AbCellera Biologics Inc. Q1 2023 Earnings Call
The 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 <unk> SEC filings are available on our Investor Relations website note that all dollars referred to during our call today are U S. Dollars now I am pleased to turn the call over to Dr. Carl Hansen.
Thank you Trent and thanks, everyone for joining us today.
It's my pleasure to provide an update on our business for the first quarter of 2023.
Through the first quarter, we continue to allocate our resources to the execution of our long term strategy.
Investing and building teams technology and infrastructure to create the industry's preferred engine for antibody therapeutics.
And using this engine with partners to develop a diversified portfolio of stakes in future antibody therapies.
This is a long term strategy designed to create an increasing competitive advantage to maximize value creation and to mitigate the risk that is inherent in drug development.
We continue to make progress on both objectives of our strategy.
With respect to our engine at the front end from program launched the lead candidate generation I believe we now have capabilities that are unmatched in the industry and that continued to improve.
At the middle of our engine over the past 12 months, we have brought online a set of powerful new technologies and workflows for antibody engineering high throughput assessment of drug like properties and lead optimization.
These capabilities are now being deployed in partnered and pre partnered programs and enable us to move programs quickly from idea right through to final drug candidate.
Our major focus is now on building the back end of our platform, including drug manufacturing and regulatory capabilities were.
We're making good progress in recruiting the leadership to these efforts and are actively building the labs and facilities that are needed for these functions.
I am confident we are on track and believe these efforts will will prove highly valuable to our partners and we'll provide accelerate a major strategic advantage to all dimensions of our business.
Underpinning our workflows, we continued to invest in the automation and software systems that are critical to integration efficiency and scale and that are the foundation for the development and deployment of machine learning methods.
In terms of building our portfolio, we continue to prioritize programs that maximize long term shareholder value and not near term cash flow or volume of partnerships.
With the technology the teams and the infrastructure in place, perhaps the most valuable input for adding value to our portfolio or the new ideas for medicines.
We believe that good ideas can come from anywhere.
For the large majority of our programs ideas come from our partners our partners come to us because we can help them get to their next value inflection point with greater certainty speed and capital efficiency.
Depending on the resources and program requirements. These collaborations contribute to programs contribute programs to our portfolio that can be structured with different risk reward profiles, including partner initiated discovery programs and co development programs.
Another rich source of program ideas, our antibody development problems that are widely known in the industry, but that are generally believed to be unsolvable.
We invest in sustained technology development efforts that seek to unlock these high value opportunities.
This requires working on multiple targets.
As this work proceeds these pre partnered programs can generate wholly owned assets that anticipate partner needs.
Although these programs represent a small fraction of our portfolio. They have the potential to create the most value on a program by program basis when partnered.
Moreover success in our pre partnered work will demonstrate that our our strategy is working and that our technology can open up new market opportunities, thereby attracting more program ideas from partners.
Regardless of the source of the idea and regardless of the program tight all programs are ultimately hand it to partners.
Each contributes to building a large portfolio that is diversified across partners risk reward profiles modalities and indications.
Being open to working on the best possible ideas, regardless of the source allows our engine to create maximum value for shareholders partners and patients.
T cell engages our TCE is provide a specific example of how our pre partnered programs arrived from technology development work that has the potential to open up new areas and make us a preferred partner for an entire class.
Tcs are amongst the most promising new modality in cancer therapy.
<unk> proven effective in liquid tumors recent clinical data supports the potential of TCE in treating a wide array of solid tumor types.
T cell engages our antibodies with two arms that are designed to simultaneously bind to cancer cells and specific immune cells called T cells.
TCE is work by bringing T cells in cancer cells, together and stimulating the T cells to kill the cancer cells.
Two key challenges both associated with toxic side effects must be overcome to realize the full potential of tce's in treating cancer.
The first challenge is to achieve the appropriate strength of T cell activation.
Activation that is too low results in poor efficacy while over stimulating T cells can result in cytokine release syndrome, a systemic inflammatory response that can limit treatment and result in severe or life threatening toxicity.
The second challenge with TCE is specificity that is to generate antibodies that recognize targets that are present only on cancer cells and that are not present on healthy cells.
In April <unk> represented two posters at the 2023 American Association for cancer Research meeting that demonstrates how our TCE platform can address both of these challenges.
Today I would like to highlight the main findings from this work.
With respect to the first challenge that are controlling the level of T cell activation the level of activation is determined by the bispecific format as well as the properties and pairing of the <unk> antibodies.
The vast majority of Tce's activate T cells by binding to a protein called <unk> three.
Because <unk> is in a tourist difficult target there are very few accessible CD III antibodies from which to make by specifics.
This limits the ability to control the level of T cell activation.
In fact, approximately three quarters of Pcs in the clinic are derived from a single most CD three antibody SP 34 dash too there was discovered in the 19 eighties and is suboptimal properties, including the induction of strong set of kind of release.
To solve this challenge we launched a technology development project about 18 months ago to build a platform that could quickly generate tce's that achieve the optimal balance between tumor cell, killing and cytokine release.
