AbCellera stock sells off despite posting record revenue on brisk sales of COVID-19 antibodies

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AbCellera Biologics Inc. ABCL-Q generated record revenue in its first quarter as the Vancouver company’s COVID-19 antibodies continued to deliver a bounty of what CEO Carl Hansen has called “non-dilutive capital” during a challenging time for the biotech sector.

But its stock sold off by 14 per cent Wednesday, reflecting another tough day for the sector as the Nasdaq Biotechnology Index closed down 3.6 per cent. Analysts also trimmed their estimates after AbCellera booked higher operating expenses than anticipated.

AbCellera said after the close of market Tuesday that it generated US$316.6-million of revenue in the first quarter, compared with US$375.2-million in all of 2021. All but 3 per cent of revenue was derived from royalties on sales by Eli Lilly & Co., its partner in taking their jointly developed COVID-19 antibodies bamlanivimab and bebtelovimab to market.

AbCellera earned a net profit of US$168.6-million, or 59 US cents a share on a diluted basis. It generated US$202.7-million in revenues and US$117.2-million in net profit in the same period in 2021.

Analysts had anticipated a strong showing after Eli Lilly reported it had generated US$1.5-billion in quarterly antibody sales. “The quarter was pretty much as expected” Bloom Burton analyst Antonia Borovina said. “The fundamentals haven’t changed. AbCellera is still executing on its long-term strategy to develop the best-in-class antibody discovery platform.”

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AbCellera uses a unique mixture of technologies to rapidly crank out antibody after antibody in partnership with pharmaceutical companies. It speeds up the process of isolating and identifying antibodies that immune systems create to fight infections.

The company was built around technology developed at a cross-disciplinary biomedical research lab at the University of British Columbia, where Mr. Hansen taught, that combines data science, protein engineering, machine learning, bioinformatics and genomics.

A key step involves passing cells from a person or animal, that has developed an immune response to a disease, through a device with hundreds of thousands of tiny chambers. Using artificial intelligence, it tests antibodies produced by cells in each chamber simultaneously to determine which could become drugs.

AbCellera worked on developing fast medical responses for future pandemics through a contract with the U.S. Defence Department’s Defence Advanced Research Projects Agency in the late 2010s. That left it poised to respond as the COVID-19 virus spread in early 2020. It quickly obtained a blood sample from a recovered patient, partnered with Eli Lilly and by the end of that year, the duo had emergency authorization from the U.S. Food and Drug Administration to sell their drug.

That unusually time-compressed success often overshadows AbCellera’s other work, which is expected to deliver results over a longer period. AbCellera has signed partnership deals for 158 programs with 36 companies ranging from startups to pharma giants and has started 84 of them, including six in the first quarter.

Six AbCellera-discovered molecules have entered the clinical-research stage, up from one – bamlanivimab – in 2020. The deals are structured to give AbCellera upfront research and development fees, as well as milestone payments as drugs enter the clinic and pass through trials, and finally, royalties on product sales.

Mr. Hansen has gone as far as to say “we are not a COVID-19 company” to draw attention to AbCellera’s other drugs in development, though none are expected to reach the market until 2029. Meanwhile, Ms. Borovina expects AbCellera’s COVID-19-related sales to fall to US$32-million in 2023 and US$21-million in 2024.

Despite AbCellera’s success to date – including the largest initial public offering by a Canadian biotech company in December, 2020 – its stock has plummeted along with other biotech stocks; it is 84 per cent below its 52-week high.

Ms. Borovina said “platform” companies like AbCellera are out of favour with investors “because they’re capital intensive, associated with long timelines and there aren’t near-term catalysts that could drive the stock higher” like trial results.

But AbCellera’s windfall from its COVID antibodies, which left it with US$786.1-million in cash, cash equivalents and marketable securities on March 31, “essentially shields them from what is happening in the broader biotech sector,” she said.

Analysts also trimmed their stock-price targets after AbCellera said it spent US$26-million on research and development in the quarter, millions more than they’d expected. Ms. Borovina cut her share-price target on the stock to US$30 from US$33 while Piper Sandler analyst Do Kim dropped his target to US$21 from US$28.

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