AbCellera Biologics Inc Aktie

All right. Good afternoon, everyone. Thanks for joining us for this next session. I'm Steve Seedhouse on the biotech team here at Cantor. It's a privilege to welcome AbCellera, our next presenting company. And I'm joined, of course, on stage by President and CEO, Carl Hansen. Really exciting time for the company. We've been following closely as you've updated the market on your lead program and many other developments, and we'll try to cover as much of it as we can here in the next 30 minutes, Carl, but thanks for being here.

We'll start off, I guess, just since reporting top line data of your lead program and maybe you can reintroduce that program for the mixed audience as you talk about this. But what are the next steps that AbCellera has taken here as you think about the strategic path forward in this indication, which is vasomotor symptoms in menopause?

Thanks, Steven. Thanks for having us. Yes, we're super excited about the data. Maybe just to set the table. So about 2023, AbCellera transitioned from a platform company to building our own assets. The lead program, ABCL635 is a first-in-class antibody against NK3R, and it is being developed for the treatment of vasomotor symptoms or hot flashes that are associated either with menopause or with induced menopause or a menopause-like state that comes alongside of endocrine therapy in breast cancer and in prostate cancer.

So that program went into the clinic only at the start of the year and quickly moved through Phase I. I guess it's now 3 weeks ago, we released the top line 4-week data. And frankly, that data, I'd say, blew the doors off even what we thought was the most bullish case for the product. So the -- I think the punchline is that we have an antibody that is following a couple of small molecules that are now approved on the market. One is Lynkuet by Bayer, the other one is Astellas.

The Phase II data that we have shows efficacy of roughly twice those 2 products in reduction of the frequency of moderate to severe hot flashes and anywhere between, let's say, 4 or 5x the efficacy in the reduction in severity score, which is a 3-point score. In addition to that, the data showed an excellent safety profile. So the 2 small molecules do have some issues with elevated liver enzymes, which we posited was because of metabolism of small molecules. An antibody, we believe, should not have that, and the data supports that. We have no evidence of elevated liver enzymes.

And in addition to that, we saw remarkable efficacy in terms of patient-reported outcomes. I think 80% of patients said they either felt much better or better. And surprisingly to us, a very obvious signal in sleep, so improved sleep, which is one of the really frustrating parts of menopause for -- menopause and hot flashes associated with menopause for many women. So across the board, in efficacy, in safety and convenience, we think we have a product that if we can translate this through to Phase III, and there's no reason to think that we can't, that it could be the dominant product for nonhormonal treatment of menopause symptoms. So that's 3 weeks ago.

Since then, a lot of thinking about how that real upside in efficacy has changed the commercial opportunity. We think it has very significantly changed the commercial possibility for the drug. And then thinking about what are the plans to move as quickly and as safely and smoothly as possible into regulatory studies. And that really means finishing the study. So we've got 12-week data and an open-label extension for 12 weeks. By the end of the year, we should have that. We'll start engaging with the regulatory agencies, with the FDA, Health Canada, EMA, maybe Australia as well, and then try to set up to start a Phase III trial in the back half of next year.

And so from a preclinical company less than 1.5 years ago to being on the precipice of having a Phase III asset in what we think is a very derisked asset and a multi-blockbuster opportunity, we're pretty excited.

Yes. Can I follow up on one of the points you made there that was interesting, which is the sleep effect that you saw with your drug. And you mentioned it was surprising. And I'm wondering if I'm remembering this correctly, like I'm not sure if Veozah, the NK3R small molecule has any effect and maybe that's why you didn't expect it. I think Lynkuet, maybe there was some evidence that it might, and I think it was mechanistically attributed to NK1R activity of that molecule. So am I getting at why it was maybe surprising that you saw it? And mechanistically, you wouldn't have expected it, but it turns out it's maybe secondary to just potency on the hot flashes.

I think you basically answered the question, but just to sort of fill it out a bit. So the 2 small molecules, one is Veozah. That is a straight NK3R antagonist. The second product, Lynkuet, was actually -- it began development as an NK1R antagonist, and it also has activity on NK3R. And NK3R is the target that is known to be important in the infundibular nucleus on KNDy neurons for driving hot flashes.

So NK1R antagonism is associated with somnolence. And so we believe that the improved sleep quality that was seen in Lynkuet, but not in Veozah was attributable to an off-target effect. So coming into this, because our antibody is clean and doesn't have a somnolence side effect, we didn't think we'd see the same effect on sleep. But as it turns out, because we have such profound efficacy in reducing hot flashes and hot flashes themselves contribute to poor sleep. And once you get someone less anxious about sleep and get them into healthy patterns, they tend to sleep better. We saw that. I think numerically, we might have even been better, but statistically, at least on par with Lynkuet.

And that was very exciting because we thought that might be the one spot where we wouldn't have a strong case against the existing products, but it looks like we do. And we do so without the -- without at this point, a reason for a warning on somnolence and sleepiness.

Yes. This was the 4-week data from the study that you announced that was obviously as exciting as you've summarized. You're following these patients for 12 weeks following that single dose, and that data is forthcoming. And then also, there's an open-label extension aspect of this study that patients are rolling into and they're getting redosed. So maybe starting with the 12-week data, what is important from that data for AbCellera? What are you going to share with investors? And what are the time lines on these?

Sure. Maybe I'll start by just describing the study because I get a lot of questions on this. So the study was a Phase II, which was a single 600-milligram injection. And then we monitored -- we have only one efficacy readout, and that's at 4 weeks. In the registrational studies, there will be both 4-week and 12-week endpoints. But if you look at the class, the effect that you get is basically saturated at 4 weeks, then you just maintain through to 12 weeks.

So the reason we did it like that, so we dosed once at 600 milligrams and then we monitor for 12 weeks, is that we are looking to see a degradation of the efficacy as the drug washes out over 12 weeks. And on a patient-by-patient basis, we will have data on the efficacy because it's a daily diary of suppression of frequency and severity as well as the PK. And using that matched efficacy and PK data, we will then build out a model that proposes what will be the doses or dose that are used in the Phase III study. And we have been admitted to the FDA Model-Informed Drug Development program. And so that is a model that uses -- that is a program that uses modeling of the kind that we have to support the design and acceptance of a Phase III study. So that's why we designed it that way.

So to your question, like what do we expect to see at week 12? Well, what we expect to see is that the efficacy starts to wane as the drug washes out. That's actually what we want to see. That's part of the design. We did see that at 4 weeks, there was no sign at all of degradation. So we've already made our target of being able to dose once a month. And that 600-milligram dose would not be the final dose, but it is the dose that simulates what would be the steady-state antibody concentration on a once-monthly dose of 300 milligrams. So at 12 weeks, we will see the degradation that will help inform the study. We basically know now that we will be able to dose not more frequently than a single shot once a month.

And so probably the most important thing is that there's nothing else in safety that comes up. And so far, it looks good. So I think it's good to have the complete study. It will be interesting to see how long it lasts. I think it probably is lasting longer than some of the biomarker data would have suggested. So all that is scientifically interesting. But from a drug development and investor perspective, provided that the safety is clean, I think it's fully green light.

Okay. Revisiting the strength of the data and maybe how that's made you rethink or at least think critically and with some urgency about some of the decisions you'll have going forward. One of the things you've mentioned is the prospect maybe of at some point, an active control study against one of these small molecules. You've also talked about if a data like this were replicated in Phase III, you'd have to imagine it might command a premium price in this marketplace.

So maybe you can elaborate on those 2 things in particular. What's sort of the company's current, as you've had a few weeks to digest? I know it hasn't been that long, but how -- what would you guide people to expect on those 2 points in particular?

Yes. I think right now, I wouldn't use the word guide at all, but I could give you some impressions. So given the very big gap in efficacy that we see between our data and the registrational data, and of course, those are cross-trial comparisons, so they should be done with a grain of salt. We don't think that it's going to be important to run a direct head-to-head to convince patients or caregivers. I think it's -- you're going to be able to look at these graphs and from across the room, you can see, hey, one is much, much more efficacious.

