Full Year 2023 AbCellera Biologics Inc Earnings Call

Operator: www.globalonenessproject.org Thank you. Thank you. Good afternoon.

Okay.

Matt: Good afternoon, and thank you for attending to upsell or biologics in FY 2023 earnings results and business update call. My name is Matt and I'll be your moderator for today's call all lines have immediate during the presentation portion of the call as an opportunity for questions and answers at the end. If you would like to ask a question. Please press star one on your telephone chemo.

Matt: Thank you for attending the Abcellera Biologics Inc. FY 2023 Earnings Result and Business Update Call. My name is Matt, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end.

Matt: If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our host, Trent Steinbart, Chief Legal and Compliance Officer with Abcellera. Trent, please go ahead.

Speaker Change: I'd now like to pass the conference over to Oracles trend Stein Mart, Chief legal and compliance officer with the seller Graham. Please go ahead.

Trent Steinbart: Thank you. Good morning, good afternoon, and good evening to everyone listening around the world. Thank you for joining us for Abcellera's full year 2023 earnings call. I'm Trent Steimart, Abcellera's Chief Legal and Compliance Officer. Joining me on today's call are Dr. Carl Hansen, Abcellera's president and chief executive officer, 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 Security and Exchange Committee. We do not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Speaker Change: Thank you good morning, and good afternoon, and good evening, everyone listening around the world. Thank you for joining us for accelerated full year 2023 earnings call.

Stein Mart: I'm <unk> <unk>, chief legal and compliance officer, joining me on today's call are Dr. Carl Hansen himself.

Stein Mart: And Chief Executive Officer, and Andrew Boone accelerates Chief Financial Officer during.

Stein Mart: 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.

Stein Mart: 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 security and Exchange Commission.

Stein Mart: Salary does not undertake any obligation to update any forward looking statements, whether as a result of new information future events or otherwise.

Trent Steinbart: 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 investment 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.

Stein Mart: Our presentation today, including our earnings or earnings press release issued earlier today and our SEC filings are available on our Investor Relations website.

Stein Mart: The information we provide about our pipeline is for the benefit of the investment community and is not intended to be promotional.

Stein Mart: As we transition to our prepared remarks. Please note that all dollars referred to during the call are in U S dollars.

Stein Mart: After our prepared remarks, we will open the lines for questions and answers now I'll turn the call over to Carl.

Dr. Carl Hansen: Thank you, Trent. And thanks, everyone, for joining us today. On today's call, I'll share some perspective on the state of Abcellera's business, review the progress we made last year, and lay out our priorities for 2024. First, the state of the business. As we enter 2024, and after nearly 12 years of investment, we are now in the final stages of building our engine, with the remaining efforts concentrated on our manufacturing capabilities. Through this work, we have built a competitive advantage in the discovery and preclinical development of antibody therapy, and we will soon be fully integrated from Target through to the clinic. We have tested and proven our capabilities across more than 100 programs, and we have done this in partnerships with the top tier of biotech and pharma companies. Through these partnerships, we have built a portfolio of passive royalty positions in therapeutic programs. We believe this portfolio represents a growing and unrecognized store of value that will mature into future high-margin revenue streams. Over the past three years, we have increasingly focused on only those partnerships that we see as strategic and that we believe will yield the highest value.

Carl Hansen: Thank you Chad.

Carl Hansen: And thanks, everyone for joining us today.

Carl Hansen: On today's call I'll share some perspective on the state of <unk> business review the progress we made last year and lay out our priorities for 2024.

First the state of the business.

Carl Hansen: As we enter 2024 and after nearly 12 years of investment we are now in the final stages of building our engine with the remaining efforts concentrated on our manufacturing capabilities.

Carl Hansen: Through this work we have built our competitive advantage in the discovery and preclinical development of antibody therapies, and we will soon be fully integrated from target through to the clinic.

Carl Hansen: We have tested and proven our capabilities across more than 100 programs and we have done this in partnerships with the top tier of biotech and pharma companies.

Carl Hansen: Through these partnerships, we have built a portfolio of passive real royalty positions in therapeutic programs.

We believe this portfolio represents a growing an unrecognized store value that will mature into future high margin revenue streams.

Carl Hansen: Over the past three years, we are increasingly focused on only those partnerships that we see a strategic and that we believe will yield the highest value.

Dr. Carl Hansen: This has included the addition of multiple co-development programs in which we have the option to maintain a 50% ownership stake. Alongside of our partnership business, we have made internal R&D investments over the last five years to unlock difficult target classes, including GPCRs and Ion channels. This work is now bearing fruit, and last year we announced our first internal program from this effort that has advanced into IND-enabling studies. We believe this is just the beginning and that it foreshadows a series of potential first-in-class therapies over the coming years. In 2021, we launched a second long-range R&D effort to build a highly differentiated platform for the creation of precision T-cell engagers for indications in cancer and autoimmunity. This work has progressed quickly and has laid a strong foundation for both internal programs and strategic partnerships. Although we did not complete a major partnership on TC last year as we had anticipated, our conviction in this effort is undiminished.

Carl Hansen: This has included the addition of multiple co development programs in which we have the option to maintain our 50% ownership stake.

Carl Hansen: Alongside of our partnership business, we have made internal R&D investments over the last five years to unlock difficult target classes, including <unk> and <unk> channels.

Carl Hansen: This work is now bearing fruit and last year, we announced our first internal program from this effort. It has advanced into IND, enabling studies.

We believe this is just the beginning and then it foreshadows a series of potential first in class therapies over the coming years.

Carl Hansen: In 2021, we launched our second long range R&D effort to build a highly differentiated platform for the creation of precision T cell engages for indications in cancer and autoimmune disease.

Carl Hansen: This work is progressing quickly and has laid a strong foundation for both internal programs and strategic partnerships.

Carl Hansen: Although we did not complete a major partnership on TC last year as we had anticipated our conviction in this effort is undiminished.

Dr. Carl Hansen: In the fourth quarter of 2023, we made a strategic decision to shift more resources to our internal pipeline, and we completed a reorganization to align with this priority. This decision was made in light of the progress in our internal programs and in response to a persistent macroeconomic headwind for biotech. While we will continue to engage in strategic partnerships that add to our portfolio of royalty positions, our number one priority is to advance and build a pipeline of first-in-class and best-in-class therapeutics, because we believe this has the highest value potential over the coming years. Last year, we secured $220 million in non-dilutive funding from the governments of Canada and British Columbia to support this priority. With a cash balance of over $780 million, this brings our total available liquidity to over $1 billion.

Carl Hansen: In the fourth quarter of 2023, we made a strategic decision to shift more resources to our internal pipeline and we completed a reorganization to align with this priority.

Carl Hansen: This decision was made in light of the progress in our internal programs and in response to a persistent macroeconomic headwinds for biotech.

Carl Hansen: While we will continue to engage in strategic partnerships that add to our portfolio of royalty positions. Our number one priority is to advance and build a pipeline of first in class and best in class Therapeutics.

Carl Hansen: We believe this has the highest value potential.

Carl Hansen: Over the coming years.

Carl Hansen: Last year, we secured a $220 million in non dilutive funding from the government of Canada, and British Columbia to support this priority with.

Carl Hansen: With a cash balance of over $780 million. This brings our total available liquidity to over $1 billion.

Carl Hansen: With this liquidity and a platform that is capable of reproducible delivering first in class therapeutic candidates, we have a rare opportunity to transition from a platform company to a vertically integrated clinical stage biotech and to do this from a base of value and without taking on binary risk.

Dr. Carl Hansen: With this liquidity and a platform that is capable of reproducibly delivering first-in-class therapeutic candidates, we have a rare opportunity to transition from a platform company to a vertically integrated clinical stage biotech, and to do this from a base of value and without taking on binary risk. Now, turning to what we achieved in 2023. At the start of last year, we communicated that our investments would be focused on three pillars of the business. The first is expanding the capabilities of our engine with forward integration. This includes manufacturing, late-stage preclinical, and clinical capability. Second, continuing our technology development efforts to unlock new target classes and modalities, including T-cell engagers, GPCRs, and ion channels. And third, advancing high-quality programs and partnerships to build our portfolio. With respect to the first, investments in our engine were focused on our manufacturing capabilities, including construction of our facility, building our platform, and building our process development, manufacturing, and quality. As mentioned, manufacturing is the final piece of our engine.

Carl Hansen: Now turning to what we achieved in 2023.

Carl Hansen: At the start of last year, we communicated that our investments will be focused on three pillars of the business.

Carl Hansen: The first is expanding the capabilities of our engine with forward integration.

Carl Hansen: This includes manufacturing late stage preclinical and clinical capabilities.

Carl Hansen: Second continuing our technology development efforts to unlock new target classes, and modalities, including T cell engages <unk> and ion channels and third advancing high quality programs and partnerships to build our portfolio.

Okay.

Carl Hansen: With respect to the first invest investments in our engine, we're focused on our manufacturing capabilities, including construction of our facility building our platform and building our process development manufacturing and quality teams.

Carl Hansen: As mentioned manufacturing is in the final.

Carl Hansen: Manufacturing is the final piece of our engine we.

Dr. Carl Hansen: We expect the bulk of further investment to be made this year. We anticipate process development activities and pilot runs to begin in 2024 and that our GMP facility will come online near the end of 2025, turning to R&D progress in 2023. We continue to invest in technologies that we believe can open up new market segments in antibody therapeutics. For example, for our T-Cell Engager platform, we presented data demonstrating the potential to solve two important problems in the field. In the first, we showed that our platform can produce TCEs that achieve high tumor cell killing with low cytokine release, which helps to address the problem of dose-limiting toxicity associated with cytokine release syndrome. In the second, we showed that our platform can generate TCR memetic antibodies that specifically recognize MHC peptide antibodies. Importantly, we believe the speed and ease with which we are able to find MHC-peptide-specific binders has the potential to greatly expand the reach of TCEs in cancer therapy.

Carl Hansen: We expect the bulk of further investment to be made this year.

Carl Hansen: We anticipate process development activities and pilot runs to begin in 2024 and that our GMP facility will come online near the end of 2025.

Carl Hansen: Turning to R&D progress in 2023.

Carl Hansen: We continued to invest in technologies that we believe can open up new market segments and antibody therapeutics for.

Carl Hansen: For a T cell engagement platform, we presented data demonstrating the potential for solving two important problems in the field.

Carl Hansen: In the first we showed that our platform can produce tce's that achieve high tumor cell, killing with low cytokine release, which helps to address the problem of dose limiting toxicity associated with cytokine release syndrome.

Carl Hansen: And the second we showed that our platform can generate Tc TCR mimetic antibodies that specifically recognize MHC peptide antigens.