Our hypothesis was that there is no single CD three that is well suited for every application and that a large and diverse panel of <unk> is an essential resource for creating TCE is with superior properties.
One of our posters that are at ACR demonstrated data on our newly generated CD three panel and its use in building optimized TCE against two cancer targets Egfr and <unk>.
Key results from this poster assets are as follows.
First we have built what we believe to be by far the industry's largest collection of CD three binders with more than 500 unique antibodies.
This panel offers unmatched diversity of binding properties and binding locations excellent develop ability and is highly differentiated from commonly used molecules.
Second this panel allowed us to effectively control of T cell activation against both targets and to achieve the desired profile, a potent tumor cell, killing with low cytokine release.
Third.
In all cases, the resulting Tcs had superior properties as compared to those built with a commonly used SP 34 dash to CD three binder and fourth that the performance of different TCE is depends on the tumor target and the level of target expression on the cancer cells.
Together these results support our hypothesis and demonstrate the potential of our platform to quickly generate Pcs that are engineered to have optimal properties.
And our second poster we presented an approach to addressing the second challenge of finding antibodies that are highly specific to cancer cells.
Central to this challenge is that there are few known proteins that are expressed only on the surface of cancer cells and not on the surface of healthy cells.
Because there are many more cancer specific proteins expressed inside cancer cells the ability to target. These with antibodies would open up a huge number of potential targets.
One way of doing this is to target fragments of cancer proteins known as peptides that are naturally presented at the surface of cancer cells by the major histocompatibility complex or MHC.
This process of peptide presentation by MHC, it's a part of natural immune surveillance and Chris and all cell types in the body.
The potential of targeting cancer through MHC peptides has attracted high interest and is being pursued with different approaches most commonly with cell therapies or engineered T cell receptors T four called <unk>.
And I'll turn to the approach is to use antibodies known as TCR memetics that are highly specific to MHC peptide complexes.
Discovering such antibodies is extremely challenging and to date. There are only two examples that have made it into clinical development.
Our poster demonstrated that we can quickly generate antibodies against a well validated cancer specific MHC peptide target derived from the protein major four for which there had been a clinical stage TCR mimetic.
We screened more than 1 million cells and found more than a dozen fully human antibodies with high affinity good developer ability and specificity to me Jay for that is comparable or superior to the clinical benchmark.
Perhaps most significant is the speed and ease with which this result was obtained from a single screening campaign and without the need for subsequent antibody engineering.
This result shows that we have capabilities that can readily address a large and essentially untouched class of tumor targets for Tcs.
Importantly, TCR mimetic antibodies can also be used in other therapeutic modalities, including antibody drug conjugates radiopharmaceuticals and cell therapy.
As such we believe this is a technological advance that has broad implications for precision oncology.
Another area, we're focused on is unlocking difficult membrane protein targets.
I am pleased to share that we had a new molecule to enter the clinic this quarter against this challenging target class.
This program is from one of the Accelerants first discovery partnership agreements with Teva Pharmaceuticals, and is directed against a difficult membrane protein target for an undisclosed indications.
I would like to congratulate Teva on this milestone and we are pleased to see the work from this collaboration progressing forward to help patients.
As I've mentioned on previous calls <unk> discovery engine and business model can also help to expand the ecosystem of drug developers by leveling the playing field for innovative new ventures.
Again this is about finding the best ideas and the best innovators and connecting them with technology to create new opportunities and in some cases, new companies that might not otherwise be possible.
This quarter, we are pleased to congratulate our partner <unk>, who announced last month, a $142 million financing.
<unk> proprietary technology develops next generation radiopharmaceuticals to treat cancer.
<unk> was a founding partner in <unk> and we started our first program with them in March of 2021.
Dara has announced that they are elected the first clinical candidate from this program a radiopharmaceutical for the treatment of cancer.
The company plans to file an IND in 2024.
It's worth emphasizing the remarkable speed by which this company has gone from concept high growth biotech with their first clinical candidate a growing pipeline and backing by top tier investors.
Have seller.
Pardon me sorry.
Finishing up <unk> is now in a position of enviable strength, we have a strong balance sheet and remain focused on the fundamentals of our long term strategy.
Accordingly, we are directing our energy and capital to three key activities first expanding the capabilities of our discovery engine, including forward integration with manufacturing regulatory and clinical capabilities.
Continuing our technology development efforts to unlock new target classes, and modalities, including T cell engages <unk> and ion channels.
And advancing high quality programs and partnerships to build our portfolio.
We believe continuous work and progress against these priorities will create the maximum long term value while minimizing risk.
This quarter, we have brought evidence this strategy is working in the form of a new molecule in the clinic.
Co founding and financing of an exciting new company in the area of Radiopharmaceuticals and data showing that our engine can solve key problems and developing new T cell engages for the treatment of cancer.
We look we look forward to sharing more evidence of progress later this year with anticipated milestones, including election of the first clinical candidates from partner initiated co development and pre partnered programs.
