The days of AbCellera Biologics Inc. minting huge returns from its COVID-19 antibody treatment have likely peaked and financial contributions from the drug should fall off “significantly,” chief executive Carl Hansen says.
But, despite a 7-per-cent selloff of the stock on Friday after the company reported first quarter earnings late the previous day, Canada’s most valuable biotechnology company stressed it is not a one-hit wonder. Rather, the Vancouver enterprise noted it is partnering on 119 development programs with 29 drug companies that should deliver a stream of revenues for years.
“I really want people to understand the very unique company we’re building here, and the bigger mission ... and [to be] less distracted by what’s happening with COVID-19,” Dr. Hansen said in an interview.
AbCellera’s COVID-19 antibody, known as bamlanivimab, has proven to be a lucrative distraction. Developed from blood of an early, recovered COVID-19 patient, the antibody was speedily brought to market in partnership with Eli Lilly last year to deliver temporary immunity to patients with mild and medium symptoms. It has been administered to more than 400,000 patients and is largely responsible for AbCellera delivering two straight quarters of US$200-million-plus revenue and US$100-million-plus net profits. Royalties from bamlanivimab were US$171.5-million in the first quarter, 85 per cent of the firm’s total revenues.
Speaking to analysts on Thursday, chief financial officer Andrew Booth said, “We would expect royalty revenues in [the second quarter] to be below where they have been” in the first. Dr. Hansen told the Globe and Mail the firm expected COVID-related revenue to peak in 2021 and to be significantly lower in 2022. But they still anticipate sales to continue for its COVID-19 antibodies, including a new drug that has just entered clinical trials and is believed to work against all known variants. “COVID-19 is a fact of life on planet Earth for a very long time,” Dr. Hansen said.
Analysts cut their outlooks following the call. Credit Suisse analyst Tiago Fauth, who had previously forecast AbCellera would earn US$700-million in bamlanivimab royalties, cut that to US$360-million. Stifel analyst Stephen Willey trimmed his revenue forecast for 2021 to US$385.6-mililon from USS$505-million. Both predict revenue will dip below US$150-million in 2022 and decline again in 2023, as AbCellera loses money both years.
At the same time, the analysts dismissed the long-term impact of a faster-than-expected drop-off. Mr. Fauth estimates COVID-19-related royalties account for about 5 per cent of AbCellera’s value. ”We continue to see AbCellera as one of the more compelling investment opportunities for investors looking to capitalize on the long-term potential of a disruptive technology-powered drug discovery platform,” he said in his Thursday note. Mr. Willey wrote: “The base business remains in great shape.”
The rush to get COVID-19 treatments to market sidestepped normal, multiyear development processes for drugs, bringing unusually fast financial results and overshadowing AbCellera’s innovative approach to drug discovery. “In biotechnology, you don’t sell a product historically any faster than a decade after you’ve begun a program,” Dr. Hansen said. “Most biotechs rise and fall and go bankrupt, and never get a drug to the clinic.” With bamlanivimab, “the entire cycle has been crushed from 20 years, including discovery, down to a year,” he noted, and the drug has saved more than 10,000 lives.
AbCellera’s strategy is to continuously create antibody candidates using “antibody discovery engine” based on technology developed at University of British Columbia’s interdisciplinary Michael Smith Laboratories, where Dr. Hansen ran the bioengineering group until spinning out the company in 2012. AbCellera isolates and identifies antibodies that humans create to fight infections by passing blood samples from a person who has developed an immunity to a disease through a credit-card-sized device with thousands of tiny chambers. With the help of artificial intelligence, it tests antibodies produced by cells in each chamber simultaneously, to determine which have potential to become drugs. AbCellera says it is a faster, cheaper process for drug discovery than normal methods.
AbCellera built its business to partner with drug companies to develop antibody treatments for a range of ailments. Each development deal comes with research fees, milestone payments and eventually royalties as the molecules advance from lab to market. AbCellera is also looking to buy other technologies that can advance its development efforts, such as its US$90-million purchase last fall of a biotechnology company that uses genetically engineered mice to help discover antibodies. “We’re focused on building a company for five to 10 years from now,” Dr. Hansen said.
But the success of bamlanivimab creates an interesting dynamic for AbCellera, akin to a rookie player that wins the MVP award in their debut season. Bamlanivimab’s success could set short-term expectations that may be hard to meet as AbCellera’s other programs follow traditional, prolonged development cycles. For AbCellera’s part, it’s treating its recent gains as found money: Mr. Booth called it “a source of undiluted capital” that AbCellera can use to pay for its expansion.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.