Carl Hansen: Importantly, we believe the speed and ease with which we are able to find MHC peptide specific binders has potential to greatly expand the reach of TCE in cancer therapy.

Dr. Carl Hansen: Moving to our GPCR and Ion Channel efforts, I would like to remind you that we previously said we would elect at least one candidate from this platform for IND-enabling studies in 2023. We achieved this with ABCL 635, which is the first program in our pipeline. Last year we also said we would move one of our co-development programs into IND-enabling studies. We achieved this with ABCL 575, a program that we launched as part of a co-development partnership with EQRx in 2021 and that we took control of after EQRx was acquired by Revolution Medicine. ABCL 635 and ABCL 575 are both on track to enter clinical trials in 2025. ABCL 635 is against an undisclosed target and is being developed as a potential first-in-class therapy for an indication in metabolic and endocrine conditions with an addressable market estimated at more than $2 billion in annual sales. There are a number of reasons why we are excited about 6.35. First, it targets a pathway that is well-validated and presents low biological risk relative to a typical program.

Carl Hansen: Moving to our <unk> channel efforts I would like to remind you that we previously said we would elect at least one candidate from this platform for R&D, enabling studies in 2023.

Carl Hansen: We achieved this with a bcl 635, which is the first program in our pipeline.

Carl Hansen: Last year. We also said we would move one of our co development programs into IND, enabling studies.

Carl Hansen: We achieved this with <unk> 575, a program that we launched as part of our co development partnership with <unk> in 2021, and we took control of after <unk> was acquired by Revolution medicines.

Carl Hansen: ABC, all 65, and <unk> 575 are bolt on track to enter clinical trials in 2025.

Carl Hansen: <unk> 65 is against an undisclosed target and is being developed as a potential first in class therapy for an indication in metabolic and endocrine conditions with an addressable market estimated at more than $2 billion in annual sales.

Carl Hansen: There are a number of reasons why we are excited about $6 five <unk>.

Carl Hansen: First it targets a pathway that is well validated and presents low biological risk relative to a typical program.

Dr. Carl Hansen: Second, we are not aware of any competing antibody drug programs against this target and therefore believe 635 has the potential to be a first-in-class therapy. Third, we have obtained compelling proof-of-concept data from studies in non-human primates, and finally, for this indication, we expect to obtain data on both safety and efficacy in early clinical development. As we discussed previously, we will disclose more details on this program only once it reaches the clinic. Our second program, ABCL 575, targets Aux 40 ligands. It is being developed as a potential best-in-class therapy for the treatment of atopic dermatitis and has potential across a broad range of autoimmune and inflammatory conditions with high unmet medical needs, including asthma, alopecia, systemic sclerosis, and inflammatory bowel disease. ABCL 575 is differentiated from Amgen's rocatinlamab in that it targets the OX40 ligand on antigen-presenting cells, not OX40 on T cells.

Carl Hansen: Second we are not aware of any competing antibody drug programs against this target and therefore I believe 65 has the potential to be a first in class therapy.

Carl Hansen: Third we have obtained compelling proof of concept data from studies in non human primates and finally for this indication we expect to obtain data on both safety and efficacy in early clinical development.

Carl Hansen: As we discussed previously we will disclose more details on this program only once it reaches a clinic.

Carl Hansen: Our second program <unk> 575 targets Ox 40 ligand.

Carl Hansen: It is being developed as a potential best in class therapy for the treatment of atopic dermatitis and has potential across a broad range of autoimmune and inflammatory conditions with high unmet medical need, including asthma, our PCF systemic sclerosis, and inflammatory bowel disease.

Carl Hansen: <unk> 575 is differentiated from amgen's rocket timber mab and that it targets ox 40 ligand on antigen presenting cells not ox 40 on T cells.

Dr. Carl Hansen: Further, 575 works through receptor blocking rather than killing immune cells, which we believe will provide a better safety profile. 575 is also distinct from biologics currently approved for the treatment of atopic dermatitis. First, it blocks signaling upstream of currently targeted TH2 signaling molecules, including IL-13, impacting a broader portion of the inflammatory response.

Carl Hansen: Further 575 works through receptor blocking rather than killing immune cells, which we believe will provide a better safety profile.

Carl Hansen: 575 is also a distinct from biologics currently approved for the treatment of atopic dermatitis.

Carl Hansen: First it blocked signalling upstream of currently targeted th two signaling molecules, including <unk> impacting a broader portion of the inflammatory response.

Dr. Carl Hansen: Second, blockade of OX40-OX40 ligand signaling is believed to promote T-regulatory cells, offering the potential for immune reset and a more durable response. At present, we believe 575 is positioned to be the second Oxford-Ligand antibody into the clinic. It follows Sanofi's Amlatilumab, which has shown excellent safety and efficacy in atopic dermatitis and is now being developed for multiple indications. ABCL 575 has been designed with potency, PK, and developability to enable less frequent dosing, which we believe provides an important potential for differentiation.

Carl Hansen: Second blockade of Ox 40, Ox 40 ligand signaling is believed to promote T regulatory cells offering the potential for immune reset and a more durable response.

Carl Hansen: At present, we believe 575 is positioned to be the second Oxford ligand antibody into the clinic it.

Carl Hansen: It is following Sanofi and with Tilda map, which has shown excellent safety and efficacy in atopic dermatitis and is now being developed for multiple indications.

Carl Hansen: ABC all 575 has been designed with potency PK and develop ability to enable a less frequent dosing, which we believe provides an important potential for differentiation.

Carl Hansen: Our focus is now to move.

Carl Hansen: <unk> 575 into clinical testing as quickly as possible.

Dr. Carl Hansen: Our focus is now to move ABCL 575 into clinical testing as quickly as possible. Considering the potential development across multiple indications, we believe it is likely that maximizing the value of this asset will require engagement with a large partner for later stage trials and commercialization. This stands in contrast to ABCL 635, where, pending positive clinical data, we believe it may be better for us to advance it independently, turning now to partnerships. Through 2023, we continue to prioritize strategic partnerships. As part of building relationships with large and highly-enabled partners, we expanded our work with Regeneron and started a new collaboration with Insight. At the same time, we continue to look for opportunities to access new technology and new biology. In 2023, this included our collaboration with Prelude to co-develop first-in-class precision antibody drug conjugation.

Considering the potential development across multiple indications, we believe it is likely that maximizing the value of this asset will require engagement with a large partner for later stage trials and commercialization. This stands in contrast to <unk> 605 were pending positive clinical data. We believe it may be better for us to advance it independently.

Carl Hansen: Turning now to partnerships through 2023, we continue to prioritize strategic partnerships.

Carl Hansen: As part of building relationships with large and highly enabled partners. We expanded our work with Regeneron and started a new collaboration with insight.

Carl Hansen: At the same time, we continue to look for opportunities to access new technology and new biology in.

Carl Hansen: In 2023. This included our collaboration with prelude to co develop first in class precision antibody drug conjugates.

Carl Hansen: And at the same time, we continued to build in our collaboration with <unk> a company that we help create create in 2021.

Carl Hansen: That is advancing a pipeline of radioisotope conjugates towards the clinic.

Dr. Carl Hansen: And at the same time, we continue to build on our collaboration with Ebdera, a company that we helped create in 2021 that is advancing a pipeline of radioisotope conjugates towards the clinic. Looking forward to 2024, our priorities for the year are as follows. First, advancing our internal pipeline. This includes moving ABCL 635 and 575 toward clinical testing in 2025 and bringing at least one and perhaps two additional programs into IND-enabling studies in the second half of the year. Second, we are completing the final stages of building our engine, with the majority of investment directed to establishing our manufacturing capabilities.

Carl Hansen: Looking forward to 2024, our priorities for the year are as follows.

First advancing our internal pipeline. This includes moving ABC, all $65 and 575 towards clinical testing in 2025, and bringing at least one and perhaps two additional programs into IND, enabling studies in the second half of the year.

Second is completing the final stages of building our engine with the majority of investments directed to establishing our manufacturing capabilities and third on the partnering front. Our focus is to expand relationships with large biopharma, including deals related to our TCE platform and.

In addition, we will continue to be opportunistic and co development deals that provide access to new targets of our technologies and by engaging with strategic investors and company creation.

Carl Hansen: And with that I'll hand, it over to Andrew to discuss our financials Andrew.

Andrew Booth: And third, on the partnering front, our focus is to expand relationships with large biopharma, including deals related to our TCE platform. In addition, we will continue to be opportunistic in co-development deals that provide access to new targets or technologies, and by engaging with strategic investors in company creation. Andrew?

Andrew Boone: Thanks Carl.

As Karl pointed out accelerate continues to be in a strong liquidity position with over $780 million in cash and equivalents and over $200 million in available government funding to execute on our strategy.

Andrew Boone: Over the past several years <unk> has been in building mode.

Andrew Boone: As we enter 2024, we are nearing the end of that built.

Our team is largely in place and we expect our departmental expenses in R&D and SG&A in 2024 to be similar to what we saw in 2023.

Andrew Booth: Thanks, Carl. As Karl pointed out, Abcellera continues to be in a strong liquidity position with over $780 million in cash and equivalents and over $200 million in available government funding to execute on our strategy. Over the past several years, Abcellera has been in building mode. As we enter 2024, we are nearing the end of that bill. Our team is largely in place, and we expect our departmental expenses in R&D and in SG&A in 2024 to be similar to what we saw in 2023. 2024 will also be our last major capital expenditure year of this multi-year build as we complete our CMC and GMP manufacturing investments. 2024 investments in CapEx are expected to be similar to what they were in 2023 and be significantly reduced thereafter as we move from building these capabilities to using them on our own programs and programs with our strategic partners, looking at results. First, let me highlight some progress made on and changes to our key business metrics, as we have detailed in our 10K submission. In Q4, we added 21 new programs under contract and ended 2023 with 203 programs under contract with 46 unique partners. All new programs include downstream participation.

Andrew Boone: 2024 will also be our last major capital expenditure year of this multi year build as we complete our CMC and GMP manufacturing investments.

Andrew Boone: 2024 investments and Capex are expected to be similar to what they were in 2023 and be significantly reduced thereafter, as we move from building these capabilities to using them on our own programs and programs with our strategic partners.

Andrew Boone: Looking at results.

Andrew Boone: First let me highlight some progress made on and changes to our key business metrics as we have detailed in our 10-K submission.

Andrew Boone: In Q4, we added 21, new programs under contract and ended 2023 with 203 programs under contract with 46 unique partners.

Andrew Boone: All new programs include downstream participation.

Andrew Boone: Consistent with our direction over the past number of years, we are focusing on strategic partnerships and high quality programs rather than deal volume in our partnering activity.

