Good afternoon. And welcome to AbCellera’s Q2 2024 Business Update Conference Call. My name is Tamiya, and I will facilitate the audio portion of today’s interactive broadcast. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. [Operator Instructions] At this time, I would like to turn the call over to Tryn Stimart, AbCellera’s Chief Legal and Compliance Officer. You may proceed.

Thank you. Good morning, good afternoon, and good evening to everyone listening around the world. Thank you for joining us for AbCellera’s 2024 second quarter earnings call. I’m Tryn Stimart, AbCellera’s Chief Legal and Compliance Officer. Joining me on today’s call are Dr. Carl Hansen, and CEO; and Andrew Booth, AbCellera’s Chief Financial Officer. During this call, we anticipate making projections and forward-looking statements based on our current expectations and pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results could differ materially due to several factors as set forth in our latest Form 10-K and subsequent Forms 10-Q and 8-K filed with the Securities and Exchange Commission. AbCellera does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Our presentation today, including our earnings press release issued earlier today, and our SEC filings are available on our Investor Relations website. The information we provide about our pipeline is for the benefit of the investing community and is not intended to be promotional. As we transition to our prepared remarks, please note that all dollars referred to during the call are in U.S. dollars. After our prepared remarks, we will open the lines for questions-and-answers. Now, I’ll turn the call over to Carl.

Thanks, Tryn, and thank you, everyone, for joining us today. Through the second quarter, we continue to focus capital allocation on our three priorities; first, building and advancing our internal pipeline; second, completing investments in our platforms and facilities; and third, executing on select strategic partnerships. Starting with our internal pipeline. Both ABCL635 and ABCL575 are progressing well and we anticipate submitting Clinical Trial Applications, the Canadian equivalent of an IND in Q2 of 2025. Turning to our TCE efforts, we noted on the last call that our platform development is essentially complete and that we are moving leads from select programs into preclinical efficacy models. On the strength of data obtained in these studies, we may elect to bring one or more of these programs into our pipeline in 2025. Of the four programs currently being evaluated, three are in oncology, including PSMA, B7-H4, and an undisclosed target. PSMA is a well-validated target in prostate cancer, an area of high unmet medical need. To-date, clinical TCEs targeting PSMA have either shown high tumor cell killing with high toxicity related to cytokine release or low tumor killing with low toxicity. In our in vitro studies, we have shown that our PSMA TCE lead have comparable tumor cell killing to the most potent clinical benchmarks, while also having much lower cytokine release. We believe this profile has potential to achieve better safety, enabling higher dosing and better efficacy. B7-H4 is a target expressed on malignant cells in various solid tumors, including breast, ovarian and lung. Similar to our PSMA program, our B7-H4 TCE leads show comparable tumor killing and lower cytokine release as compared to the only relevant clinical benchmark. As with our PSMA program, we believe this profile has the potential to improve both safety and efficacy. For both PSMA…

Thanks, Carl. AbCellera continues to be in a strong liquidity position, with approximately $700 million in cash and equivalents and approximately $220 million in available government funding to execute on our strategy. In the second quarter of 2024, we continue to execute on our plans to complete our CMC and GMP investments and to advance both partner-initiated and internal programs. Looking at our key business metrics, in the second quarter, we started work on three partner-initiated programs, which take us to a cumulative total of 93 programs with downstream participation. As Carl mentioned, Abdera advanced ABD-147 into the clinic in Q2 2024, bringing the cumulative total of molecules to have reached the clinic to 14. The other change in our portfolio of molecules in the clinic is the advance of Arsenal Bio’s AB2100 into a Phase I/II trial in the second quarter. We view our growing list of progressing molecules in the clinic as specific examples of our near- and mid-term potential revenue from downstream milestone fees and royalty payments in the longer term. Turning to revenue and expenses, revenue in the quarter was $7 million, mostly driven by research fees relating to work on partner-initiated programs, as well as $1.5 million in milestone payments. This compares to research fee revenue of approximately $10 million in Q2 2023. We expect research fee revenue to continue to trend lower as we increasingly focus on internal and co-development programs. Our research and development expenses for the quarter were approximately $41 million, roughly $5 million more than last year. This expense is driven by ongoing program execution, continuing platform development and our increasing investment in our internal program pipeline. In sales and marketing, expenses for Q2 were about $3 million, a small reduction relative to last year. And in general, in administration, expenses…

[Operator Instructions] The first comes from Allison Bratzel with Piper Sandler. You may proceed.