And with that I'll hand, it over to accelerate to discuss our financials pardon.
Pardon me I will hand, it over to Andrew to discuss our financials Andrew.
Thanks Carl.
First let me highlight progress made on our key business metrics in the first quarter of 2023.
We ended Q1 with a cumulative total of 101 program starts there were no new program starts in the quarter.
As a reminder, the number of starts in any given quarter will be irregular over the trailing 12 months. We have started work on 17 programs representing almost a fifth of our cumulative number of program starts we expect that the long term trend in program starts will remain solid while we continued to do more work and add more value on programs.
We signed three new programs under contract with one new partner or <unk> in the quarter. We ended the first quarter of 2023 with 177 programs under contract with 41 unique partners.
As we mentioned on the last call. The numbers included in our key business metrics do not include pre partnered programs from our technology development efforts.
For our molecules at the clinical stage, we saw one additional molecule from a discovery partnership reached the clinic progressing into phase one clinical trials. This new molecule brings our total number of molecules in the clinic Tonight.
New molecule was discovered by us in partnership with Teva and has entered clinical trials with an indication in neuroscience.
As we have said in the past we view our growing list of molecules in the clinic as specific examples of our near and midterm potential revenue from downstream downstream milestone fees and long term royalty payments.
Turning to revenue revenue in the quarter was approximately $12 million. This is our first full quarter without COVID-19 royalty revenues since the FDA announced in Q4 of 2022 that <unk> is no longer authorized for emergency use.
Revenue this quarter was driven by approximately $11 million in research fees relating to work on partner initiated discovery programs compared to approximately $9 million in Q1 of 2022.
This quarter's revenues also include approximately $1 million in milestone payments attributable to molecules progressing into the clinic, both from the partnership with Teva and from Novo rock, which progressed into the clinic in late 2022.
We also generated approximately half a million dollars in licensing fees.
Turning to our operating expenses, our research and development expenses for the third quarter were approximately $53 million, representing a roughly $26 million increase over the same period of the previous year.
This increase reflects the continued growth of our program execution work platform development and forward integration to build the capabilities and capacity of our engine.
It also includes investments and partnered in pre partnered programs.
Proximately $20 million in the first quarter related to specific onetime and nonrecurring upfront investments in co development and pre partnered programs.
And sales and marketing expenses for the quarter were approximately $4 million <unk>.
Compared to approximately $2 million in Q1 of 2022.
This increase reflects continuing investments in our business development efforts and team.
General and administration expenses were relatively flat for the quarter at approximately $15 million compared to approximately $14 million in Q1 of 2022.
This increase show some operating leverage in the G&A investments that we have made so far to support the growth of our business.
Looking at earnings we are reporting a net loss of roughly $40 million.
This compares to net earnings of approximately $169 million in Q1 of 2020 to.
The loss reflects our continued investments in our business and the absence of royalty revenues that were present in Q1 of 2022.
In terms of earnings per share. This quarter's result works out to a loss of <unk> 14 per share on a basic and diluted basis.
Looking at cash flows operating activities for the first three months of 2023.
Used roughly $44 million. This is our first quarter of negative cash flow since becoming a publicly traded operating company in the absence of regular royalty revenues, we would expect our quarterly operating cash flow to be irregular and often negative as we continue to invest in the company.
As a part of our Treasury strategy, we keep over $600 million invested in short term marketable securities our investment activities for the first three months of the year include an approximately $98 million net increase in these holdings as a part of that cash management strategy.
All other investment activities amounted to approximately $51 million, including nearly $15 million invested in property plant and equipment and approximately $35 million in long term investments.
Altogether, we finished the quarter with over $800 million of cash cash equivalents and marketable securities.
We prioritize investments to achieve scale operating leverage and expected rates of return when we allocate capital as a reminder, we have also been successful at funding non dilutive sources of capital, including government funding. As an example, we have received funding commitments from the government of Canada's strategic innovation fund to support expense.
<unk> into our manufacturing facility.
While this capital the capital does not show up on our balance sheet. It allows us to maintain a high level of capital efficiency.
With respect to our operating expenditures our capital needs are very manageable and we remain in a strong liquidity position that allows us to fully execute on our strategy with excellent visibility and runway. We continue to believe that we have sufficient liquidity to fund well beyond the next three years of investment and growth.
And with that we'll be happy to take your questions.
Operator.
Thank you Jim I'll ask a question. Please press star followed by one on your telephone keypad now if you wish you and maybe it sounds from the queue. Please press star followed by <unk>.
To speak please ensure your line is Amit <unk>.
The first question on the line comes from Andreas <unk> of Goldman Sachs. Please go ahead. Your line is open.
For taking my question Carl could you maybe speak more on the feedback from the ACR poster presentations and then when you do you think about the panel of the three anti <unk> what are the next steps here.
Yeah.
Thanks Andrea.
So we had.
I'd say a terrific response from the presentation of the data at ACR.
There were several conversations that have since moved forward with some of the top firms that are working in the space generally.
Generally.