Andrew Boone: In addition, we expect to increasingly drive value from our pipeline of internal and co development programs. We believe that the focus of our execution is not well represented with the number of discovery partners and programs under contract metrics as such going forward, we will no longer be reporting on these metrics.

Andrew Boone: We will keep reporting on program starts in 2023, and we started work on 12 partner initiated programs three of which were in the last quarter.

That is the rate of starts that broadly reflects our ongoing focus on strategic partnerships and high quality programs.

Andrew Boone: This takes us to accumulative total of 112 total partner initiated programs starts of which a total of 87 have downstream participation.

Andrew Booth: Consistent with our direction over the past number of years, we are focusing on strategic partnerships and high-quality programs rather than deal volume in our partnering activities. In addition, we expect to increasingly drive value from our pipeline of internal and co-development programs. We believe that the focus of our execution is not well represented by the number of discovery partners and programs under contract metrics. As such, going forward, we will no longer be reporting on these metrics.

Andrew Boone: Note that as described in our 10-K, we have also narrowed the definition of program starts business metric.

Andrew Boone: As our strategy is unfolding our main focus for partner initiated programs is on adding value to our portfolio of participation in the future success of molecules that we discover.

Andrew Boone: Consequently, we have refined this metric to only include <unk> programs with such downstream participation.

Andrew Boone: We would also like to share with you a closer look at the progression of those 87 partner initiated programs with downstream participation that we have started.

Andrew Booth: We will keep reporting on program starts. In 2023, we started work on 12 partner-initiated programs, three of which were in the last quarter. That is a rate of start that broadly reflects our ongoing focus on strategic partnerships and high-quality programs. This takes us to a cumulative total of 112 total partner-initiated program starts, of which a total of 87 have downstream participation. Note that, as described in our 10-K, we have also narrowed the definition of program start business metrics. As our strategy is unfolding, our main focus for partner-initiated programs is on adding value to our portfolio of participation in the future success of molecules that we discover. Consequently, we have refined this metric to only include programs with such downstream participation.

Andrew Boone: As of December 31, we were actively working on 23 of these programs. We have completed the agreed scope of work on the other 64 programs and have transferred the resulting antibody sequences and data to our partners for evaluation and further development.

Andrew Boone: To the best of our knowledge our partners are progressing 38 of those programs of these we believe that 30 are in late stage discovery.

<unk> are in preclinical development and three have reached clinical development.

Andrew Boone: On the best information available to US we believe that our partners have decided not to progress a total of 26 programs.

Andrew Boone: Overall, we view the progress of the molecules, we have discovered in our partners' hands positively and the attrition is consistent with our expectations. We look forward to more molecules from our programs, reaching the clinic overtime and we will continue to report on these progression to the clinic on a quarterly basis.

Andrew Booth: We would also like to share with you a closer look at those 87 partner-initiated programs with downstream participation that we have started. As of December 31st, we were actively working on 23 of these programs. We have completed the agreed scope of work on the other 64 programs and have transferred the resulting antibody sequences and data to our partners for evaluation and further development.

Andrew Boone: In Q4 2023, we saw three new molecules advanced to the clinic for accumulative total of 13 molecules to have reached the clinic.

Andrew Boone: Two undisclosed molecules from partner initiated discovery in animal health were advanced into clinical field studies and Arsenal bio received an IND authorization for <unk> 2180, 2100 is an antibody with an indication in oncology that was derived by <unk> from a tree any mouse under a license from <unk>.

Andrew Booth: To the best of our knowledge, our partners are progressing 38 of those programs. Of these, we believe that 30 are in late-stage discovery, 5 are in preclinical development, and 3 have reached clinical development. Based on the best information available to us, we believe that our partners have decided not to progress a total of 26 programs.

Andrew Boone: Beginning this quarter, we are also indicating which of our molecules in the clinic are not expected to progress. Further. These include <unk> <unk> and DLL and 91 nine as molecules discovered by <unk>. Additionally.

Andrew Boone: Additionally, one molecule discovered under our <unk> license is not expected to progress.

Andrew Booth: Overall, we view the progress of the molecules we have discovered in our partners' hands positively, and the attrition is consistent with our expectations. We look forward to more molecules from our programs reaching the clinic over time, and we will continue to report on these progressions to the clinic on a quarterly basis. In Q4 2023, we saw three new molecules advance to the clinic, for a cumulative total of 13 molecules to have reached the clinic. Additionally, two undisclosed molecules from partner-initiated discovery in animal health were advanced into clinical field studies.

Andrew Boone: We continue to view, our growing list of progressing molecules in the clinic as specific examples of our near and midterm potential revenue from downstream milestone fees and royalty payments and the longer term.

Andrew Boone: Looking broadly across the program starts in our partner initiated portfolio as well as our accelerate initiated internal programs, we see significant diversification across therapeutic indications of our 87 partner initiated programs with downstream over 90 are in human health. The majority of our partnered programs are in oncology.

Andrew Booth: And Arsenal Bio received an IND authorization for AB2100, an antibody with an indication in oncology that was derived by Arsenal Bio from a Triane mouse under a license from Abcellera. Beginning this quarter, we are also indicating which of our molecules in the clinic are not expected to progress further. These include bamlanivimab, beptalovimab, and DLL-DNL-919, as molecules discovered by Abcellera.

Andrew Boone: <unk> neurology and immunology broadly reflecting activity in the industry.

Andrew Boone: As of December 2023, we also have 19 accelerate initiated programs up from 12 at the beginning of the year all of the accelerate initiated programs rns are in human health.

Andrew Boone: We believe that the value we add to programs and the value of our partnered portfolio is reflected largely in the royalty rates. We negotiate we continue to prioritize more valuable programs instead of maximizing the number of programs under contract as a result.

Andrew Booth: Additionally, one molecule discovered under a Triani license is not expected to progress. We continue to 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. Looking broadly across the program starts in our partner-initiated portfolio as well as our Abcellera-initiated internal programs, we see significant diversification across therapeutic indications. For example, of our 87 partner-initiated programs with Downstream, over 90 are in human health.

Andrew Boone: Our result is that the range and average of negotiated royalty rates in our portfolio are shifting favorably.

Andrew Boone: As we reported last year between 2015 and 2019, our mean royalty rate was two 4% across 37 partner initiated discovery programs with downstream and between 2020 in 2023. The mean royalty rate has increased to four 3% across 141 programs with downstream participation at <unk>.

Andrew Boone: Quarter of the programs with downstream participation that we signed in this period have the potential to achieve royalty rates above 5%.

Andrew Booth: The majority of our partner programs are in oncology, neurology, and immunology, broadly reflecting activity in the industry. As of December 2023, we also have 19 Abcellera-initiated programs, up from 12 at the beginning of the year. All of the Abcellera-initiated programs are in human health.

Andrew Boone: These royalty rates do not reflect the value of programs in our internal pipeline, which we fully or substantially on.

Andrew Boone: Turning to revenue revenue in the year was approximately $38 million almost entirely driven by research fees relating to work on partner initiated programs. This compares to research fee revenue of approximately $41 million in 2022. This year's revenue also includes approximately $2 $5 million in a combination of licensing fee.

Andrew Booth: We believe that the value we add to programs and the value of our partnered portfolio is largely reflected in the royalty rates we negotiate. We continue to prioritize more valuable programs instead of maximizing the number of programs. The result is that the range and average of negotiated royalty rates in our portfolio are shifting favorably. As we reported last year, between 2015 and 2019, our mean royalty rate was 2.4% across 37 partner-initiated discovery programs with downstreams, and between 2020 and 2023, the mean royalty rate is expected to increase to 4.3% across 141 programs with downstream participation. A quarter of the programs with downstream participation that we signed in this period have the potential to achieve royalty rates above 5%. These royalty rates do not reflect the value of programs in our internal pipeline, which we fully or substantially own.

Andrew Boone: <unk> and milestone payments and unlike in 2022, we earned no royalties in 2023.

Andrew Boone: Turning to operating expenses, our research and development expenses for the year were approximately $176 million.

Andrew Boone: Representing a roughly $68 million increase over the same period of the previous year. This increase reflects the growth in program execution, continuing platform development and our increasing investment in our internal program pipeline.

Andrew Boone: In sales and marketing expenses for 2023 were approximately $14 million compared to just over $11 million in 2022 and in general and administration expenses were over $61 million.

Andrew Boone: Compared to roughly $56 million in 2022, reflecting good operating leverage supporting the growing business as I mentioned previously 2020 to 2023 were significant years of building. Our team now that team is largely in place and we expect our departmental expenses in R&D and in SG&A in 2024 to be relatively.

Andrew Booth: Turning to revenue, revenue in the year was approximately $38 million, almost entirely driven by research fees relating to work on partner-initiated programs. This compares to research fee revenue of approximately $41 million in 2022. This year's revenue also includes approximately $2.5 million in a combination of licensing fees and milestone payments.

Andrew Boone: That compared to 2023.

Andrew Boone: Looking at earnings we are reporting a net loss of roughly $146 million. This.

Andrew Booth: And unlike in 2022, we earned no royalties in 2023. Turning to operating expenses, our research and development expenses for the year were approximately $176 million, representing a roughly $68 million increase over the same period of the previous year. This increase reflects the growth in program execution, continuing platform development, and our increasing investment in our internal program pipeline. For sales and marketing, expenses for 2023 were approximately $14 million compared to just over $11 million in 2022, and general and administration expenses were over $61 million compared to roughly $56 million in 2022, reflecting good operating leverage supporting the growing business.

Andrew Boone: This compares to earnings of approximately $159 million in 2022. The loss reflects our continued investment in our business and the absence of royalty revenues that were present in 2022.

Andrew Boone: In terms of earnings per share. This year as a result works out to a loss of <unk> 51 per share on a basic and diluted basis.

Andrew Boone: Looking at cash flows operating activities for 2023 used roughly $44 million.

Andrew Boone: In the absence of regular royalty revenues, we would expect our operating cash flow to be irregular and often negative as we continue to invest in the growth and capabilities of the company of note cash flow excluding the purchase of marketable securities used approximately $130 million for all of 2023.

Andrew Booth: As I mentioned previously, 2020 to 2023 were significant years of building our team. Now that team is largely in place, and we expect our departmental expenses in R&D and in SG&A in 2024 to be relatively flat compared to 2023. Looking at earnings, we are reporting a net loss of roughly $146 million.

Andrew Boone: As a part of our Treasury strategy, we have nearly $630 million invested in short term marketable securities our investment activities for the year include an approximately $127 million net increase in these holdings all other investment activities amounted to approximately $111 million, including approximately $77 million in.

Andrew Boone: Invested in property and equipment and approximately $45 million in other long term investments investor.