There may be some value in doing that in pricing discussions. I think we're doing the work to understand if that's the case. But at this point, I'd say our priority is to move as quickly and smoothly with as little risk as possible into a registrational study to get the readout and get this drug forward to submission as quickly as possible. And we may well decide that a direct head-to-head is worth doing, but we could do that as a side study after. And so we don't need to incorporate that in the registrational trial or trials.

Okay. Thinking about both the menopause market and this oncology market and probably more of an unmet need at this point, given the launch of the small molecules into the menopause market, I think, has been more prominent. What -- how would you characterize the overall scope of the market from your perspective? How well established is it?

And then help us understand your perspective on like the launch of Veozah, which has been in the market for a few years. What have you seen from the adoption of that product? What has been done right and wrong? Has anything held it back? Has anything spurred it on recently? So just a general market perspective on VMS.

On non-hormonal treatments of VMS in general. Maybe because it's the last part of your question, I'll start with the -- some thoughts on the Veozah launch. I think I get a lot of questions is, "Hey, Veozah's tracking has been well below what the original guidance was" and people see that as a sign that perhaps the market is not there. I see it as -- I see it actually in the opposite way. So if you look at -- I think they're tracking to do maybe $400 million in sales this year. They had about $90 million in the last quarter, about 40% year-over-year growth.

And they've done that despite what was like 2 or 3 years trying to get payer coverage. I think they have the payer coverage now. So as a first-in-class, they had some work to do there and with quite intense liver monitoring, and with the box warning, and with the entry of a competitor. I'd say that, that clearly shows that they're on track to break $1 billion in peak sales. That's my view at least. And that's consistent with the guidance that Astellas has been giving. Bayer is also projecting sales on that front as well. And so we don't know much about that launch yet. We get to see some scripts. They've been keeping that data quite close. But my sense is that, that is going well full stop. And if you bring those 2 products together, like the 2 small molecules and you track usage rates, you see very robust growth despite the fact that they have in total patient number, not really scratched the surface of what's available.

So we see that as a huge opportunity and a strong launch in absolute terms. If you were to -- I had an investor ask me this, this afternoon. I said if you were to compare this to some other first-in-class launches and Prolia would be a good example, where you look at early sales years, we're below Veozah, and I think it sells $4 billion a year now. So it's normal in a new class and it takes some time to catch on. We think that the current commercial performance of Veozah and what we think is happening at Bayer strongly reinforces this is a multibillion-dollar opportunity.

And we love that we're going to be coming behind it when a lot of that groundwork is done with a product that we think has differentiation across several dimensions, including convenience, safety and efficacy. So we're feeling good about that.

Yes. It's interesting. I mean PCSK9, I guess, would be another example of...

Yes, that's a good example.

Yes. In that case, like the statins would be sort of the equivalent of the hormonal therapy in that case and the launches stunk, right? Everyone gave up on PCSK9 and now you turn around and there are multi-multi-blockbuster markets. And they're still growing...

People are impatient.

Okay. So that's a good perspective. What about scientifically, I mean, there was this debate heading into the data just about the anatomy and the neurophysiology of hot flashes and what neurons you need to target. And you sort of empirically squashed a lot of that debate. But as you sort of do the postmortem view and perspective on that, what's the view of it now? I mean, what have we established or what do we know about the biology?

That's kind of a deep science geek question. So I'll maybe set the stage a little bit. So the NK3R is expressed in KNDy neurons, and they're in part of the brain called the infundibular nucleus, which is a part of the hypothalamus. And when we started the program in sort of -- or perhaps a contrarian way, we thought an antibody should be able to get to this part of the brain. And the reason is that this part of the brain does interact with soluble factors, and it is responsible for controlling hormone levels.

Now that was a risk, but we were able to put much of that risk aside preclinically because we were able to show in primates that we could engage with those neurons, and you can read that out in male primates and in male rats and pretty much every male species by monitoring testosterone levels. So we had a good sense that an antibody could get to the infundibular nucleus. And we need to show that in people. We did the Phase I, and we showed that we had profound testosterone suppression that lasted for the full dosing interval. And so had conclusive evidence that, yes, the antibody gets to the KNDy neurons.

And a lot of people were excited about that, and I probably was the #1 person saying, wait, you should have some caution here because in the pathway that governs hot flashes, the KNDy neurons are not the only place where NK3R is expressed. So what happens is when KNDy neurons fire, they have projections that go into another part of the brain called the preoptic nucleus, and the preoptic nucleus expresses NK3R, and that's what drives thermoregulation. So we didn't know if small molecules, which probably can penetrate to that part of the brain, were getting part of their efficacy from hitting NK3R there.

The bull case argument was that, well, that's downstream of the KNDy neurons, so it shouldn't matter. If you stop what's upstream, you don't need to stop what's downstream, but it wasn't really clear. And I think that I'm careful to always make sure people understand all the risks in programs. And I probably said it so many times, I even psyched myself out. And so coming up to the day, you're like, well, how important is that? And with the data that we just got, we know it's completely unimportant. So internally, we say the preoptic nucleus is dead to me. It's all about the KNDy neurons.

One thing I can't get out of my head, and I've mentioned this to you a few times and would love your reaction though, is that, that debate now has flipped completely in the sense that you're getting all the efficacy you're getting without accessing that deep part of the brain. Presumably, small molecules are getting sort of more diffusely in the brain and NK3R, as you mentioned, is expressed elsewhere.

And I would imagine you don't want to just sort of indiscriminately hit NK3R on random neurons that have nothing to do with the hot flash that you're trying to treat. So is that now not an advantage for your antibody that you can sort of push with investigators and maybe out in the market eventually?

I mean if we needed yet another advantage, I think I would definitely bring that one up. I think we don't -- we've got plenty of advantages on performance and efficacy and safety that we hope to see through the Phase III. I would say that any time you're going for drug development, you want to hit the target. Ideally, you want to hit it only where it matters, and you want to avoid messing with any of the other biology. So I'm not aware of any really good evidence that antagonizing NK3R in other parts of the body is problematic. I'm not aware of that.

But I wouldn't want to take the risk if I didn't have to and an antibody has got the nice feature that it has very low penetration into most of the brain. And so we can rest pretty sure that, that's not going to come up as a problem.

Okay. Can we talk about Phase III sort of in the hypothetical terms, I guess, for now, but there are some things I think you probably do have a pretty good idea of. First, maybe just minimum number of patients that you would need in a Phase III program and what the safety database requirements are for VMS?

Yes. Because it's a common indication, you'd expect a pretty robust safety database. We're currently thinking that roughly 1,500 patients, which is in line with the small molecules would be appropriate.

Okay. And then endpoints of interest here, including primary endpoints in a pivotal study.

Yes. So the co-primary endpoints would be reduction in frequency and reduction in severity. On the severity side, statistical significance is the bar for approval. On the frequency side, it's statistical significance and a reduction of at least 2 events per day. Now in the Phase II, we had, I think, 5.1 was our reduction. So we're well over that bar, which, of course, is great because you have efficacy. It also means that you're not tempted or forced to really increase the baseline rate in enrollment, which can make enrollment hard. So if you're just on the edge, you might want to have like 15 or 16 baseline events. We can keep it to basically where we were, which is 10 and be very confident we're going to have enough of a signal there.

So in addition to those, we're thinking about endpoints. One of the really unprecedented and I'd say very exciting parts of the data was that in 37% of patients after a single dose of ABCL635, they went from a baseline of around 10 events per day to 0. So for a subset of -- a significant subset of patients, like more than 1/3, a single dose was essentially curative at 4 weeks. And on the severity side, I think that number was like 25%. And that's important because severity -- if you have even a minor event, which you kind of are aware of it, doesn't stop you, it doesn't really interfere your events, that gets a score on severity. So we had about 24% with 0 severity score, which means there were no events, so not a single incident.