I would say that people that had been working in this space for a long time fully.
<unk> the scale of what has been done in expanding the diversity and the quality of <unk> three antibodies that we have at a starting place and the early data that we presented demonstrating that we could use this to tune the level of T cell activation, while still giving tumor cell killing.
Attracted a lot of attention so we're advancing those those discussions.
There are some groups that are particularly interested in the pre partnered programs that have begun these are still at an early stage, but we do expect that we.
We will continue to work on those over the next year and move some of them to the point of a development candidate, where we're starting to narrow in on final clinical candidates we.
We expect that that will have a couple of positive impacts one it allows us to further demonstrate the versatility of the platform across multiple targets and to move these forward into molecules that have the properties that are suitable to move into IND, enabling studies.
And two it is a way to engage with some of the companies that are more interested in assets than in access of the capability.
And at the same time.
The cable as we've shown have also started to generate quite an interest from firms that want to start on new on new targets and begin from the beginning so I would say this is on track. We believe that this effort is creating value.
And it's still a little early to project just win will.
We will be able to engage.
With one of those one of those conversations or more that's ongoing.
Understood and then my second question is just as you think about your stated goal of speeding up the time from ideation to moving at a candidate into the clinic.
Curious now that you have nine molecules in the clinic first can you help quantify where you think you are right now in terms of the average time.
And between those two points and then second how much quicker and do you think you can get as the technology and the platform improve.
Yes, that's.
A tough question to answer so.
We have nine molecules in the clinic some of these have come from the training platform.
Others have come from discovery work that we did and have moved forward with partners now into early clinical development.
When you look at the molecules in the clinic. This is always a trailing metric. So what you see coming to the clinic. Today is work that was done years ago at a time when.
We were a smaller company than we were handing off molecules and earlier stage. So.
<unk>.
We are very pleased to see that even some of the earliest work for instance, what was mentioned today from Teva.
The program that wrapped up in 2017 made.
Made it through to the clinic and shows that there is early work that despite the fact that didn't get quickly to the clinic or in a timely way is not dead and continues to move forward.
But the more recent projects.
We think that from programs start to clinical too.
<unk> 90 filing in roughly three years is is very quick compared to the industry standard and something that we expect to be happening. So we're making progress there in terms of how quick we think we can be.
We think that really comes together once we have finished off the back end of the platform here it et cetera. So if we have integrated translational science manufacturing and regulatory capabilities.
And then we can save a lot of time through the integration and the streamlining and so that's.
That's something that we're working on hard but of course thats yet in the future.
Alright, thanks, so much.
The next question on the line comes from Antonio Barreto of Brain Batkin. Please go ahead. Your line is open.
Hi, guys. Thanks for taking my questions.
So my first question is regarding.
Can you just remind us what your current economic interest in the company and.
You classify it that says that partner initiation of program, but just wondering considering that you were one of the founders are you doing any more work on this program or are the deal terms kind of pretty similar to what we've seen with the out there.
Partner initiated.
Yeah.
Hey, Antonio This is Andrew I'm happy to take that one yeah. We were a founding partner as Karl mentioned in the prepared remarks back in 2021 would have Dara and we announced that with that partnership that we would do the discovery for them, we took a minority so less than.
<unk> continued to day to have a minority equity position in the company that's less than much less than 20% and in addition have the typical kind of deal with <unk>.
Myles stones and royalties due on the molecules that we discover in our partnership with them. Those are included in the metrics that we propose or that we publish every year in our 10-K.
So they are included in those aggregate and metrics that are published.
What's important there and it's maybe points to some comments that Carl made in the first question that those molecules look to be on track to get from that idea to the clinic within about three years and and we.
That was a partnership of nine molecules. So we continue to do work with them on some of those additional targets and of course, the first ones in discovery work that we've done on their first antibodies have been completed and handed back to them and are on track to get into the clinic in 2024.
Okay, Great and then my.
The additional question is just regarding the sector downturn and are you seeing anything with regards to.
The inbound interest from potential partners the type of deal structures partners are interested in.
Or maybe anything from the competitive landscape like is there more competition for partners or consolidation in the field.
Yes sure excuse.
Excuse me, it's currently Anthony I'll take the question.
So this is something that obviously, we're watching and responding to as everyone else's.
From our perspective.
Big change in in our partnership business has been really focusing on finding the very highest quality partnerships and engaging in partnerships with.
With a deeper interaction in terms of bringing molecules further to a value inflection into clinical development.
So over the past.
Year of focusing on that our feeling is that despite the economic environment. The quality of the partnerships the quality of the work thats being done and the volume and amount of work that has been done across programs has all gotten substantially better and so we feel like our business is getting stronger over time.
It's definitely the case that there is a lot of companies that are facing.
<unk> headwinds in terms of raising capital.
When it comes to competitors, we see that as a strategic advantage for <unk>, given that we're well positioned well capitalized and we can just focus on executing on the plan.
With respect to potential partners.
There is the possibility that companies are forced to prioritize on a smaller number of programs.