Andrew Boone: Investments in property and equipment are of course, driven largely in part by our ongoing work to establish CMC and GMP manufacturing capabilities. We expect these investments to be substantially complete in early 2025.

Andrew Booth: This compares to earnings of approximately $159 million in 2022. The loss reflects our continued investment in our business and the absence of royalty revenues that were present in 2020. In terms of earnings per share, this year's result works out to a loss of 51 cents per share on a basic and diluted basis.

Andrew Boone: We anticipate that 2024 investments in property and equipment will be similar to those of in 2023.

Andrew Boone: As a reminder, we owned 50% of our large office and lab facilities and have financed from our balance sheet their construction.

Andrew Booth: Looking at cash flows, operating activities for 2023 used roughly $44 million. In the absence of regular royalty revenues, we would expect our operating cash flow to be irregular and often negative as we continue to invest in the growth and capabilities of the company. Of note, cash flow excluding the purchase of marketable securities used approximately $130 million for all of 2023.

Andrew Boone: In addition, we own 100% of our GMP manufacturing facility and accelerate does not have any debt.

Andrew Boone: Altogether, we finished the year with about $788 million of total cash cash equivalents and marketable securities.

Andrew Boone: As a reminder, our continuing GMP facility build out is separately co funded by the government of Canada's strategic Innovation Fund. In addition in 2023, we secured $220 million from the government of Canada, and British Columbia. This available capital does not show up on our balance sheet with over $780 million on the balance sheet.

Andrew Booth: As a part of our Treasury strategy, we have nearly $630 million invested in short-term marketable securities. Our investment activities for the year include an approximately $127 million net increase in these holdings. All other investment activities amounted to approximately $111 million, including approximately $77 million invested in property and equipment, and approximately $45 million in other long-term investments.

Andrew Boone: <unk> and the unused portion of our secured government funding. We continue to have approximately $1 billion in total available liquidity to execute on our strategy.

Andrew Boone: This is more than our liquidity position from one year ago, when we reported our December 2022 financials.

Andrew Boone: With respect to our overall operating expenditures our capital needs are very manageable and we remain in a strong liquidity position that allows us to execute on our strategy with excellent visibility and runway. This includes advancing a seller lead programs towards and into the clinic and working with strategic partners.

Andrew Booth: Investments in property and equipment are, of course, driven largely in part by our ongoing work to establish CMC and GMP manufacturing capabilities. We expect these investments to be substantially complete in early 2025. We anticipate that 2024 investments in property and equipment will be similar to those of 2023. As a reminder, we own 50% of our large office and lab facilities and have financed their construction from our balance sheet. In addition, we own 100% of our GMP manufacturing facility, and Abcellera does not have any. Altogether, we finished the year with about $788 million in total cash, cash equivalents, and marketable securities.

Andrew Boone: We continue to believe that we have sufficient liquidity to fund well beyond the next three years of pipeline and platform investments and with that we'll be happy to take your questions.

Andrew Boone: If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one as a reminder, if youre using a speakerphone. Please remember to pick up your handset before asking a question, we'll pause here briefly as questions or industry.

Andrew Boone: Okay.

Andrew Boone: The first question is from the line of Robyn <unk> with <unk>. Your line is now open.

Robyn: Alright, Thanks, Scott I think that really focus on like how you're moving toward <unk> and.

Andrew Booth: As a reminder, our continuing GMP facility build-out is separately co-funded by the Government of Canada's Strategic Innovation Fund. In addition, in 2023, we secured $220 million from the governments of Canada and British Columbia. This available capital does not show up on our balance sheet.

Robyn: And building out that platform can.

Robyn: Can you think.

Robyn: Can you help us focus on how to monetize it.

Robyn: That revenue stream and how to think about.

Robyn:

Robyn: The amount of <unk>.

Robyn: Royalties, you may get doing that and when we could learn about.

Robyn: What drugs are you going to highlight them are going to stay where they are as you go through that process I think that would help the biotech investors actually understand how to monetize that.

Operator: With over $780 million on the balance sheet and the unused portion of our secured government funding, we continue to have approximately $1 billion in total available liquidity to execute on our strategy. This is more than our liquidity position from one year ago when we reported our December 2022 financial. With respect to our overall operating expenditures, our capital needs are very manageable, and we remain in a strong liquidity position that allows us to execute on our strategy with excellent visibility and runway. This includes advancing Abcellera-led programs towards and into the clinic and working with strategic partners. We continue to believe that we have sufficient liquidity to fund well beyond the next three years of pipeline and platform investment. And with that, we'll be happy to take your questions. Thank you. Thank you. Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press the star followed by two.

Robyn: And model that.

Yes.

Speaker Change: Hey, Robyn Carl here happy to happy to take that.

Robyn Carl: So first let me just frame this with the strategy that we've been communicating since becoming a public company and long before which is first to.

Invest in building capabilities that allow us to repeatedly generate molecules that have potential to be first in class and best in class therapies, and then to use that platform.

Robyn Carl: With partners.

Robyn Carl: To work on programs that build a portfolio of positions in future therapeutic programs now within that broader frame, we have a growing portfolio of programs that we've done through what we would call partner initiated programs.

Robyn Carl: These are now converting as Andrew.

Robyn Carl: As Andrew detailed into potential passive royalty streams that are going to mature over time.

Robyn Carl: Over the past three years, we've started to.

Operator: Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question is from the line of Robin Karnouskas with Truist.

Robyn Carl: Evolve that business model to include co development programs, we have a bigger stake.

Robyn Carl: And for the last five years, we have been working consistently.

Robyn Carl: On technology projects that are now yielding wholly owned potential first in class and best in class assets that we're taking forward into the clinic. So on the portfolio side. There is let's say single digit royalty positions that add up in aggregate to what we believe will be long term predictable predictable and high margin.

Robin Karnouskas: Your line is now open. Hi, guys. I think I'm really focused on how you're moving toward going to IND and building out that platform. What do you think?

Robin Karnouskas: Can you help us focus on how to monetize that revenue stream and how to think about the amount of royalties you may get doing that?

Robyn Carl: <unk>.

Robyn Carl: On the programs that we are bringing forward.

Robyn Carl: Forward ourselves.

Robyn Carl: We would view that like you would do a typical integrated biotech. So each of these has the potential to generate huge upside in value.

Robin Karnouskas: And when we can learn about what drugs you may be developing, are you going to highlight them? Are you going to say what they are as you go through that process? I think that would help the biotech investors actually understand how to monetize that and model it. Thank you. Hey Robin, Karl here, happy to take that.

Robyn Carl: And we have taken our time to find the opportunities that we're excited about and where we believe there's an excellent chance of getting to value inflections now for those.

Dr. Carl Hansen: So first, let me just frame this in the strategy that we've been communicating since becoming a public company and long before, which is first to invest in building capabilities that allow us to repeatedly generate molecules that have the potential to be first-in-class and best-in-class therapies, and then to use that platform with partners to work on programs that build a portfolio of positions in future therapeutic programs. Now, within that broader framework, we have a growing portfolio of programs that we've done through what we would call partner-initiated programs. These are now converting, as Andrew detailed, into potential passive royalty streams that are going to mature over time. Over the past three years, we've started to evolve that business model to include co-development programs. We have a bigger stake.

Robyn Carl: We're going to look at each of them independently decide how we're going to prosecute those moving forward into the clinic. Both we are committed to take forward into phase one as I mentioned in my prepared remarks for 605.

Robyn Carl: We are very excited about that program and we see the potential to take that beyond phase one given the nature of development for <unk> 575 in the area of atopic dermatitis and other inflammation autoimmune conditions, we think that that program would benefit from a partnership.

Speaker Change: So to your question.

Speaker Change: As you bring molecules forward you get them closer to revenue you get them Derisked at Indy and then past phase one obviously the potential terms for out licensing are going to grow commensurately and we're making a decision on every program based on capital allocation and based on options to maximize the value for that so we expect that.

Dr. Carl Hansen: And for the last five years, we have been working consistently on technology projects that are now yielding wholly owned potential first-in-class and best-in-class assets that we're taking forward into the clinic. So on the portfolio side, there are, you know, let's say single-digit royalty positions that add up in aggregate to what we believe will be long-term predictable and high-margin cash flow. On the programs that we are bringing forward ourselves, we would view that like you would view a typical integrated biotech. So each of these has the potential to generate huge upside in value. And, you know, we have taken our time to find the opportunities that we're excited about, and we believe there's an excellent chance of getting to value inflections. Now, for those, we're going to look at each of them independently and decide how we're going to prosecute those moving forward into the clinic.

Speaker Change: <unk> could be a.

Speaker Change: A very valuable program for out licensing, but right now we're focused on getting that through to phase one.

Speaker Change: Yeah.

Speaker Change: Alright can follow up.

Speaker Change: Attrition rate it's beyond I.

Speaker Change: I think it's around 40% if I recall.

Speaker Change: Do you expect it to become similar or higher over the period and more color on this.

Speaker Change: This continued program could you take.

Speaker Change: Keep that in house.

Speaker Change: You can do all of that.

Speaker Change: Capabilities could you.

Opined on that and like what would you do with this program.

Speaker Change: Hey, Robyn the Andrew here.

Speaker Change: So the first part of that question.

Robyn Carl: Yes, we're showing and what we believe is going to be an annual disclosure now on the progress of the pipeline in the hands of our partners, we've been able to provide that because of investments over the last number of years in alliance management. So we have much better visibility much stronger connections with those partners.

Dr. Carl Hansen: Both we are committed to taking forward into phase one. As I mentioned in my prepared remarks, for 635, we are very excited about that program, and we see the potential to take that beyond phase one, given the nature of development. For ABCL 575, in the area of atopic dermatitis and other inflammation autoimmune conditions, we think the value of that program would benefit from a partnership.

Robyn Carl: You were saying that the.

Robyn Carl: Attrition rate of about 40%.

Dr. Carl Hansen: So to your question, you know, as you bring molecules forward, you get them closer to revenue, you get them de-risked at IND and then past phase one. Obviously, the potential terms for outlicensing are going to grow commensurately, and we're making a decision on every program based on capital allocation and based on options to maximize the value for that. So we expect that ABCL 575 could be a very valuable program for outlicensing, but right now, we're focused on getting that through to phase one. All right, two follow-ups. Attrition rate is beyond, I think it's around 40%, if I recall. Do you expect it to become similar or higher over the period, and more color on, you know, you have this discontinued program. Could you take that in at house?

Robyn Carl: Sure.

Robyn Carl: What do we expect it to be going forward I mean I think.

Robyn Carl: We are quite optimistic about the remaining ones in blinded and like I said.

Speaker Change: Pardon me.