So from someone that was really struggling with this to essentially it's gone, that's something that you rarely, rarely see in drug development. We definitely think that, that's a big leg up over everything else that's been done and is something that we would think about including as an endpoint. And I think that makes a strong case with medical practitioners and with payers.

Yes, that's fair. What about dose selection and dose interval? How much flexibility do you think you have there based on the data?

Well, the dose selection and interval will be informed by the modeling, and that's part of the program that we're in with the MIDD. I think there's a good chance we'd be able to look at that data and propose, "Hey, here's a single dose, single interval to go forward." Given that we'll have no difficulty powering the trials, like to put it in perspective, the Phase II trial, if we had 15 patients in each arm, we would have been adequately powered.

So you're going to run 1,500 patients for safety, and you need very, very few patients to get the signal that you're after. It means that we can and probably want to include more than one dose because it gives an extra optionality, both in development and commercially. And so I think we're looking at that, but these are currently impressions and not plans yet until we talk with regulators.

Okay. And then the oncology sort of indication side of things here, is that -- would that be Phase III ready right away? Or would that entail maybe an exploratory Phase II study initially?

Yes. For both of those -- thanks for bringing that up. So in addition to preparing for the registrational study in menopause-associated VMS, we will initiate before that 2 Phase II trials, one for breast cancer probably first and then for prostate cancer. Those, I think, will be of the nature that they could go Phase II/III ultimately, but they start as Phase II trials. And if Sarah was here, our CMO, she'd give you the details of why that is.

One of the things we're looking at -- we've already done some groundwork for the sites and one of the things we need to really understand is what is the natural history, what's the prevalence and what should be the proper inclusion criteria to do that study effectively.

Okay. And then there was one study that was interesting in the Lynkuet, the Bayer development program. I think it was OASIS 3, where the sort of baseline VMS frequency requirement was eliminated and so they had a lower average baseline. It was still effective in those patients and maybe that leads to expanded demographic of the candidate for therapy. Is that something that you think about running as well or...

Yes. I mean, again, too early to guide on direct plans, but we're definitely aware of that study. And that study, I think, is important because it's a way to get a broader safety database and also show efficacy in a patient population that's not as severe. As you mentioned, I don't remember exactly, but I think that study was positive. I don't think it met the 2 reductions per week.

That is right. It was a lower effect size. But it was sort of directionally.

Exactly.

Okay. The -- just fast forward here, assuming Phase III is successful, which I think based on your Phase II data is not really that far-fetched of a call. I wish I could make...

That's an important point that like -- I mean, maybe you're able to do that, but I think it's an important point that in investor conversations, I think it doesn't always come across like there is this sort of coarse grain thinking, it's Phase II, Phase II to Phase III is this percent success, and so we're going to discount things. I look at the data and think like how do you miss on that? I'm not -- like the efficacy, I think, is highly unlikely to miss. I think we're very, very bullish on that.

Yes, I don't think you're out of turn in saying that. I mean it's pretty clear. But how prepared is AbCellera? Because, again, this pivot to internal pipeline development for the company was really only like less than 3 years ago?

2023. September 2023 was the official stamp on that.

Right. Yes. So we're talking 3 years. So I guess how ready are you to commercialize this product into a mass market like this, manufacturing there? Are you already thinking about how do we build a global sales force and commercial team? Where are you from the maturation of company standpoint in that regard?

Well, 15 months ago, we were a preclinical company. So we're not commercial ready, but -- we don't need to be commercial ready now. So if we go on the plan I just described to you, we'd start the Phase II study in the back half of next year. It's probably 2, 2.5 years for that study if you model off of Lynkuet and Veozah. Then you apply, then you have a year or so. A launch like around 2030 would be about right.

So there's time between here and there. It's not too early to be making plans and figuring out a strategy, but we're also not in a rush to put everything in place right now. I get asked the question a lot about, hey, would you commercialize this? And that's not yet decided, but we are trying to build a multiproduct commercial company that competes and wins on global markets. That's what the vision is. So we're going to go there eventually.

Could ABCL635 be the first one? I like that idea a lot. And I think the way that commercialization is changing quite quickly, particularly with things like direct pay and direct-to-consumer and sort of more technology forward distribution, there's an exciting opportunity to build something that is not just 1,500 sales reps running to all GPs. That's something I think we have less appetite to do. So we're excited by that.

On the flip side, the right commercial alliance with the right partner under the right terms could also be a game changer for the product. And I think there are some strategics out there that would probably be good fits if you could come to the right deal. From where we're sitting today, I think the drug and the company just gets more and more valuable as it moves forward. And we're entertaining conversations, but we're making sure that we're fully capitalized and that we have plans so that we're able to go on our own. And frankly, that's my favorite scenario, although it's not decided.

Yes. I think it makes sense. And you've proven sort of in very short order that, obviously, you proved during COVID with the neutralizing antibody, what you could do scientifically, right, and on an expedited time frame and now you've proven through clinical development, what you're capable of and just smart choices on that trial and setting expectations. And then yes, the further you can take it, I think it will just continue to sort of validate the company's capabilities.

But on the pipeline that you're building, I mean, just in the last couple of minutes, help frame for us like the company -- the vision you have for the company and as you bring forth new products and some of them are still in stealth. So even just speaking to sort of why that is and how you think about constructing this story around AbCellera going forward, would love your closing thoughts.

Hey, I appreciate the question. I think I even said like just at the end of our Phase II press release on the data that there is this danger, right? The danger is that as soon as you have a big winner that knocks it out of the park like this, suddenly no one sees anything else about the company. So 2 months ago, no one has paid attention to 635. Now it's all they pay attention to. And this discussion is, I think, a pretty good example of that. But there is much more in play and much more under the hood that we are excited about. In fact, I think if I was to ascribe value, the platform and the drugs that it's going to make from here are going to be the most valuable thing about the company moving forward.

So we have 2 programs, ABCL688 and 386 that are on track to be in the clinic next year. If you'd asked me 2 months ago to grade them, I would have said, hey, they're on par with ABCL635. Now we just had a terrific data readout. So 635 is my favorite right now, but you never know. And we are going to continue to press our advantage in making antibodies against difficult targets and to look for those high conviction bets where we think, yes, this is one that I wouldn't bet against it being a drug and being a successful drug that returns, and we're going to keep putting those forward moving forward.

So we've got 2 more in the pipe. We expect to have another development candidate this year. We have not disclosed much about those. And to your question, we do that because we recognize, as many people do, that the world is hypercompetitive. And the moment that you tell people what you're doing, you've got 20 other companies in the U.S. and in China that are lining up to eat your lunch. And we want to make sure that we're out as far as possible before we do that.

In fact, for ABCL635, we have already brought into IND-enabling studies a follow-on that's engineered for even longer half-life because we see that as white space. This is a giant opportunity. We want to leave no white space for anyone. And after this year, I'm not even sure that we'll announce development candidates. We'll probably just wait until things get to the clinic because you don't get much value and you expose yourself too much.

Well, I'll make this commitment to you, Carl, that...

You'll keep asking me.

If those other 2 products are in the clinic next year, and we're following there -- those clinical trials, then we can focus the conversation next year exclusively on those, and we can leave VMS maybe until the Phase III is on deck.

That's great, Steve. I look forward to it.

Okay. Fair enough. Well, thanks so much, Carl, for the conversation. I appreciate you going through all the details.

Thanks to everyone in the room and on the webcast for listening and look forward to following the progress from here forward.

Awesome. Thank you.

Good afternoon, and welcome to the ABCL635 Phase II Clinical Update. My name is Jonathan, and I will facilitate the audio portion of today's interactive broadcast. [Operator Instructions] At this time, I would like to turn the call over to Tryn Stimart, Chief Legal and Compliance Officer. You may proceed.

