quarter and we are taking a long view on the commercial enterprise. And in the long view, we do expect strong growth driven by business development and by expanded technology. n terms of the execution, there was I think a healthy uptick from two starts in last quarter to six starts this quarter. As discussed last time, that will also be variable from quarter-to-quarter. But generally, as the business development pipeline goes up and as we start to build out the capacity, we do expect that trend to be positive, although I wouldn't say that necessarily be so from quarter-to-quarter.

Perfect. Now, I understood. Congrats again on the progress.

Thanks, Tiago.

Thank you. We have the next question comes from the line from Gal Munda of Berenberg. Your line is now open. You may ask a question.

Yeah. Hi. Thanks for taking my questions. The first one is just kind of expands on what we were just talking about and thinking about existing capacity that you have. I guess the 19 starts in the quarter is pretty impressive, but how do we think about the capacity? What could be doable if your commercial team really ramps up to where you wanted to be, say, in a year or so?

Thanks, Gal. Carl here, and I'll take that one again. First of all, I think it's important to stress that the program starts are currently not bottlenecked by capacity. There's a delay between putting programs under contract and getting a work plan in place and having the reagents and the kick-off meeting that are needed for us to count that as a start. And so because of that, there is often work that is done for some time assembling all of that material to begin that happens prior to us reporting off a program start. Also, we have the capacity today to do significantly more programs. Of course, when we don’t have those starts ongoing, we also have a very heavy investment on platform development and we have the ability to ship that back and forth if needed, as well as the improvements in technology and efficiency that comes with the data science, we don’t anticipate a pinch on capacity and execution although, of course, we need to keep our foot on the gas to make sure that remains the case.

Okay. Perfect. And then just kind of thinking strategically right now the way you think – the way you’ve been engaging obviously you have downward - downstream participation with all your new programs under contract. But just when you engage with partners, what do you tend to prefer these days thinking something along the lines of also equity investment and the way you’re thinking about equity participation or potentially a smaller less developed partner who has a big upside I guess because of that? Or how do you balance that with kind of your flagship pharma customers when you're kind of thinking about taking new programs?

Yeah. I would not say that we have a preferred customer profile or a preferred business model. What we focus on is finding the perfect match between the partners’ needs, the technology and the structure of the deal that we're putting in place. And what we're looking for there is to find high-quality partners that are working on great science. To date, we have managed to secure what I consider to be an elite group of partners that have the wherewithal to develop drugs or that have very innovative ideas at the early stage of the process and are needing the technology to move that forward. This quarter, a great example of that is the deal where we've taken a different deal structure and one where in addition to providing and right now created an option for us to deepen our position in these programs with the ability to invest at various stages. So that’s in deal making in a way that aligns interests and creates maximum value for our shareholders.

Thank you. Thanks, Carl. Appreciate it. Have a great rest of the day.

Th. Next question we have from the line of Stephen Willey of Stifel. Your line is now open. You may ask your question.

Yeah. Good afternoon. Thanks for taking the questions and congratulations on the progress. I guess, maybe just an initial question on business mix. So I guess when you look at the programs under contract, which you have vast participation, I think you said there’s 115 of them. I see that there's 24 that's within global pharma. I’m just kind of wondering if that 20% or so distribution is in line with where you want the mix of business to be. And I guess, is it a little bit more challenging to win some of that business on the big pharma side just given the fact that there may be some internal infrastructure on the workflow side or maybe just some inertia or I guess anything that you can speak to on that front?

Sure. Thanks for the question. I think where I’d start with that one is that AbCellera has a platform that we've built over the last 10 years, that is both able to solve problems that have traditionally been out of reach and also is exceptionally versatile. And I believe that's reflected in the diversity of our portfolio. So if you look at our portfolio and the programs, we've got everything from the small private companies to the large pharmaceutical companies. We're working on pretty much every indication for which antibodies are being developed. We are doing programs that are connecting into a whole range of modalities, including classic antibodies and next generation molecules. So in many ways, there’s a lot of diversification in that portfolio and that is a key part of our strategy. On the flip side, all of those programs have something in common and it is that we have conviction in the science, we have conviction and faith in the leadership teams. The deal with EQRx being a terrific example of seasoned drug developers that are taking a very innovative commercial approach to developing drugs. And of course, all of those programs have also in common that they are being driven on best-in-class technology and that is the value that we're bringing to the partnership.

Okay. And then I guess when you look at the mix of targets, I guess whether it's launching or a bit more conventional, is there a correlation there between I guess targets that are deemed to be difficult in the business mix, i.e. is…

Absolutely.

I think I'm not the only one who's lobbying to the more difficult targets?