It's up to us and our business development teams to make sure that we're finding those opportunities and engaging on the things that our highest priority in this market and in any market and so we.
We don't feel we're highly affected.
<unk>.
Of course it is.
It's still playing out and so we will we'll keep our eye on that.
Okay. Thanks.
The next question on the line comes from Stephen Willey of Stifel. Please go ahead. Your line is open.
Yes, good afternoon, thanks for taking the questions.
I guess on the on the TCE front do you think that some of the CD three focused collaborations that you could be doing here going forward.
Would include scenarios, where a partner is kind of bringing a variable domain against the tumor antigen to the table and just selecting one of the CD three variance to pair with.
Or do you envision.
I guess monetizing the CD three.
Library by kind of a.
Built for purpose start from scratch type of approach where you are.
We're developing both both ends of the antibody.
Yes. The short answer is that we are open to working with partners in whatever way it makes the most sense.
So the three ways that we envision.
Partnership being set up our first we have.
Now initiated work on five pre partnered programs as those advance.
We expect that there will be partners that are interested in those specific targets.
And that will be it.
We will be able to partner with them either while we're still in development and getting towards the final candidates or after that has been done. So that's the first way.
Second way is that by doing that work, we have the data to show partners the ability to quickly generate optimized TCE and this has attracted interest from groups that have new targets for which they don't yet have antibodies and of course, our business and our capabilities allow us to quickly generate those antibodies and then pair them and test them with.
Different CD three so that's the second way and the third way is the one that you alluded to where partners may have binders already.
They believe are adequate or up to the task for making a new TCE.
We would be happy and are interested in engaging and using our CD three panels to properly pair those with the right binder to get the right properties.
That isn't just a matter of sending over CD three that requires that we take the binding molecule.
And we make a large panel of bi specifics and run it through the functional assays and there may even be a couple of iterations of that since we have a very large count to go through so there's still substantial work there, but thats another path forward and one that we're definitely.
Contemplating and there are some discussions in that direction.
Okay and then.
I know one of the ACR posters highlighted the capacity on the major forefront to target. These.
MHC peptide complexes.
And I guess, that's addressing the specificity part of the question, which is kind of click <unk> in solid tumors, but then.
There is also this question I guess of.
Intra tumoral T cell availability in.
<unk> energy that exists in solid tumors as well and just curious if.
And doing more work here on on the TCE is it.
Now I guess inherently interested in.
Moving towards a multi specific format as well, where you're introducing something like co stimulation.
Well first off by specifics or multi specifics.
An area that we believe is going to be very high growth for the industry and one that we're very well positioned to help drive.
Our work to date has been on Tcs that are based on a variety of formats using ortho mab that are pairing CD three with tumor antigens.
Youre right to bring up some questions of T cell energy are the T cells there.
One of the things that we expected that some of these therapies would be used in combination with other immuno stimulatory or checkpoint inhibitor type therapies, and that's something that is being pursued across the industry.
So that's one of the solutions.
But coming back to your opening comment the work against MHC peptide antigens.
We think is.
<unk> is showing the potential of the platform to open up a whole field of targets for Tcs and even more broadly to open up the target space for precision oncology and so we think that particular.
Result, and particularly the speed and ease with which it was done.
Is very significant and has potential in adcs and radioisotopes and beyond and so that's an area that we're quite excited about.
And.
And are starting to to work on a strategy as to how we want to pursue that further on the technology front on the partnership front.
Okay that makes sense and then maybe just lastly, Brent Andrew can can you clarify just a little bit more of the.
I guess it was about $20 million of one time impact that was embedded in R&D is a function of investment and partnered in pre partnered programs are those specific to any collaboration or.
Great question, Steve So.
Yeah, absolutely. So as we've mentioned we've got as you know from our previous metrics. We've got a number of co invest programs in pre partnered programs that we've initiated the good news there is that those programs are progressing well and as Karl even said, we expect at the end of the year to have something to talk about in terms of lead clinical candidates in those areas.
We have some upfront investments or commitments, we needed to make.
Specifically related to those co invest in programs and Thats what needed to go through our P&L in the R&D in the form of 20 million. So we don't expect it to be recurring recurring it's one reason we called it out. So we know you are building your models and just to make sure you have the right kind of run rate R&D expense built into those.
We wanted to call out that.
Upfront investment, specifically and hope to have more to share about that at the end of the year with as Carl mentioned, having lead candidates.
Clinical candidates available to talk about.
Okay. Appreciate it thanks.
Oh.
The next question on the line comes from MS. Shang Gandhi of Charles. Please go ahead. Your line is open.
Hi, This is Sean and one for Robin actually.
Our first question in terms of BD.
How much of your current business development.
From inbound versus like the levels of marketing that you kind of have to do all this.
Yeah.
Sure.
I'll take that so the nature of our business development is that it depends a great deal upon building scientific credibility and a network across the industry.
No.
<unk>.
The best opportunities that we find are typically because we have become known.
None in the sector through investors through stakeholders through previous partners and of course at scientific conferences.