Good morning, good afternoon, and good evening, everyone. I am Tryn Stimart, AbCellera's Chief Legal and Compliance Officer. We are pleased to welcome you to AbCellera's conference call to discuss our Phase II top line data for ABCL635.

Speaking on the call today are Carl Hansen, AbCellera's President and Chief Executive Officer; Sarah Noonberg, AbCellera's Chief Medical Officer; and Dr. Kelsey Mills, an obstetrician and gynecologist specializing in complex menopause care.

During this call, we may make forward-looking statements based on our current expectations and in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These include statements regarding the therapeutic potential, safety profile and regulatory pathway for ABCL635. Our statements are subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from those described. Please review the Risk Factors section of our most recent Form 10-K and subsequent 10-Q filings with the SEC for a more detailed discussion of these risks.

AbCellera assumes no obligations to update any forward-looking statements to reflect events or circumstances after today's date. Our presentation today, our press release and our SEC filings are available on our Investor Relations website. The information we provide about ABCL635 is intended for the investment community and is not promotional. As we transition to our prepared remarks, please note that this call is being recorded and will be available for replay on our Investor Relations website. After our prepared remarks, we will open the lines for questions and answers. With that, I will turn the call over to Carl.

Thanks, Tryn, and good morning, everyone. I have to say that we are more than excited to share our top line 4-week data for the Phase II study of ABCL635 in the treatment of moderate-to-severe hot flashes. As I said on last week's earnings call, coming into this readout, we were defining success as comparable efficacy to small molecules, improved safety profile that eliminated the need for liver monitoring and a more convenient once-monthly self-injection dosing regimen.

With this product profile, we believe ABCL635 has potential to be a blockbuster product. The top line results, which were released this morning, exceed our target product profile and the efficacy data is beyond even the most aggressive upside scenario we had dared to consider. With this readout, we now view ABCL635 as a potential best-in-class nonhormonal therapy with strong differentiation against approved NK3R competitors across all important dimensions, including efficacy, safety and dosing convenience.

It is exceedingly rare to see Phase II data that are so clearly positive and differentiated. Given the large observed effect sizes and the overwhelmingly significant statistics, we believe ABCL635 is now a highly derisked program. Most importantly, these data present an opportunity to really move the needle on care and to develop a product that offers a profound benefit to patients suffering from VMS.

In particular, we believe ABCL635 has potential to capture a large share of 2 key markets, including the nonhormonal treatment of hot flashes associated with menopause and the treatment of hot flashes arising from hormone deprivation used in cancer therapy. It is estimated that more than 12 million women in the U.S. experience moderate-to-severe hot flashes, of which more than half or 6 million will seek treatment. Menopause hormone therapy, which is an effective treatment and currently the standard of care is unsuitable for at least an estimated 20% of these women because of contraindications, tolerability and other factors.

Therefore, we believe there are approximately 1.2 million women in the U.S. alone who will seek relief from safe and effective nonhormonal treatments. Assuming only price parity with approved small molecule NK3R antagonist, this would correspond to a total addressable U.S. market of at least $6 billion annually.

From this base estimate, we see a large upside potential for a highly differentiated product that offers improved efficacy, safety and convenience. This upside includes higher pricing, adoption in ex U.S. markets and broader use by patients who either choose not to use hormone therapy or who get only partial relief from hormone therapy. In addition to VMS associated with menopause, we believe there is a smaller but comparable opportunity for treatment of VMS in patients undergoing hormone deprivation therapy during cancer -- hormone deprivation during cancer therapy.

This includes patients being treated with androgen deprivation therapy in prostate cancer and patients treated with tamoxifen or aromatase inhibitors in breast cancer. We estimate there are approximately 500,000 patients being treated for breast and prostate cancers in the U.S. alone. Ultimately, the impact and the commercial success of a product depends on how well it meets the needs of patients and how it fits into the reality of medical practice on the front lines.

Today, we are pleased to have Dr. Kelsey Mills on the call. Dr. Mills is a world-recognized leader in menopause and women's health, a clinical associate professor at the University of British Columbia, a Board member of the Canadian Menopause Society and a practicing OB/GYN with deep expertise and specialization in complex menopause treatment. She was not an investigator on our trial, but we have invited her to share her expert perspective on the current treatment landscape and the unmet need in VMS. Dr. Mills?

Thank you, Carl, and good morning, everyone. I think everybody on this call today is aware that menopause is an incredible opportunity in the health space, but that it is not just a moment, but we are seeing this as a movement in women's health. And I would argue that menopause is likely one of the most important and urgent aspects in women's health at this time. What we see from a clinical perspective at the current time is that our historical nonhormonal options for treatment of vasomotor symptoms and other menopausal symptoms are now not generally supported by global guidelines.

So we have the exception of a few small molecules and antidepressants for treatment of patients. And there is a considerable unmet need in my patients who can't, won't or shouldn't take systemic hormones to treat their symptoms. Vasomotor symptoms and sleep disruption are the 2 most ubiquitous symptoms in the midlife, and these can have incredible and far-reaching implications on a woman's mood, ability to maintain her weight, sexual function, metabolic health, cardiovascular disease risk and more.

And I have a tremendous number of patients in my practice who have had a breast cancer or other estrogen receptor positive cancer or other medical complications such as heart disease, stroke, history of blood clot or simply failure to respond to menopausal hormone therapy. And so I'm left with these women who are looking for better treatment options. We do have 2 FDA-approved small molecules, but these come with considerable side effects, very cumbersome monitoring programs or as some of my patients have found lack of effect.

So I am truly excited to join this call today as an academic menopause physician, and I am very excited about the opportunity of a novel agent and what it could mean for my patients in my practice who currently have a significant unmet need in their menopause care. I'm really pleased to be here, and I'm happy to answer clinical questions, but I'll now turn the call back to Carl.

Thank you so much, Dr. Mills. We really appreciate your perspective on the clinical need and the current treatment landscape for women and for practitioners. I'll now turn the call over to Sarah, who can walk us through the data for ABCL635. Sarah?

Thank you, Carl. It's a pleasure to present the Phase II data on ABCL635, which has markedly exceeded our expectations and target product profile. We believe these data support the potential for ABCL635 to have a best-in-class efficacy and safety profile and may help countless women with challenging menopausal symptoms. As a reminder, our Phase II study was a randomized, double-blind, placebo-controlled study in postmenopausal patients experiencing moderate-to-severe VMS.

The planned sample size was 80 patients, but due to high patient interest, we wound up overenrolling by 15% to a sample size of 92 patients. Eligibility criteria were designed to be highly comparable to registrational studies of fezolinetant and elinzanetant with the exception of the upper age range, which we increased to 75 years from 65 years based on feedback from our clinical advisers.

Study endpoints included VMS frequency, severity, patient-reported outcomes, safety and pharmacokinetics. Efficacy analyses used the intent-to-treat population of all 92 patients and MMRM methodology was used for the majority of efficacy endpoints. Our predefined efficacy analyses occurred at 4 weeks, although patients continue to be followed for 12 weeks for safety, PK and to support exposure response analysis.

Patients were randomized 1:1 to receive a single dose of ABCL635 at a dose of 600 milligrams subcutaneously or matching placebo. The dose of 600 milligrams ABCL635 was chosen after a review of our safety, PK and target engagement data from our Phase I study. Patients in both active and placebo groups have the option to receive an open-label dose of ABCL635 after the 12-week follow-up visit.

Overall, the ABCL635 and placebo groups were well matched with respect to clinically important demographic and baseline characteristics. Additionally, these characteristics were generally similar to prior registrational studies of the approved small molecules with the exception of a slightly higher mean age compared to both elinzanetant and fezolinetant Phase III programs and a somewhat lower mean VMS frequency at baseline compared to the elinzanetant Phase III study.