That's correct. I mean, I would -- it's not a hard rule. But as you might expect, the large and highly enabled groups are the ones that have spent a decade or more building up their own technologies, their own teams, and expertise and capacity. And so there will be many programs that they have for which they believe they have the tools at most to prosecute those. Our objective in the long run is to be able to show increases in speed and efficiency that can help us to better capture that market and to provide value to those customers in those targeted classes. But those large and enabled groups also have a big roster of programs that have either been worked on ineffectively or have been put on the shelf because they're generally deemed to be intractable. We are laser focused on the investments to push back that frontier of technology and unlock those target spaces. In many cases, a good example will be in GPCRs and ion channels. We’ve had success, I believe we’re at the front of the pack, but the work is not yet done. So this is an effort that’s going to persist in the coming years and over time, I believe we’re going to be able to help those groups to move forward with therapeutic into areas that have been neglected, not the reasons of a lack of targets or clinical validation but rather for technology limitations.

Got it. That's very helpful. Thanks for taking the questions and congrats on getting three more candidates in the clinic.

Thank you. We have the next question comes from the line of Gary Nachman of BMO Capital. Your line is now open. You may ask your question.

Hi, good afternoon. First, on the three new molecules into the clinic. That would certainly good to see. The LY-CoV1404, we should see that data this summer. But when can we start to see some clinical data for the two new NovaRock molecules? And what sort of milestone does that trigger if you give us just order of magnitude?

Thanks, Gary. So first of all, the two NovaRock assets are at the very beginning of clinical development. One having just entered Phase 1, I believe and the other one with an approved IND application. So we typically structured deals to get milestones at the initiation of the various phases of clinical development, the Phase 1, 2 and 3. Phase 1 data normally doesn't take that long. Phase 2 trials are longer, depending on the indication and the clinical design of course enrolment. It's worth highlighting that NovaRock of course is the driver of those programs. And these are programs that we acquired through the acquisition of Trianni. So, they will be taking the lead in reporting out any data that comes from those development efforts. For us, it’s a terrific endorsement of the Trianni platform. And I hope and believe foreshadowing of what we may expect to come over the coming months and years from that platform will enhance the partners and also use extensively current technology stack.

Okay. And just to clarify. So when you show that NBL-012, that you're looking at three therapeutic areas, that's three separate programs, correct? So that's why you talked about earlier you could have a single molecule doing several different program?

No. I think what I mentioned in the – this is Andrew speaking, Gary. What I mentioned is that we can have one program or at cellular a discovery program that can yield multiple molecules that make it to the clinic. So the example there was the COVID program which counts as one program and one program start in our typical metrics, but it has yielded two molecules that have made it to the clinic. So bamlanivimab and etesevimab. In the case of the NovaRock assets, they're going after specific indications. And I think you can find the details of exactly how those clinical trials are getting set up publicly.

Okay. And then on…

I would like just to point out…

Oh. Go ahead. Yeah, please.

Yeah. I was just going to point out that we made that second metric for these molecules in the clinic where they're using license technology. And we did the Trianni acquisition which is we're going to working very well. It's a beautiful addition to the technology stack. We're able to integrate it immediately into our business development activities. And in addition, we are able to generate revenues from the licenses as we've seen well over $20 million. When we bought the portfolio – when we bought the company, it came with a portfolio of previous licenses that have been licensed out of which NovaRock is one. And there are over 20 of those licenses which have downstream milestones and royalties which we would expect to see hitting these metrics into the future. But just as a reminder that those 20 or so license programs because – that we have in our other key metrics, those are exclusively our own AbCellera programs. But when they have molecules that hit the clinic, we will count them in this other metric, it's one of the reasons we needed to change the definition of that metric.

That's very helpful. And then just you had on your recent new deal structure [Audio Gap] and so value. So I'm curious for this type of partnership and deals, how long were those in the work? Like, that could take a while to get those types of deals done? And then that's also sort of playing into the cadence that you're talking about, the new programs for the rest of the year. I'm just wondering if COVID, if that could cause any delays to some programs just in terms of being able to communicate with potential partners, that color would be helpful.

It's hard to put a hard number on what is the representative sales cycle, there's quite a range that depends on the firm and it depends on whether or not you come into any difficulty in negotiating the contract. Typically from first engagement to a signed term sheet is anywhere from a month to three months and from that term sheet to a contract can be a couple of months to much, much longer if you run into some contractual difficulties. It is important that we do have a strong funnel. So we maintain that activity and so you need to you need to keep working on this but there’s a robust to this development pipeline and we’re in good shape for the future.

Okay. Thank you.

Thank you. There are no other questions at this time. I would like to hand the conference back to Mr. Carl Hansen for closing remarks.

Okay. Thank you very much. Just would like to finish by thanking everyone for joining us today. And to reiterate that this is an exciting time for AbCellera and we're looking forward to ongoing calls to keep you updated on our progress in the future. Thank you, everyone.

Thank you. Ladies and gentlemen, that concludes today's conference call. Thank you all for participating. You may now disconnect.