Speaker Change: No my daughter assessing if she is in the background.

Speaker Change: Okay Alright.

Speaker Change: Yes.

Speaker Change: Hey, Greg.

Yes.

Speaker Change: Okay.

Speaker Change: But again right it should go higher correct.

Well the lower that's right I think if we think about like.

Speaker Change: I think.

Speaker Change: Of course, we would be delighted if the attrition rate was only 40% in the rest of those made it to the clinic. So we would expect some additional attrition on top of that so when we said in the prepared remarks. It is within our expectations and of course, it's still there is some time before those other ones.

Speaker Change: Our matured are matured and invested in by the partners and make it to the clinic. So we would expect not all of the rest of them to make it to the clinic, but we will continue to report on that on an annual basis.

Robin Karnouskas: You know, you can develop that now that you have capabilities. Could you opine on that and like, what would you do with those programs? Hey Robin, Andrew here.

Speaker Change: And discontinued program like how do you think about the.

Andrew Booth: To the first part of that question, we're showing what we believe is going to be an annual disclosure now on the progress of the pipeline in the hands of our partners. We've been able to provide that because of our investments over the last number of years in alliance management, so we have much better visibility, and much stronger connections with those partners. And you were saying that the attrition rate was about 40%. What do we expect it to be going forward? I mean, I think we're quite optimistic about the remaining ones in that pipeline. And like I said, Pardon me? No, my daughter was testing you. She's in the background.

Would you take them in house.

Carl Hansen: Carl here Robyn so.

Carl Hansen: For most of the programs that are not being advanced.

Speaker Change: Have a contractual right to take those in house.

Speaker Change: And I would also highlight that as Andrew said, we expect there to be considerable attrition between the initiation of discovery and clinical development certainly.

The one with experience in the industry would expect well below 50% of programs will actually make it into clinical development those programs will fail for a whole variety of reasons there could be.

Speaker Change: Scientific data that comes in based on animal models, there could be competing programs out there for some companies it will be a matter of pipeline prioritization and capital allocation.

Robin Karnouskas: Don't worry. Okay, sorry. But it should go higher, correct? Like, it will go lower?

Robin Karnouskas: That's right. I think if we think about, I think, I mean, of course, we would be delighted if the attrition rate was only 40%, and the rest of those made it to the clinic. So we would expect some additional attrition on top of that. So when we say it in the prepared remarks, it's within our expectations. And of course, it's still some time before those other ones are matured and invested in by the partners and make it to the clinic. So we would expect not all of the rest of them to make it to the clinic, but we'll continue to report on that on an annual basis, and discontinued programs, like how do you think about those? Would you kick them in hell?

Speaker Change: Thus far of the ones that we've seen that are not advancing.

Speaker Change: We have not contemplated taking them in house and we honestly have high conviction in the programs that we've generated internally and Thats, where our focus is for our internal pipeline.

Speaker Change: Alright, great. Thank you guys. Thank you for my daughter and lifting costs.

Speaker Change: Thank you.

Thank you for your question next.

Speaker Change: Next question is from the line of Andreas <unk> with Goldman Sachs. Your line is now open.

Andreas: Good afternoon, Thanks for taking my question.

Maybe first can you speak a little bit more about what you think will be necessary to show for the TCE platform such that it will enable a major partnership.

Dr. Carl Hansen: Carl here, Robin. So, you know, for most of the programs that are not being advanced, we don't have a contractual right to take those in-house. And I would also highlight that, as Andrew said, we expect there to be considerable attrition between the initiation of discovery and clinical development. Certainly, anyone with experience in the industry would expect well below 50% of programs will actually make it to clinical development. Those programs will fail for a whole variety of reasons.

Speaker Change: Thanks Andrea.

Speaker Change: So that's a great question as I said in my prepared remarks, we launched that in about 2021.

Andrea: And we are very pleased with the progress of the science and the data that we've been able to bring forward. So we've been attending ACR and city and were able to raise the bar at every one of those conferences.

Dr. Carl Hansen: There could be scientific data that comes in based on animal models. There could be competing programs out there, too. For some companies, it will be a matter of pipeline prioritization and capital allocation. Thus far, of the ones that we've seen that are not advancing, we have not contemplated taking them in-house, and we honestly have high conviction in the programs that we've generated internally, and that's where our focus is for our internal pipeline. All right, great. Thank you guys. Thank you for listening to the call. It's great.

Andrea: At this point.

Andrea: What we really have in hand.

Andrea: Is the broadest most well characterized panelists CD three.

Andrea: We've shown we compare those with different tas to tune in the combination of cell, killing and cytokine release.

Andrea: And we have shown that we can use our platform to generate highly specific TCR mimetic antibodies that bind MHC peptide targets.

Andrea: That work has been done in large part.

Robin Karnouskas: Thank you. Thank you for your question. The next question is from the line of Andrea Tan with Goldman Sachs. Your line is now open.

Through internal R&D and work on a series of targets that we have been advancing and as that as that work matures and gets closer to the clinic, we're seeing the appetite from industry increase.

Andrea Tan: Good afternoon, thanks for taking my question. Carl, maybe first, could you speak a little bit more about what you think will be necessary to show for the TCE platform such that it will enable a major partnership? Thanks, Andrea.

Andrea: Think.

Andrea: It's difficult to know when.

Andrea: That will get to the point, where we consummated a deal every indication is that were talking to the right people and the.

Dr. Carl Hansen: Yeah, so that's, that's a great question. You know, as I said in my prepared remarks, we launched that in about 2021. And we are very pleased with the progress of the science and the data that we've been able to bring forward. So we've been, you know, attending ACR and CITSE, and we are able to raise the bar at every one of those conferences. At this point, you know, what we really have in hand is the broadest, most well-characterized panel of CD3. We've shown we can pair those with different TAAs to tune the combination of cell killing and cytokine release. And we have shown that we can use our platform to generate highly specific TCR mimetic antibodies that bind MHC peptide targets.

Andrea: The response from scientists at really I would say that some of the top if not be top firms in the space.

Andrea: Has been universally positive and so we're we're hopeful that that will continue to move forward.

Andrea: But I wouldn't speculate on what is going to be the key piece of data that makes that happen because it's a combination of science and priorities of the partner and of course business terms.

Andrea: Okay.

Speaker Change: Got it. Thank you and then Andrew maybe one for you just given the 40% capital allocation that you.

Speaker Change: Laid out for the build out of your engine and manufacturing just curious if you would ever look to monetize the latter via contract manufacturing.

Dr. Carl Hansen: That work has been done in large part through internal R&D and work on a series of targets that we have been advancing, and as that work matures and gets closer to the clinic, we're seeing the appetite from industry increase. I think you know it's difficult to know when that will get to the point where we consummate a deal. Every indication is that we're talking to the right people, and the response from scientists at, really, I'd say that some of the top, if not the top firms in the space, has been universally positive, and so we're hopeful that that will continue to move forward, but I wouldn't speculate on what is going to be the key piece of data that makes that happen because it's a combination of science and priorities that the partner and, of And then Andrew, maybe one for you, just given the 40% capital allocation that you laid out for the build out of your engine and manufacturing, just curious if you would ever look to monetize the latter via contract manufacturing. Thanks, Andrea.

Speaker Change: Thanks, Andrew So I think in the first two programs that we're talking about 605 and $5 75, we are actually using contract manufacturers in order to move those through to IND, enabling studies and.

Speaker Change: If you are talking about would we be using our own internal and contract contracted out.

Speaker Change: It is not our intention to be a service organization or <unk> that we are expecting to use this facility for our own internal programs prioritizing internal programs co development programs and the programs of our partners and I think given the scale of the facility that in the pipeline that we have there that will be sufficient to keep the facility active.

Speaker Change: Perfect. Thanks, so much.

Speaker Change: Thank you for your question.

Allison Brett: Next question is from the line of Allison, Brett <unk> with Piper Sandler Your line is now open.

Allison Brett: Hey, good afternoon, and thank you for taking my questions.

Allison Brett: So two from me.

Allison, Brett: First Keith I will engage our platform I'm, hoping you could characterize interest in this approach for autoimmune indications relative to oncology indications and just overall, what kind of updates or disclosures.

Andrew Booth: So, I think in the first two programs that we're talking about, so 635 and 575, we are actually using contract manufacturers in order to move those through to IND-enabling studies. And if you're talking about, would we be using our own internal resources and contracting them out, that's not, it is not our intention to be a service organization or a CDMO. We are expecting to use this facility for our own internal programs, prioritizing internal programs, co-development programs, and the programs of our partners. And I think given the scale of the facility and the pipeline that we have there, that'll be sufficient to keep the facility active. Perfect, thanks so much.

Allison, Brett: Can expect out of that.

Allison, Brett: Form over the next year or so and then second just kind of a follow up on a prior question.

Allison, Brett: <unk>.

Speaker Change: Business metrics, you'll be providing could you clarify.

Speaker Change: The metrics you all.

Speaker Change: Provide going forward on a quarterly and annual basis.

Speaker Change: And also just how we should think about research Steven and milestone revenues.

Andrew Booth: Thank you for your question. The next question is from the line of Allison Bratzel with Piper Sandler. Your line is now open.

Speaker Change: Both near and longer term. Thank you.

Steven: Thanks, Alison maybe I'll start and I'll hand, it over to Andrew for the metrics and the financials. So.

Allison Bratzel: Hey, good afternoon, and thank you for taking the questions. So two from me: first, on the T-cell Engager platform, I'm hoping you could characterize interest in this approach for autoimmune indications relative to oncology indications and just overall, what kind of updates or disclosures we can expect out of this platform over the next year or so. And then second, just kind of a follow-up on a prior question about the new business metrics you'll be providing. Could you clarify just the metrics you'll provide going forward on a quarterly and annual basis, and also just how we should think about research fees and milestone revenues, both near and longer term? Thank you. Thanks, Allison.

Andrew Boone: So I think the first question was about interest in T cell engages for autoimmune.

Andrew Boone: That has been I'd say over the last year.

Andrew Boone: Hot topic of discussion with a variety of partners.

Andrew Boone: As Youre, probably aware theres been some exciting data in the car T space, particularly on CD 19 for autoimmune conditions in lupus.

Andrew Boone: And many people have recognized that if car T can work in this in this indication.

Andrew Boone: And there is a real opportunity to bring.

Andrew Boone: Bi specifics as a substitute that would have all the advantages of being much more like a drug and easier to get the patients and easier to make a business setup. So we think thats a very exciting opportunity.

Andrew Boone: One that we are well positioned to move on beyond that I don't have much to add on autoimmune conditions.