Hi. Good afternoon and thanks so much for taking the question. Maybe just one for me, on the TCE platform. Could you help us understand strategic interests and also your own internal interest in advancing this program in oncology indications versus autoimmune indications like with your CD19 program, just how do you view that? And now that you’re moving the four TCE modules into preclinical efficacy models, could you just frame for us kind of what we can expect in terms of preclinical updates that could help us understand the differentiation of those products? Thank you.

Thanks, Allison. Carl here, happy to take that. So first, just quickly with respect to strategic interest. I’ve had that question on previous calls. The answer remains largely the same. We have advanced the program, pardon me, the platform very significantly over the last two and a half years. The science has been reviewed and I think widely appreciated for the quality and the potential of what it can do in TCEs and we remain in active conversations with some of the key players in the space. Our focus right now is in showing that the data that we’ve had in vivo, pardon me, in vitro, will translate into in vivo models and then ultimately toward the clinic. So with respect to that, we are simultaneously advancing four programs into in vivo studies. Those studies obviously are to confirm, at least in the oncology case, to confirm the ability to get tumor regression in xenograft models, as well as to evaluate cytokine release alongside of that. We don’t know yet how the data will shake out and we’re keeping a high bar. But we think that, you know, based on what we’ve seen thus far with TCE, there’s a good probability that we’ll be able to come up with molecules that are differentiated with respect to what we’ve seen in the clinic thus far. And as I mentioned, we are testing our molecules against benchmarks and using that as one of the criteria for deciding whether or not we bring them into the portfolio next year. So we will share that data at conferences like ASCO and CITSE when it becomes available. As I mentioned, I don’t expect that we’d be in a position to elect a development candidate this year. But on the basis of strong data, we could do so next year. On the autoimmune side, CD19, we think that’s a tremendous opportunity. We believe that the data that’s being seen thus far in CAR T and also with the small Blincyto studies suggests that this could be an approach that is widely applicable to autoimmune conditions. We think that a great product needs to have a strong B-cell depletion. As I mentioned, our goal is to get something that is comparable, if not as good as what is seen in CAR T, and also that it should be both safe and convenient. And obviously, you know, CAR T therapies have real challenges commercially and in terms of cost and convenience and accessibility. And Blincyto is itself also not a particularly convenient drug. So the studies that were done required five days of continuous infusion done twice. So our goal is to have something that looks much more like a standard drug and our platform has been built to allow for strong killing with low cytokine release in a developable package. And so we’re confident that, we’ve got at least a very good shot of doing that and we’ll let you know as that data progresses.

Thank you.

Thank you. The next comes from Stephen Willey with Stifel. You may proceed.

Yeah. Hi. Good afternoon. Thanks for taking the questions. So, Carl, I know that you’ve talked about the TCE platform and the improved cytokine release profile relative to some of the benchmarks out there. But I guess in the setting of autoimmune disease, we’ve seen much lower rates of CRS with both CAR T and TCEs, at least what was previously described in oncology and I’m presuming that’s due to the lower antigen burden. So just curious how you think about the lower rate of CRS from a competitive perspective as you choose to move another CD19 TCE into what’s becoming a fairly crowded space. And then you talked about the importance of convenience. How important is product profile with respect to sub-cue administration, with respect to dosing interval, things like that?