I'm not sure if you want to call that marketing or do you want to call that inbound.
It's really about building relationships and trying to find the right people within organizations that appreciate the technology.
And can see how <unk> platform can help to create value on both sides.
Great. Thanks.
Second one in terms of program I know you had.
<unk> that this quarter.
You do not have any programs tax and there is variability quarter to quarter. So just wondering if this would be this quarter or at least is it attributed and something that we look at the overall macro condition or do you think is just.
This one quarter that you did not have any program starts.
Yes.
Andrew here as you May recall in Q4, we had a particularly strong quarter as well with nine programs starts. It's just the way. This metric is calculated and it's quite clear in our statements and filings about how we calculate this there's very specific triggers that would constitute a program starts.
Timing I think in the first quarter.
The strong fourth quarter and then just resulted in very few or none in in the first quarter. We do expect to have a strong number of program starts in the duration of the year. So that long term metric that we've always pointed to as kind of a trailing 12 month metric I think is the way to to look at it.
And.
I think Thats, where you would look.
As we're going forward. It is not we don't think its anything systemic that's out there if thats what youre asking.
In the in the health of the programs and partners that we have we actually think it is very strong.
If I could just add thank.
Thank you for another yes.
If I could just add another question I'm sorry for that.
So.
As Andrew said theres going to be fluctuation from quarter to quarter in part that is the nature of the type of business development that we do so.
We are not managing the business development in our business in general.
For quarterly.
Quarterly numbers, we're managing it to find and engage with the very best at the very very best programs in the highest value programs that we can find.
In terms of.
The capacity, which I think is probably the thing that smooths out.
And looking at the work at any given time.
We are working on perhaps 20 different partner initiated programs and over the past year, we have been doing more and more on those programs as we built out capabilities to take take programs further and further towards in a value inflection point. So the growth of activity has gone up substantially and layered on top of that over the last year.
We've also announced initiation of more than 10 pre partnered programs. So in terms of applying or in terms of executing the strategy building capabilities and using those capabilities to build the portfolio.
We feel like there has been.
We're in great shape, and we're very very pleased with.
The partners partnerships that we have formed and the ones that we think are in the pipe coming up so just wanted to add that.
More color.
Great. Thank you very much.
The next question on the line comes from.
<unk> <unk> from Baird. Please go ahead your line is open.
Hey, guys How's it going.
Wanted to ask how should we think about the average NPV.
The split between the three.
Program Times pre partnered partner initiated co development and the standard partner initiated discovery programs are you able to provide any color on how should we should think about that or is it still early days and we shouldnt think about it on a separate basis just yet.
Okay.
Yes, I don't think you should look at it as a separate basis just yet.
Thank you.
The partnership business, which you are quite familiar with what we've been.
Large volume small royalty stakes in those which we've which we publish annually how that's been progressing and as Carl said as we're doing more work generally we're managing to command higher and higher economics really focused on the royalty.
These year to do the with such a number of them in that portfolio. You can do maybe that aggregate I think it's too early to try and put an MPV formula or we don't have enough details about either the co investment or the pre partnered programs, but maybe for a future time.
That might be appropriate.
Got it and then just a quick follow up for me just as a reminder, you might've touched on this earlier I apologize.
Many to date program starts have you had for pre partnered programs and then for co development programs respectively.
Yes, we have.
17, co development programs like under contract of which I think we've initiated about six or seven and on the pre partnered programs. We've initiated I believe it's well.
We partnered programs and that's a mixture of the key programs that Carl talked about the difficult targets and of course, our work in pandemic preparedness was actually.
The first pre partnered program.
Got it thanks, guys appreciate it.
Yeah, Karl here I, just wanted to add maybe another comment on top of Andrea's response there.
So one of the things I want to highlight is that.
Whether it's partnering.
Partner initiated or pre partnered program.
This is all part of building a diversified portfolio of steaks and future therapeutic programs now there are some differences in the investment and the risk reward profile updates. So partner initiated discovery programs. This is the highest volume number.
The return on investment for these is very high since we did the early work and then we hand it back to partners.
And we have tremendous conviction in that as a long term business if you.
If these are successful as they have been historically and you run the numbers in the long run you end up with an outstanding.
P&L and we don't build in a big balance sheets to fund all of them.
And that's a business that we're going to stick by it and Thats a key pillar of our strategy on top of those we have opportunities where we can see the opportunity to have more conviction.
And those are co development program, so it'll be a smaller number where any one of those if they are successful can materially change the business and the pre partnered programs also have that profile with the added benefit that we control them that.
That we generate the data that we can then show to partners and to the market.
To demonstrate that we're making progress on the strategy and when partnered we believe that those have the potential to generate very substantial upfront payments in cases, where theyre successful.
Now the nature of those that we're working on difficult.
Well validated high value targets. So not every pre partnered program will result in an asset but.
But we do believe that we're making strong progress against that and it's one of the parts of the business that we are most excited about but I also think it is a part of the business that <unk>.