As expected for the indication, the majority of patients enrolled in the study assess their vasomotor symptoms as either severe or very severe on the patient Global Impression of Severity score and both groups had a mean frequency of approximately 10 moderate or severe VMS events per day. The PROMIS-SD-SF-8b is a patient-reported outcome scale for sleep disturbance and the baseline values of approximately 59 and 57 indicate a greater degree of sleep disturbance than a reference population.

One of our key efficacy endpoints was an evaluation of the frequency of moderate or severe VMS events, which are recorded by patients daily and analyzed as mean values over a 1-week period. This slide shows the effect of ABCL635 plotted as change from baseline values using both the primary MMRM analysis, which included values from weeks 2, 3 and 4 as well as a prespecified sensitivity MMRM analysis that included week 1 values as well.

At the 4-week time point, the ABCL635 group had an impressive mean reduction of 8.8 events per day compared to a mean reduction of 3.5 events per day in the placebo group, representing a placebo-adjusted treatment difference of 5.3 events. The benefit on VMS was seen early with a significant treatment difference of 2.6 events at week 1 and increased over time.

When the same data are expressed as a percent change from baseline, the ABCL635 group experienced an 83% reduction from baseline in daily events compared to a 33% reduction in the placebo group or a placebo-adjusted treatment difference of 50%. These VMS frequency data compare very favorably to data from the approved small molecule NK3R antagonist. Notably, the benefit of ABCL635 was highly consistent across subgroup analyses and the data were robust to a variety of sensitivity analyses.

Another key efficacy endpoint was an evaluation of the severity of VMS, which is reported on a 3-point scale, representing mild, moderate and severe events. This slide shows the effect of ABCL635 plotted as change from baseline values using both the primary MMRM analysis and the sensitivity MMRM analysis. At the 4-week time point, mean severity scores decreased by 1.4 points in the ABCL635 group versus 0.3 points for the placebo group for a placebo-adjusted treatment difference of 1.1 points.

A significant benefit was observed as early as week 1 and was consistent across subgroup and sensitivity analyses. When expressed as a percent change from baseline, the ABCL635 group experienced a 58% mean reduction in severity from baseline compared to a 12% mean reduction in the placebo group for a placebo-adjusted treatment difference of 46%. These data also compare very favorably to data from the approved small molecule MK3R antagonist.

A more intuitive way of looking at the impact of ABCL635 on VMS severity is seen on this graph of absolute severity scores over time. As mentioned, at baseline, both treatment groups had mean severity scores of 2.4, which is indicative of a mixture of predominantly moderate and severe events. By week 4, the mean severity in the ABCL635 group had improved to a score of 1, which is indicative of mild events, whereas the placebo group, the severity scores were 2.1, which were still indicative of moderate events.

By definition, mild events refer to brief sensations of heat that don't involve sweating or interrupt activities, whereas moderate events involve sweating, which are not only noticeable to others, but are distracting and can impact normal functioning. While the previous analyses looked at mean change over time for VMS frequency and severity, another valuable way to look at the data involves cumulative distribution plots, which allow you to evaluate the full range of treatment effects in the study population.

In these plots, the X-axes represent the treatment effect on VMS frequency and severity and the Y-axes are the percent of patients experiencing at least that level of treatment effect. Looking at the cumulative distribution plot on VMS frequency and associated table on the left, you can see that 37% of ABCL635 patients had complete or 100% resolution of moderate-to-severe events compared to 2.2% of placebo patients.

To our knowledge, comparable levels of complete resolution of moderate-to-severe events has not been reported for any nonhormonal VMS treatment. Furthermore, nearly 61% of ABCL635 patients had at least a 90% improvement from baseline in the number of moderate or severe events compared to 8.7% of placebo patients. Similarly, impressive benefits were observed on cumulative distribution plots for severity as well as shown to the right.

While vasomotor symptoms are the most common symptoms of menopause, sleep disturbances are also a major source of distress for women. Sleep was evaluated using the PROMIS sleep disturbance short form survey that evaluates 8 different aspects of sleep over the preceding 7 days. On this scale, ABCL635 patients had a roughly 9-point improvement in sleep at week 4 compared to a 3.5 point improvement in placebo patients, leading to a placebo-adjusted treatment difference of 5.5 points.

It's noteworthy that improvements were observed across each of the 8 aspects of the study that are listed on this slide, including difficulty falling asleep, difficulty staying asleep, restlessness and overall satisfaction with sleep. Another important outcome measure in this study was the Patient Global Impression of Change, or PGIC, which is often used to determine whether a change on a given endpoint is clinically meaningful to a patient.

The instrument is a 7-point scale that asks patients to rate their vasomotor symptoms compared to the start of the study with options ranging from much worse to much better. The results of the PGIC at week 4 are shown on this slide and clearly reflects that ABCL635 treatment had a major impact on patients' symptoms. At week 4, 71% of ABCL635 patients reported their symptoms as much better, the highest possible score available to them compared to 16% of placebo patients, and 84% of ABCL635 patients reported their symptoms as much better or moderately better compared to 27% of placebo patients.

Importantly, at 4 weeks, no ABCL635 patients reported their symptoms as worse than prior to the study and only one single patient reported their symptoms as unchanged. By contrast, in the placebo group, more than 40% of patients reported their symptoms as worse or unchanged compared to the start of the study.

Turning to safety data. ABCL635 demonstrated a favorable tolerability profile in this data set. This slide summarizes adverse events reported in at least 2 patients in either treatment group regardless of relationship and occurring during the first 4 weeks of treatment. While overall, there were a numerically higher number of patients with at least 1 adverse event in the ABCL635 group compared with the placebo group, there were no serious or severe adverse events in the ABCL635 group compared to 1 placebo patient with a serious adverse event and 2 placebo patients with severe adverse events.

Similar to our data in the Phase I study, ABCL635 was associated with an increased incidence of headache, although the majority of events were rated as mild and transient in both treatment groups. Fatigue was also reported more often in the ABCL635 group but all events in the active group were rated as mild.

Surprisingly, we didn't see any evidence of gastrointestinal toxicity in the study despite it being consistently reported with the 2 approved small molecules. There was a lower incidence of nausea in the ABCL635 group and no events of diarrhea or abdominal pain compared to multiple patients reporting these events in the placebo group. There was one adverse event of increased transaminases in the ABCL635 group. The event was reported as mild occurring at week 3 and resolved without intervention by week 4.

AST and ALT levels were roughly 2.5x the upper limit of normal with maximum values of AST of 92 and ALT of 66. The investigator assessed the event as unrelated to treatment. While not reported as an adverse event, there was also 1 placebo patient with moderately elevated liver function test and a history of MASH at baseline who experienced an ALT increase to 121 or 3x the upper limit of normal during the 4-week period.

The study participant has had ALT fluctuations throughout the study period that are in line with her medical history. Looking closer at liver safety during the 4-week period, there were no liver safety signals observed in ALT, AST or bilirubin laboratory values over time. The dotted lines reflect the upper limits of normal, so the mean values continue to be reassuring.

While we realize the limitations of cross-trial comparison, we felt it was valuable to show the treatment effect on our primary efficacy endpoints of VMS frequency and severity relative to data collected similarly at 4 weeks from the registrational studies of fezolinetant and elinzanetant. On the frequency endpoint, our placebo-adjusted treatment effect of 5.3 fewer moderate or severe VMS per day is considerably larger than the 2.1 to 3.3 events seen in those Phase III studies.

And if we normalize by baseline frequency of events, this difference is even larger, particularly in comparison to elinzanetant. An even greater difference in treatment effect is observed in VMS severity with a roughly 3.5 to fivefold greater benefit compared to the registrational studies of fezolinetant and elinzanetant. So with these Phase II data, we are enthusiastic about the potential for ABCL635 to differentiate itself as a potential best-in-class nonhormonal treatment for VMS.