Those are great questions, Steve. So, first, I think that’s accurate, that, as compared to oncology, the data that exists thus far in using CD19-directed B-cell ablation methods has shown less cytokine release and less toxicity. Presumably, that is because there is less burden. You don’t have the big tumor burden that you have in liquid tumors. It’s also potentially because many of these patients are being treated after, they’ve been on several lines of therapy for immunosuppression. So that’s certainly accurate. That said, in some conditions, for instance, like lupus, that’s very serious and where patients have been refractory to existing therapies, hospitalization or delivering something over multiple days is probably okay, certainly, if it has a good effect. In other autoimmune conditions, we think that, the bar is going to be higher in terms of the convenience of the product. And so if you imagine that this will be a more general strategy for treating autoimmune conditions, you certainly don’t want to be using a CAR T. So we actually don’t consider the CAR T to be a direct competitor. We believe that if someone comes up with a TCE that has even close to the same efficacy, it will dominate over CAR T’s in terms of use and so that’s the strategy. And if you think about the TCEs that are out there right now, there actually are surprisingly few. I mean, that’s one of the things that makes us attractive. There are, as I mentioned, some molecules that were developed for oncology that are being repurposed. We think the class can be huge and we are focused on using our platform to come up with the best in class profile. So that’s the bar that we’re holding and we’re hopeful and optimistic that we’ll get there.

Okay. That’s helpful. And then with respect to the oncology TCE candidate for which the target has yet to be disclosed, is that just a function of the fact that that’s just not a lead development candidate as of yet or is that insinuating that perhaps you are taking a little bit of novel biological risk with this third target?

I’d say that, thus far, apart from some very notable exceptions, there’s been biological risk associated with any TCE in solid tumors. So that’s kind of built in to the space. But you’re right, the reason we have decided not to disclose that one yet is that program is a step behind the others and I do expect that as that matures, we’ll make that target known and share data in due course, probably at CITSE or ASCO, depending on when the data comes in.

Okay. Very good. Thanks for taking the questions.

Thank you. The next question comes from Andrea Tan with Goldman Sachs. You may proceed.

Good afternoon. Thanks for taking our questions. Carl, one here for you, maybe around the increasing debate that’s occurring right now regarding OX40 versus OX40 ligand approaches in atopic derm. Just wondering if you could walk us through, again, the puts and takes for targeting ligand versus the receptor, and remind us where you see 575 differentiation as a potentially best-in-class asset. And then just as a follow-up to that, then, if there is any possibility that we could see preclinical data ahead of the IND filing next year? Thanks so much.

Thanks, Andrea. So first, with respect to OX40 ligand, OX40, I’ve heard arguments made on both sides. I would say, generally, there’s pretty good evidence preclinically, that blocking that pathway, however you do it, has a good chance to be efficacious. What is worth noting that is different between amlitelimab, which is the lead, obviously, in OX40 ligand and our program, which is falling behind that as a best-in-class asset versus Amgen’s roc. It’s that Amgen’s is a depleting antibody. And so it’s an antibody that binds to OX40, but it’s been engineered in the FC to ablate the cells that express OX40. And that has -- or there have been, some side effects associated with that molecule, and presumably, that’s the reason why. In terms of, our program, we are excited, as I’ve mentioned before, about the class. If you think about atopic dermatitis, there’s really, I’d say, two targets that have proven to be very efficacious. One of them, obviously, is IL-13, and the other or one pathway, I should say, is IL-13 and the other is the OX40, OX40 ligand pathway. We also think that this is a program and a class that has large potential across many different autoimmune conditions. And one of the things that really is distinguishing about it is what appears to be a very long-lasting effect, which lends itself to less frequent dosing. We have come into this knowing that, to be successful, this is going to be a program that needs to stack up against other programs that are following and have a best-in-class profile. What that means is a molecule that has potency, at least comparable to amlitelimab, superior half-life, good developability, meaning that we can get it to a high-dose formulation, and then, of course, a good CMC package and a high-titer cell line. Thus far, we are on track for all of that. And I’ve maybe taken a little more time than some others in moving it forward. We’re on track for a CTA submission in Q2 of next year and I think that the extra time making sure we’ve got a great molecule is going to pay off.

Got it. And then maybe if you don’t mind commenting on your interest or potential to even share some preclinical data ahead of that CTA submission.

Another good question. I think that we may well do that. We haven’t made a definitive plan to do it yet. Probably the most interesting data would be some of the early PK studies in NHP. So, sorry, I don’t have a clear answer for you yet. We may well show that. Of course, those studies are not necessarily predictable what will happen in people and probably the most important data will be the early PK data from the Phase I study.

Okay. Thanks so much.

Thank you. The following comes from Evan Seigerman with BMO. You may proceed.