People should give us value for when we've actually shown evidence that it's working and so at this point, we wouldnt hazard to try to split what is the value between the different pillars. We think it's all part of one strategy.
And it's about building a portfolio that <unk>.
<unk> value in the long term and that's balancing the risk reward across the different programs that we run.
Awesome, Thanks for the color guys.
Hey, Gal, Rob just wanted to make one clarification point as well so the co development programs are included in the program metrics that you see but the pre partnered programs in terms of starts or not.
We've.
I tried to be consistent with that but just for added clarity we wanted to point that out.
Thanks for that answer I appreciate it.
The next question on the line comes from Puneet <unk> of Seb Securities. Please go on line. Please go ahead. Your line is open.
Yeah, Hi, Karl Andrew Thanks for taking the question. So first one I mean.
I appreciate the fluctuations in the program start and.
Or overall.
Macroeconomic climate.
Now with Covid somewhat behind would it be possible to.
Provide.
Annual maybe not a quarterly as you pointed out maybe maybe an annual guidance.
Guide number from at least from the research seats perspective.
And just wondering how should we think about.
In terms of the metrics that we ought to be tracking.
For the maybe at least on annual basis.
Hey, puneet thanks.
Thanks for the question.
We we are not looking to provide guidance on the research fees.
Revenue also because its not where we believe the biggest value is that is reflected in kind of the metrics that we do present, which of course are the the program starts and how we're building that portfolio.
So I think we don't have a plan to to.
To provide that kind of guidance.
In the future for for revenue.
<unk>.
Yes, Carl I think you wanted to add something to that.
Yes, I was just going to say.
We definitely appreciate that people are building models or trying to get good good clarity on topline revenue in the near term.
From my perspective, I think our perspective.
We are executing a strategy to build capabilities and then build a stake in future therapeutic programs now.
When market conditions get tough, there's a tendency for people to look on the short term.
We think that optimizing our running the business for short term revenue is the surest way to destroy value in the company and so for that reason, we are not providing guidance because we are not optimizing that in the business development, where we're optimizing is building strengthen the capabilities and making sure that we're engaging those capabilities on the various.
Best programs with the best partners.
Ultimately bring molecules through the clinic and to have a significant piece of those.
So that's the reason that we are reluctant.
To provide guidance on research revenue.
That's not where we're steering the company.
Okay.
Sure.
And then.
On.
Technology, and the technology stack that you've developed.
Karl maybe can you provide given the environment that we're in and the <unk>.
Capital funding are you finding opportunities on the technology side to sort of grow the stacked grow the capability or do you see this as a time to largely invest into the pre partner program. So.
You potentially have Molly.
Molecules down the line.
That could provide upside how would you think how are you sort of thinking about the sort of investments into the technology versus investments into the pre partnered programs.
Sure so.
When there are difficult.
Market conditions and capital is scarce.
Theres always an opportunity to look for M&A opportunities that makes sense and in the past we have done that.
To bring on technologies that have helped to complete our capabilities on the front end.
We're always looking at opportunities, but right now in terms of technology development investment for capability building. The lion's share of that is going to be on.
Completing the forward integration so translational science.
Manufacturing.
Regulatory and clinical capabilities that allow us to take programs from concept right through to <unk>.
Where the majority of the focus is today.
And then in terms of investments on pre partnered programs. These are programs that are being advanced in connection with high value long range R&D. So if you looked at how accelerate is allocating capital today. It's the same that we were doing a year ago or two years ago and roughly we have three.
Pardon me two thirds of our total investment.
On building technology and capabilities and about one third on executing on the partnership business and we expect that that will be the case.
For the next couple of years at least as we complete.
Building the antibody discovery and development engine that we set out to build more than a decade ago now.
Got it and then just last one if I could clarify what's the estimate that you were expecting data in later this year or was that another contract that you mentioned.
I don't think I mentioned the conference, but we are making rapid progress on the TCE work.
And we will look at every opportunity to present updates when they are available at major conferences and that would be an obvious one to target.
Got it alright, thanks, guys.
The next question on the line comes from Malcolm Hoffman of BMO. Please go ahead. Your line is open.
Hi, guys just knock them on for FMC do you remember.
Wanted to.
Asking if you could give a little bit of commentary regarding partners operationalized in collaborations with some urgency.
We observed changes the economics for these new programs and updated terms for existing programs or are the are there any other notable trends that you'd like to call out.
And then just secondarily on the manufacturing side, how do you think about capex going forward.
Mr capacity, you focus more on kind of a developmental side in clinical or more towards scaling up towards commercial and.
Later on thanks.
So it sounds like there was a two part question.
I'm happy to take the first part, but I didn't quite understand the nature of the question could you maybe restate that one.
The first question.
The first question was about business terms, but I didn't quite understand what you were asking.
Yes, we were just looking for a little bit more commentary basically on.
Collaborations in general the overview of kind of what the term structures being like for some of the later stage collaborations and any trends that you are hearing from kind of your collaboration partners in general for those those new agreements going forward just thinking about the collaborations in general there.