Dr. Carl Hansen: Maybe I'll start and I'll hand it over to Andrew for the metrics and the financials. So I think the first question was about interest in T cell engagers for autoimmune diseases. That has been, you know, I'd say over the last year, a hot topic of discussion with a variety of partners. As you're probably aware, there's been some exciting data in the CAR T space, particularly on CD19 for autoimmune conditions

Andrew Boone: Second you asked about updates on the TCE platform.

Andrew Boone: As I said, we are continuing to advance that platform and get proof.

Andrew Boone: Proof points on internal internal programs that are being done with the TCA platform. We currently have four abstracts that have been submitted to ACR. We are hopeful that those will all be accepted and that will be able to share data.

Dr. Carl Hansen: And many people have recognized that if CAR T works in this indication, then there's a real opportunity to bring by specifics as a substitute that would have all the advantages of being much more like a drug and easier to get to patients and easier to make a business out of. So we think that's a very exciting opportunity, one that we are well positioned to move on. Beyond that, I don't have much to add on autoimmune conditions.

Andrew Boone: Shortly.

Andrew Boone: In public there.

Andrew Boone: And I think that was the scientific part maybe I'll hand over to Andrew for the last pieces, yes.

Andrew Boone: So thanks for the question on the business metrics, so going forward on a quarterly basis. We will continue to report out on a program starts and our molecules in the clinic.

Dr. Carl Hansen: Second, you asked about updates on the TCE platform. As I said, we are, you know, continuing to advance that platform and get proof points on internal programs that are being done with the TCE platform. We currently have four abstracts that have been submitted to ACR. We're hopeful that those will all be accepted and that we'll be able to share data shortly in the public there. And I think that was the scientific part; maybe I'll hand over to Andrew for the last pieces. Yeah. Hey Allison,

Andrew Boone: And on an annual basis.

Andrew Boone: We will be continuing to report out on the royalty rates sort of our average royalty rates and an aggregate milestones that we've accumulated which are reported also in our 10-K as well as it would be our intention to report on this attrition graph and with the progression of molecules are that we've handed back to our partners.

Speaker Change: Excellent. Thank you.

Speaker Change: Thank you for your question.

Andrew Booth: So thanks for the question on the business metrics. Going forward, on a quarterly basis, we'll continue to report out on our program starts and our molecules in the clinic. And on an annual basis, we will be continuing to report out on the royalty rate, sort of our average royalty rates and aggregate milestones that we've accumulated, which are also reported in our 10K, as well as it would be our intention to report on this attrition graph on what the progression of molecules is that we've handed back to our partners. Excellent, thank you. Thank you for your question. The next question is from the line of Stephen Wiley with Steeple. Your line is now open. Yeah, good afternoon.

Speaker Change: Next question is from the line of Stephen Wiley with Stifel. Your line is now open.

Stephen Wiley: Yes. Good afternoon, thanks for taking the question.

Stephen Wiley: It would be a couple so.

Stephen Wiley: Now that you just have a line of sight into completing.

Stephen Wiley: This forward integration process.

Stephen Wiley: Accretion of manufacturing.

Stephen Wiley: Talking about having pilot runs going before the end of this year.

Stephen Wiley: Can you start engaging potential partners or even co development partners on the BD front with kind of.

Stephen Wiley: Posed workflow that now contemplates.

Stephen Wiley: The manufacturing of an end product.

Stephen Wiley: Or do you have to wait to those pilot runs are done before you can start engaging on.

Stephen Wiley: On those kinds of deals.

Stephen Wiley: Steve Karl here.

Steve Karl: I think youre exactly right so.

Steve Karl: Once the development candidate has been picked.

Stephen Wiley: Thanks for taking the question; there could be a couple. So, I guess now that you just have a line of sight...

Steve Karl: First step is to move that into.

Steve Karl: Into the generation of cell lines, and then start to develop a process ahead of the manufacturing. So we have been building. Our PD teams ahead of that and we are certainly in a position. This year to begin working on process development, leading to manufacturing and have every confidence that the pilot runs and the facility will be.

Stephen Wiley: Proud to be Puneet Souda, Gal Munda, Do Kim, Abcellera. Can you start engaging potential partners? You have to wait for those pilots. Steve, Carl here.

Dr. Carl Hansen: Noah, I think you're exactly right. So, once a development candidate has been picked, the first step is to move that into the generation of cell lines and then start to develop a process ahead of manufacturing. So we have been building our PD teams ahead of that, and we are certainly in a position this year to begin working on process development leading to manufacturing and have every confidence that the pilot runs and the facility will be online to support that. So those are conversations that we can begin having right now. I'll also add that, as I mentioned in my prepared remarks, we are targeting to bring at least one additional development candidate forward ourselves this year, and it is our expectation that we'd be able to do the manufacturing on that one from start to finish, and maybe just on the... Partnership, just to follow up, I guess, have any of the BD conversations that you've had today? either shape the kind of deal you want, type of, and the data Is it your preference to do something exclusive?

Steve Karl: Online to support that so thats.

Steve Karl: Those are conversations that we can begin having right now I'll also add that as I mentioned in my prepared remarks, we do we are targeting to bring at least one additional <unk>.

Steve Karl: Development candidate forward ourselves this year and is our expectation that we'll be able to do the manufacturing from that one on that one from start to finish.

Steve Karl: Okay.

Speaker Change: And then maybe just on the TCE partnership just to follow up I guess.

Speaker Change: Have any of the BD conversations as you've had to date.

Speaker Change: Either I guess shape the kind of deal you want to do <unk>. The type of deal that you think you can do just kind of given.

Speaker Change: The data that you shared today and the progress that you've made with this channel of CD three variants and is it your preference to do something exclusive versus non exclusive I'm just kind of curious as to how you're thinking about this.

Dr. Carl Hansen: non-exclusive. Yeah, I mean, it's always dangerous to speculate on deals and what exactly the structure is going to be. You're exactly right that if you're talking to companies that have a strong interest in this, then that will certainly help you get smarter about the types of deals that you should do and how you should think about maximizing value on the platform. And, you know, those conversations have been helpful. The real question, and Andrew asked something similar, like what is the key data? It's really a combination of moving the data forward enough and finding the right partner with a good alignment, and then making sure that you're doing a deal that really captures the value of the platform. If we wanted to execute TCE deals, we could have done several TCE deals last year, and we passed because we think that it's not in the best interest of the long-term value of that platform.

Speaker Change: Yes, I mean, it's always dangerous to speculate on on deals and what exactly the structure is going to be.

Speaker Change: Youre exactly right that if you are talking to the companies that have a strong interest in this.

Speaker Change: And then that will certainly help you get smarter about the types of deals that you should do and how you should think about maximizing value on the platform.

Speaker Change: And those conversations have been helpful.

Speaker Change: The the real question I think.

Speaker Change: Andrew asked something similar like what is the key data, it's really a combination of moving moving the data forward enough and finding the right partner with the good alignment and then making sure that youre doing a deal that really captures the value of the platform. If we wanted to execute TCE deals we could have done several TCE deals last year and we passed.

Speaker Change: Because we think that thats not in the best interest of the long term value of our platform and.

Speaker Change: And so that's a.

Dr. Carl Hansen: And so that's an issue that we're continually evaluating and that we'll navigate going forward. And while we do want to get that deal out and have the validation, it's much more important for the long-term state of the business that we do the right deal and make sure we're not selling this cheap. Maybe just one quick..., follow-up, I guess the one or maybe two additional candidates that might be moving forward, kind of past discovery, this year in addition to five sub Um, do those also kind of fall in? Sure. So I don't think that I mentioned it, but probably the most likely source of those candidates is going to be from our work in GPCRs and ion channels. 6.3.5, which we are wildly excited about. We love that program.

Speaker Change: That's.

Speaker Change: That's an issue that we're continually continuously evaluating and that we will navigate going forward.

And while we do want to get that deal out and have the validation. It's much more important for the long term state of the business that we do the right deal and make sure we're not selling this cheap.

Speaker Change: Okay, and then maybe just one quick.

Speaker Change: Follow up I guess, the one or maybe two additional candidates.

Speaker Change: You might be moving forward kind of past discovery.

Speaker Change: This year in addition to $5 75.

Speaker Change: 635.

Do those also kind of fall into the.

Speaker Change: Either TCE or GPC, our ion channel bucket in terms of being I guess quote unquote higher value.

Speaker Change: Sure so.

Speaker Change: I don't think that I mentioned it but.

Speaker Change: Probably the most likely source of those candidates is going to be from our work in <unk> and ion channels.

Speaker Change: 605, we are wildly excited about.

Speaker Change: We love that program.

Dr. Carl Hansen: I'm probably every bit as excited about the prospect of that effort that's been going on for a long time to start to generate some very exciting molecules. So we're hoping that we'll be able to deliver on at least one, perhaps two of those molecules from that platform. There is, I think, a slight chance that it could also come from a TCE program, and that's really on our side about prioritization and deciding where we like the data and the opportunity the best. Alright, thanks.

Speaker Change: Im probably every bit as excited about the prospect of that effort that's been going for a long time to start to generate some very exciting molecule. So we are hoping.

Speaker Change: That will be able to deliver on at least one perhaps two out of that platform. There is I think aside chance that it could also come from a TCE program and that's really on our side about prioritization.

Speaker Change: Deciding where we like the data and the opportunity to divest.

Speaker Change: Alright, thanks for taking the questions.

Dr. Carl Hansen: Thank you for your question. The next question is from the line of Steve Detrick with Key Corp. Your line is now open.

Speaker Change: Thank you for your question.

Speaker Change: The next question is from the line of Steve <unk>.

Steve Karl: Key Corp. Your line is now open.

Steve Detrick: Hey guys, is there any additional color you can provide on the three new partner-initiated programs that were started in the fourth quarter? You know, only that I would say, you know, most, most often, you can see we had some BD activity in the second half of the year. Most often, the starts are following recent deal activity, but we don't normally go into any detail there, Steve, on what quarter to quarter are the specific deals and starts that we have. Okay, thank you. Thank you for your question. The next question is from the line of Puneet Souda with Lerank Partners. Hi, yeah, you have Michael on for Puneet.

Steve Karl: Hey, guys.

Steve Karl: Are there any additional color you can provide on the three new partner initiated programs or started in the fourth quarter.

Steve Karl: Okay.

Speaker Change: Only that I would say most most often you can see we had some BD activity in the second half of the year most often those.

Speaker Change: Starts are.

Speaker Change: Following.

Speaker Change: A recent deal activity, but we don't normally go into any detail there Steve on what quarter to quarter are the specific deals in starts that we have.

Steve Karl: Okay. Thank you.

Speaker Change: Thank you for your question.

Speaker Change: Next question is from the line of Puneet soda with Leerink partners. Your line is now open.