Hi, guys. Thank you for taking my question. A few from me. One, I know you’ve comped your PSMA by CD3 to Amgen’s AMG 160. But maybe kind of talk to me about what you think might help reduce the CRS and AEs in the clinics. Also, looking at some of your research fees this quarter, we saw pretty meaningful lower research fees for the quarter, maybe expand on that. Kind of what drives this and whether you expect this to be reflective of any sort of run rate going forward? Thank you so much.

Yeah. So, Carl here. I’ll start with the PSMA question and maybe hand off to Andrew for the research piece. So, we have been benchmarking against Amgen 160. That’s one of the molecules that we have used in our internal studies. In in vitro studies, so meaning cell killing assays on tumor cells done on the bench. What we see is the ability to kill cancer cells to the same level and at similar potencies, but with dramatically less cytokine release. That data is actually quite striking. So it’s not that you get a small difference in the release of some of the most inflammatory cytokines like TNF-alpha. Rather, what you see is something that looks like it is qualitatively, as well as quantitatively different. So we’re excited about that. We think it’s highly differentiated compared to anything that we’ve seen or anything that we’ve tested on the bench. And the open question now is if that profile will be reproduced in animal studies. So there’s no guarantee that that will work, but based on what we believe to be the mechanism, we’re optimistic that that will happen. If it does, then as I mentioned, it means that you should be able to get the same type of tumor cell killing and have less of the toxicity that has been seen in some of these TCEs. And we believe that while TCEs against PSMA have been a crowded space, it’s also a good space because there is data out there. So something about what has happened in the clinic. There is really good evidence that you can get efficacy with a straight TCE and that’s a great place for us to prove the platform and to move on forward. But of course, that’s a bit downstream. Right now, we’re focused on getting the in vivo data. Andrew, maybe I’ll pass to you for the research piece question.

Yeah. Thanks, Carl. Thanks, Evan. Yeah. I think that the trend, as I indicated in the prepared remarks, the research fees has been reduced because of our focus more on internal programs, as well as the co-development. And we had highlighted that in previous quarters, that the expectation was that the research fees would be about this rate and trending downwards in the coming quarters. So you should be able to -- you should expect that. And what’s driving that is, as I mentioned before, the focus on internal programs, which is where the majority of those R&D dollars are spent and less emphasis on the partnership business, just with the few strategic partners and some of the co-development activities.

Thank you. The next question comes from Puneet Souda with Leerink Partners. You may proceed.

Hi. You have Michael on for Puneet today. So, I guess, I want to talk a little bit about the large cap collaboration. So you’ve noted a couple program expansions. I was wondering if you could talk a bit about how the economics of these collaborations have evolved since their first iteration?

Sure. So Carl here. Yeah. We are very pleased to reinforce the collaboration with Lily this quarter. Actually, that happened in Q3, but it was announced recently, so we brought it up on the call. That has been a collaboration that has been very productive, where there’s really good engagement with the scientists. And of course, Lily is one of the premier companies in the space and we believe that relationship is going to be important for AbCellera in years to come. I think I’m not at liberty to disclose the financial deal -- the financial components of that deal, but it’s moved in the right direction. The other thing I would say is that renewal or expansion of the collaboration alongside of the other ones that we noted, including Gilead and Regeneron, I do view as a very strong endorsement that the work that we’ve done in building the platform and being able to tackle some of the most difficult problems has produced a platform that is valued by people in the space that have their own capabilities and they’re at the very top of the heap. And I think that’s a really great indication that we’re on the right track in terms of being able to do a better job at creating antibody therapies. So as a message to the investor community that there is something under the hood, I think it’s a pretty strong signal.

Okay. Great. Now I was wondering if you could also clarify what drove the impairment you assessed this quarter?

Yeah. Thanks very much, Puneet. So the impairment -- we had an impairment of both contingent consideration, as well as some in-process R&D that we’re mostly offsetting. So you’ll see the contingent consideration impact in the other income and the IPR&D and the depreciation amortization and other. And that is from an acquisition made previously where we had some contingent consideration due. It looks as though that contingent consideration will be reduced and there was an associated impairment that we took on some in-process R&D relating to some programs that are not going to advance forward that were a part of one of those acquisitions. So it was non-cash and the impairments were roughly offsetting.