In summary, our Phase II data demonstrated statistically significant and clinically important reductions in both VMS frequency and severity after a single 600-milligram dose of ABCL635. We observed significant improvement in sleep disturbances and associated vasomotor symptom burden, and ABCL635 has demonstrated a favorable tolerability profile with no clinically meaningful liver or gastrointestinal safety signals observed to date.

We look forward to presenting additional data at major medical conferences later this year, along with completion of the 12-week follow-up portion of the study to support optimal dose selection. These data will then form the basis for regulatory discussions on late-stage development plans in VMS, whether it be due to naturally occurring menopause or a result of hormone-suppressing cancer therapies.

I'll end this presentation on a personal note by saying that both as a menopausal aged woman and as an internal medicine physician, it is a true privilege to be advancing a therapy to address such a common, important and often overlooked and undertreated cause of diminished quality of life. And with that, I'd like to ask Dr. Mills to provide her perspective on what this data may mean for her patients.

Thank you, Sarah. I think that when I first viewed this data, my honest impression was, wow. But I would say that I am tremendously excited to review the data for ABCL635. And I am most influenced by the incredible efficacy and the likely outperformance of the existing small molecules that are the current treatment options in this space. In terms of what my patients would feel would matter for them, the lack of GI side effects seen in these studies is very significant because that's one of the major reasons why patients will discontinue use of the small molecules.

I think that when I'm prescribing medication for menopausal women who already suffer from the considerable mental load of being a woman in the midlife that we all recognize that remembering to take pills or dealing with patch-changing schedules can be very challenging and often lead to side effects or lack of compliance or adherence or discontinuation. So I think ease of use of this singular dose is really special in this program.

Of course, the lack of required monitoring in terms of liver signal is very important as a practicing physician. We acknowledge that currently managing patients on fezolinetant with a significantly cumbersome liver enzyme monitoring schedule is a challenge definitely for patients and the clinicians who follow them. I was also quite influenced by the PGIC scoring, which to me is so much stronger than the patient perspectives in the small molecule trials.

And so I was really excited to review this data just recently. But I think the thing that stuck with me the most is I have yet to see the idea of complete resolution of VMS symptoms in moderate to severely impacted women. And to have that in 37% of the study population was an overwhelming take-home point for me. And there are many patients for whom menopausal hormone therapy can't perform that well.

So for me, I see this as a possible best-in-class nonhormonal treatment. And I know that my patients who aren't candidates or who aren't getting good effect from standard nonhormonals or even hormonal therapies would be really excited to hear about the next steps from this program.

So thank you so much, and I'll turn the call back over to Carl.

Thank you so much, Dr. Mills. With that, we will be happy to take questions from the phones. Operator?

[Operator Instructions] Your first question comes from the line of Evan Seigerman from BMO.

Really congrats on the data. So as we think about moving this program forward, how are you going to take this great 4-week data and design a comprehensive Phase III program that mitigates the risk so you can produce something as impressive and hopefully get this to patients in need.

Thanks, Evan. We are still digesting this data. And so I think our next steps will be to collect the 12-week data to have robust discussions with our advisers. And I think the strength of this data set really opens up a wide variety of possibilities of how we might take this forward into Phase III studies to truly maximize the value of the assets and make sure that 635 is able to demonstrate its differentiation potential.

So this is something that we're going to be discussing in quite a bit of detail over the coming weeks and as well with our regulatory agencies in the U.S. and abroad. I'd also just like to point out that this study data, the data quality was excellent. And thanks to our terrific clinical operations team, our data compliance is about 98.5% with patients filling in the diary. And it just shows how training sites and following closely and really having good relationships with the investigators, choosing your sites well can really result in high-quality data, and that's something that we will then take forward those learnings into Phase III.

Follow-up, I guess, kind of what do you think the single most important factor that really gives you confidence that you'll be able to replicate this data in a Phase III trial. I know it's that impressive, but what about this data set really stands out to you as you move forward?

I would say what really stands out is the magnitude of the effect size, the consistency across orthogonal endpoints that are looking at VMS symptoms, overall burden, perceptibility to patients. Obviously, the treatment effect is large. And we've learned a lot from the approved small molecules conducting these studies as well as our own experience, and we plan to take these learnings moving forward.

Your next question comes from the line of Stephen Willey from Stifel.

Congrats on some pretty exceptional data. Curious, maybe just to kind of follow up on the prior question. And again, I know you're still kind of evaluating everything. But how do these data just kind of change the scope of the Phase III development program that you're thinking about and whether or not you would contemplate a superiority study in menopausal VMS? And then also just curious if these data change, if at all, the way that you're thinking about this asset strategically? And I just have a quick follow-up for Dr. Mills.

In terms of our Phase III design, as I've mentioned, we are thinking deeply about various possibilities. Our baseline plan was to conduct a Phase III program very similar to the approved small molecules. I think the strength of this data makes us consider whether we might do a head-to-head study. That's not something that we have made any kind of decisions on, It's a complicated decision.

But those decisions weren't really part of our landscape as we were thinking about our target product profile of just an efficacy bar that was comparable to the approved small molecule. So I think we have to digest this data a little bit more, talk with our advisers, do some powering calculations. And I think we'll be able to get back to you later this year, particularly after we get our full 12-week data set, and we have some regulatory discussions with our Phase III studies. But it's obviously a high priority to, as I said, maximize the value of this asset and make sure that it can clearly differentiate itself amongst the competition.

And Steve, I'll just add a comment on the strategy side. So I would characterize this as early and resounding success on exactly the strategy that we've been playing out over the past many years. So building a platform with the ability to solve really tough discovery problems, trying to be very thoughtful about our choices in where we develop, looking for high conviction science for differentiation for large unmet need.

And then to come out of the gate and on the first program to get data like this that is so compellingly positive is a terrific tailwind for us moving forward. It also means that we will prioritize ABCL635. Once you have one on the hook, you definitely don't let it go. At the same time, we're not backing off on the rest of the pipeline. And AbCellera is by no means a single asset company, and we intend to do our best to deliver on this again. We've now set a pretty high bar, but we're feeling pretty excited about what's there.

Appropriately so. And then for Dr. Mills, just a quick question. Just curious how sleep score improvements kind of as a driver of prescribing decisions when you're considering VEOZAH versus Lynkuet? And just how important of a variable is that for patients?

Thank you for the question. Sleep is of paramount importance to perimenopausal and menopausal women. So when we have PROMIS scoring that looks really competitive, if not superior or favorable, these are huge impacts in people's decision-making to prescribe. If you can fix a woman's sleep in the midlife, that is a massive impact on her overall health function, economic output, et cetera.

Your next question comes from the line of Steve Seedhouse from Cantor.

Congrats on the milestone for the company. Just this question for the company or for Dr. Mills actually, just given you proved essentially crossing the blood-brain barrier is unnecessary. It seems to have a pretty profound effect on hot flashes. I'm wondering if you think that becomes maybe a safety advantage now for the antibody versus the orals? And like do we really know where NK3R is expressed precisely everywhere in the brain and how it might influence stress or behavior or things like that? And I have a follow-up.

Maybe I'll ask Dr. Mills to comment on whether she sees that as a favorable characteristic of 635.

Thanks. Absolutely, I think any time you can limit possible side effect profile, that's really important. I think there's -- yes, I think I would leave it there. I think that limiting side effect profiles is always of value to patients and prescribers. But I think that we are looking at a possible therapeutic that is going to perform differently than the small molecules. And I think it definitely could be favorable.

Yes. And I'll just follow up on that. I mean going into this program, we really had a question about whether the preoptic nucleus, which sits clearly behind the blood-brain barrier was going to be important from an efficacy perspective. And I think this data set really resoundly answers that question and provides a tremendous amount of new biology information for scientists studying the mechanisms of hot flash.