Speaker Change: Hi, Yes, you have Michael on for Puneet.

Andrew Booth: I was just wondering, so with this pickup in the pucks later in this year, I was wondering if that's like a typical seasonality and VD activity or if you're seeing a pickup now that there's been a decent amount of biopharma, M&A, and if that influences kind of your outlook for how much co-development or asset sale you might have, kind of in the near term. Hey Michael, thanks for joining us No, I think it's just, there's no sort of predictable seasonality with the BD deal flow; it just, you know, it can be irregular, and it has been irregular in the past, too, so we don't, I wouldn't read into anything regarding that, you know, quite robust quarter.

Michael: Just wondering so with this pickup in the hubs.

Puneet Souda: Later in this year I was wondering if that's like a typical seasonality in BD activity or if you are seeing pick up now that there's been a decent amount of biopharma M&A and that influences kind of your outlook for how much co development or.

Puneet Souda: Asset sale you might have.

Puneet Souda: Kind of in the near term.

Puneet Souda: Yes.

Speaker Change: Hey, Michael Thanks for joining for Puneet there.

Speaker Change: No I think its just theres no sort of predictable seasonality with the BD deal flow it just.

Speaker Change: It can be irregular and it has been in the past also irregular so we don't I wouldn't read into anything.

Speaker Change: Regarding that quite robust quarter.

Michael: And as I mentioned, we don't consider the programs under contract to be really a meaningful business metric for people, turning people's attention to going forward, and we're going to stop reporting on that on a quarterly basis. Got it. And then I was wondering if you had any visibility on whether those five pre-clinical assets might be getting into the clinic sometime in 2024 or 2025? Hi, thanks for the follow-up. I mean, we would hope so, but they're in the hands of our partners, and they're moving them at their own pace.

Speaker Change: And as I mentioned, we're going to we don't.

Speaker Change: <unk> the programs under contract to be really the meaningful business metric group people, turning people's attention to going forward and we're going to stop reporting on that on a quarterly basis.

Speaker Change: Got it and then I was wondering if you had any visibility on level. It does.

Speaker Change: <unk> preclinical assets.

Speaker Change: If they might be getting into the clinic sometime in 2024 or <unk>, 5%.

Speaker Change: Hi, Thanks for the follow up.

Speaker Change: I mean, we would hope so but they are in the hands of our partners and Theyre moving them at their own pace I would say like the the progression as we have seen in the past can take Kent.

Andrew Booth: I would say the progression, as we have seen in the past, can take any number of years. Ones that we are particularly excited about because they have, or we could expect in 2024, let's say, because they have already disclosed this themselves, is Abdera, the company we worked with on radioisotope conjugates. They have indicated that I think at least one would come into the clinic in 2024, so we're definitely keeping our eye out for that. For the other ones, we don't have any particular insight into what their schedules are. Got it. Thank you very much.

Can take any any number of years ones that we are particularly excited about because they have or we could expect in 2024, let's say because they have all.

Speaker Change: Already disclosed this themselves as <unk>. The company, we worked with on radio isotopes conjugates. They have indicated that I think at least one would come into the clinic in 2024. So we're definitely keeping our eye out for that for other ones. We don't have any particular insight on on what their schedules are.

Speaker Change: Got it thank you very much.

Stephen Ma: Thank you for your question. The next question is from the line of Stephen Ma with Cowan. Your line is now open.

Speaker Change: Thank you for your question.

Speaker Change: The next question is from the line of Steven Mah with Cowen. Your line is now open.

Stephen Ma: Great, thanks for taking the questions. Andrew, how should we think about the R&D expense going forward in 2024, especially in light of, you know, advancing two internal programs into R&D enabling studies? And then, you know, the second part of the question, you know, given the, you know, the cadence of INDs in 2024, of one or two, could you give us some color on what's driving that cadence and could you do more if you had enough, you know, if you had multiple compelling candidates? It seems like you have the cash and the manufacturing capability, and capacity to accelerate if you wanted it. Is Hey Steve, so I'll take each of those, and I think Carl will chime in on the second one as well at the end.

Steven Mah: Great. Thanks for taking the questions.

Steven Mah: Andrew.

Steven Mah: How should we think about the R&D expense going forward in 2020 for especially in light of your.

Advancing to and from our programs.

Steven Mah: IND, enabling studies and then.

Speaker Change: The second part of the question.

Given.

Speaker Change: Given the.

Speaker Change: The cadence of <unk> in 2024.

Speaker Change: One or two.

Speaker Change: Yes.

Speaker Change: Could you give us some color on what's driving that cadence and could you do more if you had enough you had multiple compelling candidates.

Speaker Change: You have the cash and the manufacturing capability and capacity to.

Speaker Change: Accelerated if you wanted to is that a fair.

Your statement.

Speaker Change: Hey, Steve So I'll take each of those and I think Carl will chime in on the second one as well at the end so on the R&D expense in 2024 as I mentioned in the prepared remarks, we'd consider it to be we would expect it to be relatively flat versus last year's expense last year. We did have some expenses relate.

Andrew Booth: So on the R&D expense in 2024, as I mentioned in the prepared remarks, we consider it to be, we would expect it to be relatively flat versus last year's expense. Last year we did have some expenses related to the clinical development of a certain number of programs, certainly bringing 575 and 635 to where they are in R&D enabling studies. And we would expect it to actually be similar in 2024, so relatively flat overall.

Speaker Change: Two clinical development.

Speaker Change: A certain number of programs, certainly, bringing $5 75, and 635% to wear it to where it is in IND, enabling studies and we expect it to actually be similar in 2024, so relatively flat overall.

Andrew Booth: Regarding the second question, as Carl mentioned, we would expect two additional programs getting into development candidates and towards R&D enabling studies in 2024, and actually, 635 and 575 would reach R&D in 2025. And then that's when our phase ones would be expected to start. We're on a pace of roughly that, then those two development candidates from this year would have INDs or be going to IND enabling studies with expected INDs in 2026. That appears to be the pace and cadence that we're getting into. I'll let Carl talk about what the capacity is and what are maybe the limiting features of that. I'm sure I'll be happy to do that.

Speaker Change: Regarding the second question.

Speaker Change: As Carl mentioned is that we would expect two additional programs getting into development candidate and towards IND, enabling studies in 2024, and actually that 635 and $5 75 would reach IND in 2025, and then that's when their phase ones would be expected to start we're on a pace of roughly that.

Speaker Change: Then those two development candidates from this year would have indeed go into IND, enabling studies with expected <unk> in 2026 that appears to be the pace and cadence that that we're that we're getting into.

Speaker Change: I'll, let Carl talk about whether what the capacity is and what are maybe the limiting.

Speaker Change: Features on that.

Carl Hansen: Sure happy to do that so.

Andrew Booth: So maybe I'd first emphasize, as I did in my prepared remarks, that we believe advancing internal portfolios is going to be the biggest value driver in the long run for Accelera. Now our focus is on making sure that we're building that portfolio and moving it forward effectively. This is not about numbers.

Maybe just first emphasizing as I did in my prepared remarks that we believe.

Carl Hansen: Advancing internal portfolio is going to be.

Carl Hansen: The biggest value driver in the long run for accelerating now.

Carl Hansen: Our focus is on making sure that we're building that portfolio and moving it forward effectively this is not about numbers, it's not about putting a certain number of <unk> on the board. It is completely about being able to look at the data look at the opportunity look at the commercial case and get excited that you have a much better than average chance of bringing.

Dr. Carl Hansen: It's not about putting a certain number of INDs on the board. It is completely about being able to look at the data, look at the opportunity, look at the commercial case, and get excited that you have a much better than average chance of bringing forward a molecule that's going to be a drug that helps patients. So the fundamental bottleneck here is in finding opportunities and getting the science to the point where you really have conviction and believe that this is a program that deserves to be added to the portfolio. That's, by far, the biggest challenge.

Carl Hansen: Forward a molecule that's going to be a drug that helps patients. So the fundamental bottleneck here is in finding the opportunities and getting the science of the point, where you really have conviction and believe that this is a program that deserves to be added to the portfolio.

Carl Hansen: That's by far the bottleneck.

Dr. Carl Hansen: Now, the other piece is, in the event that you're working on many programs, as we are, and a lot of them happen to hit in the same year, I could imagine that, you know, there is a number at which we would run into a bottleneck operationally in being able to, you know, manage the manufacturing, get the I&D packages together, do the preclinical work. Frankly, that would be, you know, a problem that we would welcome. And given the nature of what we're working on, we could pace those out. Most of these programs are against targets that the industry has known about for many years and where we're not seeing antibodies move forward because people have not been able to solve those problems. So we would love to have a backup of exciting first-in-class molecules to move forward with. That's not currently the case, but we are putting our necks out a little bit and saying, hey, this year, we're hoping to get at least one breakthrough and perhaps two and add two more programs in Development Canada. Okay, great. That's a really helpful color.

Carl Hansen: Now.

Carl Hansen: The other the other pieces in the event that Youre working on many programs as we are.

Carl Hansen: And a lot of them happened to hit in the same year.

Carl Hansen: I could imagine that there is a number at which we would run into a bottleneck operationally and being able to.

Carl Hansen: Manage the manufacturing and get the R&D packages together do the preclinical work.

Carl Hansen: Frankly that would be a problem that we would welcome and given the nature of what we're working on.

We could pay those out most of these programs are are against targets that the industry has known about for many years and where we're not seen antibodies move forward because people have not been able to solve those problems.

Carl Hansen: So we would love to have a backup of exciting first in class molecules to move forward. That's not currently the place, but we are putting our next out a little bit and saying Hey, this year, we're hoping to get at least one breakthrough and perhaps too and add two more programs in development candidates.

Speaker Change: Okay great.

Speaker Change: Really helpful color and then last one is in the fall.

Stephen Ma: And then last one is a follow-up question on manufacturing. You know, given the recent discussions by the U.S. government on the bioeconomy and securing domestic and allied supply chains, are you guys applying for any U.S. government funding for biomanufacturing or, Saw Production? That's a good question. You know, as you probably know, we have had some close interactions with DARPA and the US government in the past, and we certainly would welcome that again. But we're not currently engaged in those types of conversations.

Speaker Change: So up question on manufacturing.

Speaker Change: Given the recent discussions by the U S government.

Speaker Change: Bio economy, and securing domestic and allied supply chains are you guys applying for any U S government funding for by manufacturing or.

Speaker Change: No.

Speaker Change: All production.

Speaker Change: Yes.

Speaker Change: That's a good question as you probably know we have had some close interactions with DARPA in the U S government in the past and we certainly would welcome that again.

Speaker Change: We're not currently.

Speaker Change: Engaged in those types of conversations.