Sure so.
Generally.
The trend has been that as we add capabilities and do more work on.
Our total value.
And in in a program has increased and normally.
We always look to have that value connected to the success of those molecules as they move to the clinic and ultimately to approval. So that has been constant I would say one of the.
More interesting developments over the last year in terms of the nature of our partnerships is that now that we have built and scaled.
Sort of the middle part of our engine so to be able to do not just the early.
Early discovery and generating panels and hits and lead but take those right through develop ability packages and translational work and come with the final clinical candidates that are ready for IND, enabling studies.
That's a much deeper type of interaction. It's one that we think really differentiates us from many of the competitors that are out there where there is there has been in our view a tendency for for groups to be providing sort of a shallow and thin offering that stopped well short of what is the value inflection, particularly for the smaller companies.
So what that means is these are these are more deep interactions and their interactions where we will look to.
To create value with partners in a way that's <unk>.
Even more collaborative.
And I think Thats, a very positive thing for our business and one that we're excited about.
Yes.
And welcome Andrew here I'll take the second part of your I'll take the second part of your question, which is more around Capex and I think it fits in very nicely of course with the strategy that Carl mentioned, we're what we're building here is the capabilities to go from target to <unk> in the clinic.
Our antibody discovery engine and in doing so the capital expenditure, where we're putting forward at the moment is really focused on those that vertical integration into CMC GMP manufacturing capabilities in order to actually go from target to drug product that could start in a phase one clinical trial.
Yes.
As I mentioned in the prepared remarks, we have the capital to continue those investments as we have indicated in the past and we have been I think.
Quite capital efficient and looking for non dilutive sources of capital including that.
That we got from the Canadian government strategic Innovation fund to co fund, 50% of that capital investment building out that manufacturing facility. So we have quite a detailed capex plan over the coming years as we complete the building of this engine and capability from target all the way to the clinic.
Thank you really appreciate it guys.
The final question on the line comes from Stephen <unk> of Cowen. Please go ahead. Your line is open.
Alright, great. Thanks for taking the questions a lot of ground already covered so I just have one follow up question on a previous pre.
Previous topic.
So you've talked quite a bit about the pre partnered discovery efforts, but could you provide some color on how you balance this internal R&D effort versus your partnered R&D efforts is there ample capacity at the company for for both.
And especially as you think about adding new partners and new partnered programs.
As they start to mature or are they potentially could require more R&D efforts.
Should we think about that.
From a capacity standpoint.
And then how should we and then the second part is how should we think about pre partnered program.
Program prioritization going forward, given the higher cash burn and you talked about it being offset by the potentially higher MPV of the wholly owned programs, but you know just how should we just think about that.
Going forward I'm talking about more like long term, maybe not 2023.
It's a great question.
So first in terms of balancing partner initiated of which there are two types, there discovery partnerships and co development versus pre partnered.
We're not trying to manage the business to a specific mix of those two what we are doing is making sure that we are deploying our time and resources and capital on what we think are the most valuable programs to be working on.
And as I've said before we want to be diversified across indications across modalities and across risk reward profiles.
In terms of capacity one of the things we've really seen over the last year is a major improvement in our throughput in the front end of the engine, which is what we would expect and hope to have seen.
Given the investments that we've made over the last little while so the total activity. That's ongoing in partner initiated programs has gone up substantially we've layered on top of that significant work on pre partnered programs that was already being resources because its part of long range technology development efforts and we still have <unk>.
Capacity to take on more programs at any time. So we are not capacity limited now where that.
Where that probably breaks down a bit is once programs move forward into the back end of the engine so into <unk>.
Translational science, and certainly into manufacturing and beyond where we're still constructing those capabilities and.
So theres definitely a capacity limit there and our job right now is to make sure that we are making the investments doing the hiring getting organized getting economies of scale. So that that capacity exists to take the programs that move into that part of the pipeline forward without having to take the foot off the gas.
The second part of the question was about capital allocation.
To be clear.
Pre partnered programs are not about us shifting strategy in any way. So the intent is not to suddenly double down on a single thing and run it all the way through.
We are taking these forward.
To the point, where we can hand them off to partners and have created value by having solve the tough problems and anticipated partner needs.
And that that typically means that we're we're not going we don't expect to incur large costs at least in the foreseeable future connected with those and we do believe that as a business.
That has the potential to be cash generating in the near to medium term as we had those over so we actually think that the cash flow profile of the pre partnered programs is a positive feature that complements well the discovery initiated partnerships, which because they are mostly connected with royalties.
Have.
Great cash flow, but it's substantially on substantially longer timelines, because it requires ultimately approval and delivery of therapies to patients.
Okay I appreciate the color very helpful. Thank you.
Yes.
We have no further questions. So I'll hand back to Carl Hansen for any closing remarks.
Thank you everyone for joining the call.
It's always a pleasure to provide an update and we look forward to the next one.
Thank you. This concludes today's conference call. Thank you all for joining you may now disconnect Nicole.
[music].
This concludes today's conference call.