Yes. And if I would just add one more thought is that coming in, there was a potential liability that an antibody couldn't get to the preoptic nucleus. We now know that's not important. And in fact, we see the fact that an antibody does not penetrate deeper into the brain as a potential advantage of the class over small molecules.

Just a follow-up for me. If you could comment on -- like I know you're following patients, as you mentioned, sir, through 12 weeks in this study. You'll get those data at some point that's after the single dose. And then you have an open-label extension portion as well, which I think it entails repeat dosing, but just wanted to confirm that. And also more importantly, are you planning to report the incremental data from both of those efforts at some point next year? I think that would be an interesting catalyst as well for the company.

Yes. So the 12-week data should be available later this year. We're seeing very high uptake into the open-label extension. We've had a few patients that have moved away or physically couldn't come back to the center and so -- aren't able to participate, but we will have a very sizable data set in the open-label extension, and we see that as another important data set that will be coming in the subsequent year. So yes. You are correct that it is a single dose of ABCL635 at that 600-milligram dose level.

Your next question comes from the line of Brendan Smith from TD Cowen.

Congrats to the team on the data, great to see. Maybe first, actually just kind of looking at the efficacy and severity curves. It looks like you're not seeing any waning of efficacy at 4 weeks. If anything, it might still actually be getting better. I know this was a single-dose study, but you, mentioned patients will be monitored for up to 12 weeks. So I guess, first, just wondering if you might consider any longer dosing intervals in the Phase III, if you feel like that's maybe even necessary? And then also just based on kind of market research, can you remind us just how long you would expect VMS patients to remain on drug and/or actually kind of need treatment in clinical practice?

Yes. So I'll start with your first question. Yes, we're very pleased to see the robust efficacy at 4 weeks, and we certainly haven't seen any loss of activity. If anything, we're getting still a little bit stronger. We have data out through 12 weeks, but it's not the full data set. And so we'll really wait to get that full data set before we make any decisions about dosing frequency. But with a half-life of 24 days that we reported in our Phase I study, we feel comfortable that at least monthly dosing, if not potentially longer.

But again, that will have to come after the full 12-week data set. But we're certainly very pleased with what we have and stay tuned for the full 12 [indiscernible] where we can really define just how long this benefit lasts. In terms of how long women are on therapy, I think we can say that at least median duration of time that women experience moderate-to-severe VMS after they hit menopause, not including the perimenopausal state is roughly 4 years, but there are about maybe 25% of patients that are considered lifelong hot flashes that into their late 60s, 70s, they continue to have moderate-to-severe hot flashes.

And it was one of the reasons why our advisers pushed us to increase that upper age range because not only are there patients that continue to have hot flashes, but there are those that have treatment with hormone therapy, but maybe after 3 or 5 years are advised to stop because of overall benefit risk or concern for cardiovascular, but still have those treatments. So having that upper age range gives us a lot of flexibility. And maybe I'll ask Dr. Mills to comment on sort of duration of therapy in her practice.

Yes. Thank you, Sarah. I absolutely agree. I think historically, we have underestimated the length of time that women spend with significant vasomotor symptoms, sleep disruption, concomitant anxiety and mood disruption that results from VMS. So we do now say that the average experience is about 8 years and is inclusive of the perimenopause.

But as Sarah mentioned, there is a big proportion of women, which we call the forever flashers who will have vasomotor symptoms until the end of their life. And these people are really underserved because they're not great candidates for hormone therapy or they stop their hormones and can't go back on or they have accruing cardiovascular metabolic risk over time. And so this is another unmet need in this area.

Your next question comes from the line of Kripa Devarakonda from Truist Securities.

Congratulations on the data. Just for the company, given that you're seeing a meaningful rate of complete resolution of VMS with 635, could this be something that could be formally part of the label? I know it's far away, but would this be part of your discussion with FDA when you discuss Phase III trial design? And if the complete resolution is something that eventually gets added to the label, this is a question for Dr. Mills. How would this drive treatment decisions?

Thanks for the question, and you read our mind. This is something we will absolutely be pursuing in terms of regulatory discussions of, let's say, a key alpha protected secondary because we do see it as important for physicians to have access to the data, if replicated, and be able to share with their patients. And I'll turn it over to Dr. Mills.

Yes. Thank you for the question. I think that this is that 37% complete resolution was one of the biggest items that stood out in this data presentation to me when I had access to it. And I'm really struck by it. I think it speaks to the mechanism here, a different vehicle, et cetera. And I think that this is incredibly important to patients and their prescribing physicians or nurse practitioners because patients want the most effective treatment for many, many women. These symptoms are life altering. And so if they have to make a choice between something that has an incredible possibility of complete resolution of symptoms or something that's only going to cut their symptoms by 20%, like some of the other nonhormonals perform, then I think for me, it's a slam dunk.

What are the rates of complete resolution you see with HRT?

Yes, it's a good question. And we talked about this with the company. The studies are challenging because they are different routes, different doses, even different preparations. I will tell you, clinically, maybe 50% of patients that do well on hormones will tell me that they have good resolution of their symptoms. It's actually pretty rare that people say they are completely gone. And certainly, with the nonhormonal class, it doesn't perform as well in general.

Your next question comes from the line of Allison Bratzel from Piper Sandler.

First, just for the company, could you just talk more on the headaches you're seeing? Just mechanistically, is there an explanation for that? And just what would you expect to see upon repeat dosing? And then just for Dr. Mills, could you just talk about overall trends you see in practice? Have you seen an increase in patients seeking treatment for hot flashes now that the oral NK3R options are available? Or just how you expect that to evolve over time?

In terms of the headache, we're still looking into mechanistically what may be the case. We did see an imbalance in our Phase I study. So I guess it wasn't surprising that we saw it as well in Phase II. It is noteworthy that it is also the most common adverse event in elinzanetant that is more frequent than in elinzanetant than the placebo group. So it is not unique to us. It is seen in the class.

We are still new with this data. So we're digesting it. But I can say that in general, these events were mild. I think we had 2 events that were listed as moderate, which we'd refer to, let's say, taking an Advil or Tylenol to relieve the headache. There was a little bit of variability. But for the most part, the median duration was within 1 day. So these aren't headaches that are lasting for weeks and weeks for patients.

And we saw sort of a split of moderate and mild and placebo as well, but obviously in lower numbers. I really can't comment as to what will happen with multiple dosing. But I would say this is mild headache that's self-limited for the most part, and we haven't gotten any complaints or feedback from investigators that this is problematic. We haven't gotten any feedback that patients wouldn't want to go on to the open-label extension because of this event.

And certainly, this isn't the type of event where we would dial back the dose or worry about efficacy to try and mitigate. So obviously, this is something that we'll continue to take a look at and think about more. But overall, as a key safety signal, we feel pretty good, especially considering the overall benefit risk.

And then I can speak about the question about overall sort of nonhormonal prescription trends. The small molecules are still relatively newer medications in different markets. But what I am seeing are considerable uptake by the oncology programs, specifically breast, a huge interest from prostate programs and other programs like gynecologic tumors, melanoma programs, et cetera.

So there's a lot of interest and prescribing uptake there. And oncologists are very comfortable prescribing many different types of medications and injectable medications. So I do see that. The other thing to consider is that menopausal hormone therapy is challenging to prescribe. You have to dose titrate. There are many different products available. And there is considerable side effect with menopausal hormone therapy, including about 50% of people having unwanted bleeding being the most common reason why people stop.

So to have an ease-of-use nonhormonal VMS target that doesn't alter bleeding patterns that is a singular dose easy regimen, I think that, that's really favorable. But of course, patients are the biggest drivers for prescribing patterns, and I certainly am seeing more and more patients coming into the office self-advocating for a trial of the current available small molecule options. So I do see a significant uptake and the biggest community for that are breast cancer survivors.

Your next question comes from the line of Danya Ben-Hail from Jones Research.