Dr. Carl Hansen: You know, what has been interesting, as I'm sure you've seen, is that there are some geopolitical factors that are making it more and more important to have manufacturing in-house and have it in North America. So we think that that's really playing well into the strategy. And we believe that in the long run, you know, if you have the ability to continue to generate first-in-class assets, it is highly strategic to be able to control the supply chain through PD and manufacturing. And so we view GMP manufacturing, not so much as a revenue center, but a key strategic asset to execute on the vision of building a vertically integrated clinical stage biotech. Thank you for your question. The next question is from the line of Evan Saigerman with BMO. Your line is now open.

Speaker Change: What has been interesting as I'm sure you have seen is that there is.

Speaker Change: There are some geopolitical factors that are making it more and more important to have manufacturing in house and have them in North America. So we think that that's that's really playing well into the strategy.

Speaker Change: And.

Speaker Change: And we believe that in the long run if you have the ability to continue to generate.

Speaker Change: First in class assets. It is highly strategic to be able to control the supply chain through PD in manufacturing and so we view the GMP manufacturing not so much as a revenue center as a key strategic asset.

Speaker Change: To execute on the vision of building a vertically integrated clinical stage biotech.

Speaker Change: Okay, great. Thank you.

Speaker Change: Thank you for your question.

Speaker Change: The next question is from the line of Evan <unk> with BMO. Your line is now open.

Evan Saigerman: Hi guys. Thank you so much for taking the time to answer my questions. Bigger picture One that I want to ask one on 635, the bigger picture, as you think about kind of your transition to this, you know, more of a drug development type company, how do you decide what assets you're going to put through a phase one, maybe it's a phase two versus partnering out? Is it really just the sheer size of resources, the economics?

Evan: Hi, guys. Thank you so much for taking my question bigger picture one that I wanted to ask one on <unk>. So bigger picture as you think about kind of your transition to this more of a drug development company. How do you decide what assets youre going to put through a phase one maybe it's in phase II versus partnering.

Evan: Really just the sheer size of the resources the economics market through kind of that thinking and then maybe on 635 walk us through kind of the Genesis of this I know youre not going to disclose the target or kind of what you're going after here, but metabolic is obviously very hot what do you see as differentiating differentiated about 635 and <unk>.

Evan Saigerman: Walk me through kind of that thinking. And then maybe on 635, walk us through kind of the genesis of this. I know you're not going to disclose the target or kind of what you're going after here, but metabolic is obviously very hot. What do you see is differentiated about 635?

Evan Saigerman: And maybe, you know, how does that fit into kind of a rapidly evolving metabolic space? Thank you very much. Sure. Happy to take those questions in turn.

Evan: How how does that fit into kind of a rapidly evolving metabolic space. Thank you very much.

Evan: Sure.

Speaker Change: Happy to take those questions in turn so the first question was about how do you decide which programs youre working on.

Dr. Carl Hansen: So the first question was about how you decide which programs you're working on, how far you take them, and when you look to partner out. So, first of all, when we decide at every point in development whether we further invest in a program, we're looking at four key dimensions. We're looking at science, we're looking at the commercial opportunity, we're looking at the potential for differentiation, and we're looking at a practical path for development. So every asset, every opportunity needs to be looked at through those four dimensions at each step. Now, as you start to get further into clinical development, I think one of the big questions as to whether it's better to keep it in-house or better to look for partnerships depends on the scale of the resources you need to commit. So, we are definitely not in the game of betting everything on a single asset.

Speaker Change: How far you take them and when you look to partner one so first of all deciding at every point in development do we further invest in our program. We're looking at four key dimensions. We're looking at science, we're looking at the commercial opportunity. We're looking at the potential for differentiation and we're looking at a practical path for development.

Speaker Change: So every asset every opportunity needs to be looked at through those four dimensions at each step.

Speaker Change: Now as you as you start to get further into clinical development.

Speaker Change: One of the big questions as to whether it's better to keep it in house or better to look for partnerships. It depends on the scale of resources you need to commit.

Speaker Change: We are definitely not in the game of betting everything on a single asset we have.

Dr. Carl Hansen: We have been diversifying our portfolio from the beginning, and we're going to continue to do that. But it's also the clinical development capability, and, you know, for some indications, particularly indications that are competitive in terms of patient enrollment, these are much better done by a large and established company. I think atopic dermatitis is probably a pretty good example of that.

Been diversifying our portfolio from the beginning and we're going to continue to do that but.

Speaker Change: But it's also the clinical development capability.

Speaker Change: And for some indications, particularly indications that are competitive in terms of patient enrollment.

Speaker Change: These are much better done by a large and established company I think atopic dermatitis is probably a pretty good example of that so there is there is some combination of resource allocation and just what is practical and do you believe that you can do it effectively and that youre going to create the most value.

Dr. Carl Hansen: So, there's some combination of resource allocation and just what is practical, and do you believe that you can do it effectively and that you're going to create the most value, you know, for patients and for the company by keeping it in your own hands or by finding the right partner? And then when you find the right partner, then the question is what exactly is the nature of that partnership. And those are the things that need to be evaluated not as an omnibus strategy but rather on a case-by-case basis based on the best information you have at the time. All right, that's helpful. And then I guess more on 2.5 or kind of what else you'd want to share.

Speaker Change: For patients and for the company by keeping it in your own hands or by finding the right partner and then when you find the right partner. Then the question is what exactly is the nature of that partnership and those are the things that need to be evaluated not as a omnibus strategy, but rather on a case by case basis based on the best information you have at the time.

Speaker Change: Alright, that's helpful. And then I guess more on fiber kind of what else you would want to share.

Dr. Carl Hansen: Thank you. Thank you. Thank you. Yeah, I don't have too much more to share on 635. I mean, the highlights are that we think this is a potentially first-in-class antibody therapy against a GPCR or ion channel target. It's in the area of metabolic and endocrine disorders.

Speaker Change: Yes, I don't have too much more to share on 65 I mean, the the highlights are we think this is a potentially first in class antibody therapy against the GPC, our ion channel target.

Speaker Change: In the area of metabolic and endocrine disorders, and we have compelling data in nonhuman primates.

Dr. Carl Hansen: And we have, you know, compelling data in non-human primates that we believe has, you know, a high likelihood of translating to humans. And the nature of the indication is that we believe we can get both safety and efficacy data early in clinical development. That's the focus right now. Once we get to that point, we'll have to reevaluate what's the next best step. Okay, no, that's very helpful. And then, kind of, just one more to add in. So as you think about kind of, you know, right sizing or kind of reconciling your business priorities, you know, what's driven by, you know, I don't want to say pressure from, you know, the government, but kind of priority from the Canadian government versus investors and pushing forward on assets that you think could be most profitable? How do you balance that?

Speaker Change: That we believe has highlighted are translating to humans and in the nature of the indication is that we believe we can get both safety and efficacy data early in clinical development.

Speaker Change: The focus right now once we get to that point, we'll have to reevaluate what's the next best step.

Speaker Change: Okay. No that's very helpful. And then just one more.

Speaker Change: And so as you think about kind of.

Speaker Change: Right sizing, our kind of reconciling your business priorities, what's driven by.

Speaker Change: The pressure from the government, what kind of priority from the Canadian government versus <unk>.

Speaker Change: Investors and pushing forward kind of assets that you think could be most profitable how do you balance that because it's clearly an important strategic priority for the Canadian government, which is great. But we also want to make sure you're balancing that resource allocation.

Evan Saigerman: Because it's clearly an important strategic priority for the Canadian government, which is great, but we also want to make sure you're balancing that resource allocation with, you know, high potential. Hey, thanks for the question, Evan. I think it's important that, of course, the government has been, the Government of Canada and the Government of British Columbia have been excellent funding partners here. Importantly, you know, we still have full operational control of the company, and we're making the decisions which are best for the company to advance our assets and establish ourselves as an anchor company here in Canada. And that is exactly what the Canadian government and the Government of British Columbia are looking for. So I think our interests are very well aligned there.

Speaker Change: High potential assets.

Okay.

Speaker Change: Okay.

Speaker Change: Hey, Thanks for the question I have and I think important.

Speaker Change: Of course, the government has been the government of Canada, the Governor British Columbia have been excellent funding partners. Here importantly, we still have full operational control of the company and.

Speaker Change: We're making the decisions, which are the best for the company to advance our assets and establish ourselves as an anchor company here in Canada and that is exactly what the Canadian government and the government of British Columbia are looking for so I think our interests are very well aligned there and of course, we have certain commitments for.

Evan Saigerman: And, of course, we have certain commitments to the Canadian Government which are highlighted in some of the documents that we've provided previously on the nature of that funding. But I think those are all also right in line with what the strategic objectives are of the company. So I think we find ourselves not at odds with any sort of competing, let's say, motivation between what we're doing that's right for the company and for shareholders and what the Government of Canada funding is allowing us to do. I would go, you know, even further and say, you know, the government of Canada and British Columbia, I think that the top priority is to make sure that here we are building an anchor company that is building an ecosystem in clinical trials So we are 100% aligned in maximizing shareholder value, bringing great drugs to patients, and building programs that really make a difference and move the needle for the industry. So there is no misalignment; this is all one thing.

Speaker Change: The Canadian government, which are highlighted in some of the documents that we have provided previously on the nature of that funding, but I think those are all also right in line with what the strategic objectives are of the company. So I think we find ourselves not at odds with the.

Speaker Change: Any sort of competing.

Speaker Change: Let's say motivation between what we're doing that's right for the company and for shareholders and what the government of Canada funding is allowing us to do.

Speaker Change: Hi.

Speaker Change: I would go even further and say.

Speaker Change: The government of Canada, and British Columbia.

Speaker Change: I think that the top priority is to make sure that here. We are building an anchor company that is building an ecosystem in clinical trials and clinical development.

Speaker Change: And that accelerated successful. So we are 100% aligned in maximizing shareholder value, bringing great drugs to patients and in building programs that really make a difference in moving the needle for the industry. So there is no misalignment. This is this is all one thing.

Dr. Carl Hansen: Well, thank you so much. Thank you for your question. There are no additional questions waiting at this time, so I'll pass the call back to the management team for any closing remarks. Thank you everyone for joining the call. We are very pleased to share progress and look forward to speaking with you again. That concludes the conference call. Thank you for your participation. You may now disconnect your line.

Speaker Change: Well thank you so much.

Speaker Change: Thank you for your question there are no.

Speaker Change: No questions waiting at this time I will pass the call back to the management team for any closing remarks.

Speaker Change: Thank you everyone for joining the call.

Speaker Change: We are very pleased to share our progress and look forward to speaking with you again.

That concludes the conference call. Thank you for your participation you may now disconnect your lines.