Great. Thank you very much.

Thank you. [Operator Instructions] The next question comes from Steven Mah with TD Securities. You may proceed.

Great. Thanks for taking the questions. Just a couple on the business development front. Congratulations on the Lilly expansion. But can you talk about new partner engagement levels? I’m curious to see how that’s going as you start to see a little bit more funding into biotech companies and you see a few more green shoots out there.

Yes. Carl here, I’m happy to take that one. Yeah. Glad to hear that you’re seeing more funding into biotech companies and some optimistic signs. That’s great to hear. Regardless of that, we have, for some time, been communicating that we’re focusing at the top priority, building and advancing our internal pipeline, as well as finding select strategic partnerships. So, I think, it was last call that we announced a new engagement with Biogen. This quarter, we’ve got a renewal with Lilly. That’s the type of deal that we’re looking for. We may also find interesting companies where there is synergy in technology or new biology that we think can contribute to building an exciting pipeline of either fully owned or co-owned assets internally. What that means is that you’re going to see lower volume. That, of course, is reflected in the research fees. That’s what Andrew mentioned. And there’s going to be a less brisk pace of announcements in partnerships as compared to, let’s say, 2020, 2021, when we first became a public company.

Okay. That makes sense. And then maybe pivoting over to your Viking ArrowMark collaboration. Given the success with Abdera and Invetx, those have worked out well. How is the Viking ArrowMark collaboration going and when should we start to expect to see companies start to launch out of that collaboration? Thank you.

We love that collaboration. I would say it’s off to a great start, but we are still in the early innings, right? So, we are working with them on program ideas and intend to create companies once we have development candidates. So that’s something that’s going to take some time to play out and we will let you know when we have something interesting to report. But I do agree that the Abdera example is a terrific example of the value that can be created by finding good ideas and complementary skills and executives and putting that together with the built platform. And we certainly hope to repeat that and we’re working hard to make sure that we do.

Okay. Great. Thank you.

Thank you. The final question comes from Bill Jahangiri with Truist. You may proceed.

Hi. This is Billal Jahangiri on for Kripus [ph]. We had a couple of questions here. Now that you’re increasingly prioritizing internal programs, how will you prioritize your partnerships? And on that note, what capabilities do you offer a company like Regeneron that they don’t already have? And also on that note, on your TCE front, we’ve noticed you had MHC peptide targets. I believe Regeneron used to have pig programs that never made it into the clinic and wanted to know how you differentiated there? Thanks.

Carl here. Would you mind maybe breaking up the question and just taking them one at a time?

Yeah. I guess for the MHC peptide targets, how do you differentiate from previous companies that have tried to enter in that space? It’s a complex target. You have to immunize mice and stuff like that and other companies have not gone into the clinic. So I just want to know how you guys are pushing forward and differentiating from them?

Yeah. Well, we mentioned the TCE programs are bringing forward. The program that is an MHC peptide target that we have previously talked about was not in that group before. Although we do believe that’s a program that has become interesting recently because of some readouts in the cell therapy space. So that target was against MAGE-A4. That’s one that maybe we’ll look at again and re-evaluate. In terms of our space in MHC peptide, we believe that in terms of generating TCR memetic antibodies, that our platform provides a very considerable advantage over other approaches that we’re aware of. That doesn’t mean that other people cannot do it, but we believe we can do that with greater speed and quality than most, at least on average, given a given target. So, there is -- in our view, no reason why if you can generate a good antibody MHC peptide target, that you would not bring that into the clinic, provided that you found an area of high unmet medical need and you’ve thought about the development path. So we think that’s an exciting space. There are, of course, companies that have developed programs against MHC peptide and we think there’s going to be a lot more of that in the future. It’s just not one that we’ve prioritized for the first programs in TCE.

Thank you.

Thank you. There are currently no other questions at this time. I will pass it back to the management team for closing remarks.

Thank you, everyone, for joining the call. We’re excited about the progress internally and we look forward to keeping you updated on future calls.

This concludes the conference call. Thank you for your participation. You may now disconnect your line.