Congrats on the data. So was the efficacy consistent across subgroups, including baseline symptom burden, age, BMI, so on?

Yes. We haven't presented all the subgroup data, but we started to do exploratory analyses. That's something that we'll be presenting later on this year at major medical conferences. But we saw our treatment effect across all subgroups that we have evaluated so far. So stay tuned for more data, but I don't think there'll be any surprises.

What patient populations are most likely to prefer an injectable long-acting therapy over a daily oral medication?

I think the injectable is definitely favorable for several populations. I mean, certainly, the breast cancer survivor population, the vast majority of them are very -- they're already familiar with this in terms of, for example, goserelin or leuprolide acetate injections. So that's not new to that patient population at all. We also have a lot of people in the menopause space that are currently self-injecting or auto-injecting for the GLP-1 class, and that's only on the rise.

So that's another sort of area in which patients are very comfortable. But I think overall, if you can put to a patient, you can do this injection once a month, and your symptoms are managed versus you have to remember to take your estrogen pills and your progesterone pills and you change your patch twice a week and don't get confused. I think there is a lot of benefit to simplicity in terms of improving patient adherence and compliance. I see it as a huge plus.

And I'll just follow up. As a company, we've done some third-party research to actually survey patient preferences in terms of oral injectable. And in that research, we asked patients if they had the same efficacy and safety profile, again, not different as we're seeing today, but the exact same efficacy and safety profile, would you prefer a daily oral or a once-monthly injectable? And over half in that data set preferred a once-monthly injectable.

And if they had any experience with auto-injectors, that value was considerably higher, more than 3 quarters. And it's important to note that even people who might feel uncomfortable with needles, having the daily oral small molecules involves liver monitoring, which involves a much larger needle multiple times to get your blood drawn for liver function test. And so when you factor that in, we feel that there'll be significant interest in an injectable.

And Carl here, I'll just maybe add on top of that, that while, obviously, the data is new, and so we haven't had an opportunity to do it. We certainly will pursue the question of, given a significant change in efficacy and in safety, what would be that relative preference between 2. And obviously, we expect that to go up significantly.

There are no further questions at this time. We've reached the end of the Q&A session. I will now turn the call back to Carl Hansen for closing remarks.

Thank you, operator. And I really want again to thank Dr. Mills who joined us today and for offering the very valuable perspective. Just before I end the call, I'd like to put today's results in perspective and in context for what we're building at AbCellera. Given the strength of today's data, I think there's a real danger that people will start to see AbCellera's future as equivalent to the development of this single asset.

In fairness, that's often how biotech works. But I believe ABCL635 is rightly viewed as the latest important outcome of what is a much bigger project. Since founding the company, our vision has been to build Canada's first global biotech company, a company that's known for innovation, a company that can repeatedly invent, develop and commercialize breakthrough medicines for patients around the world. Our strategy for achieving this is built on 3 core objectives: First, to create a differentiated platform that gives us a lasting advantage in advancing new medicines; second, to find our first winning drug; and third, to build out a pipeline of new innovative products that will allow us to grow and scale over decades.

Each of these is easy to say, but it's extremely difficult to achieve. I think everyone who works in AbCellera already believes that we've built the platform. And today, we have shown this can deliver drugs that could make a real difference for patients. Beyond the potential commercial value of ABCL635, today's data also provides strong validation that our platform can make drugs against the most challenging targets and that we are successfully navigating the difficult transition to a late-stage clinical biotech.

Looking forward, our focus is to take ABCL635 into late-stage studies and to maintain momentum in building a pipeline of future winners. We have 2 exciting programs coming into clinical development next year with ABCL688 and ABCL386 and more will follow. I know that many of our 560 employees in Vancouver, Sydney, Montreal and the United States will be listening in on this call. Congratulations, everyone, and thank you for the terrific work over the years.

This success is rightly owned by the entire team from discovery to development, from finance to operations, from manufacturing to platform development. Obviously, nothing is certain. But today, it sure looks like we found our first winner. Congratulations, everyone.

This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon, and welcome to AbCellera's Q2 2026 Business Update Conference Call. My name is Jonathan, and I will facilitate the audio portion of today's interactive broadcast. At this time, I would like to turn the call over to Tryn Stimart, AbCellera's Chief Legal and Compliance Officer. You may proceed.

Thank you. Hello, everyone. Thank you for joining us for AbCellera's Second Quarter 2026 Earnings Call. I'm Tryn Stimart, AbCellera's Chief Legal and Compliance Officer. Dr. Carl Hansen, AbCellera's President and CEO; and Andrew Booth, AbCellera's Chief Financial Officer, are speaking on today's call.

During this call, we may make statements about our strategic priorities and financial outlook based on our current expectations and in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our statements are subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from those described. Please review the Risk Factors section of our most recent Form 10-K and subsequent 10-Q filings with the SEC for a more detailed discussion of these risks. AbCellera assumes no obligation to update any forward-looking statements to reflect events or circumstances after today's date. Our presentation today, our earnings press release and our SEC filings are available on our Investor Relations website. The information we provide about our pipeline is intended for the investment community and is not promotional.

As we transition to our prepared remarks, please note that this call is being recorded and will be available for replay on our Investor Relations website and that all dollars referred to during the call are U.S. dollars. After our prepared remarks, we will open the lines for questions and answers. Now I'll turn the call over to Carl.

Thanks, Tyrn, and thank you, everyone, for joining us today. The most important data readout this year is the top line results for ABCL635 in the treatment of moderate to severe hot flashes associated with menopause. Last quarter, we shared our interim Phase I data that showed robust and sustained target engagement in healthy male volunteers and supported quickly advancing into a Phase II study in postmenopausal women experiencing moderate to severe hot flashes. Recruitment in this study accelerated through H1, and we completed enrollment and initial dosing of patients in June, well ahead of schedule. Based on this, we expect a top line data readout very soon. If the data is positive, we believe ABCL635 will be highly derisked.

As noted in our last call, we've been preparing for next steps, which would include late-stage clinical development in moderate to severe VMS associated with menopause and clinical studies to evaluate ABCL635 in treating VMS associated with cancer treatment. Turning to our broader portfolio. ABCL-688 and ABCL386 continue to progress through IND-enabling activities, and we expect both to enter Phase I/II studies in 2027. We will disclose more information on these programs when they enter clinical studies.

Our Phase I trial for ABCL575 completed dosing and is on track for a readout in Q4. As previously discussed, we intend to complete Phase I studies, and we currently have no plans to develop it past Phase I. Finally, I had previously communicated a goal of moving another program into IND-enabling activities in the first half of this year. Although we missed this time line, we are making good progress, and I'm confident in the productivity and innovation of discovery.

The most significant public disclosures since our last earnings call are related to business development associated with our T cell engager platform. As a reminder, it was 5 years ago that we started working on TCEs. And since then, we have invested heavily in the platform. Our efforts began with the hypothesis that more diverse CD3 binders would be important for engineering TCEs with improved therapeutic properties. Our internal work to date has proven this to be true, but it's also revealed that diversity of CD3 binders alone is not sufficient.

Today, we know that repeated success in generating optimal TCEs requires a comprehensive toolkit of binders, technologies, assays, models and biological insights. Accordingly, our platform now includes diverse panels of CD3 targeting antibodies, along with proprietary panels of co-stimulatory antibodies to enhance and fine-tune TCE function, scalable protein engineering workflows to create a large diversity of binder combinations and formats, scalable in vitro assays to assess TCE function and development properties, experience in the translation between in vitro assays and in vivo models across multiple targets and increasingly, a connection between TCE properties and third-party clinical data. Together, we believe this creates a highly enabled platform for developing multi-specific TCEs with broad applications across oncology and autoimmunity. While we are leveraging this capability to advance internal programs, we also view it as a key platform for strategic partnerships.

Last year, we announced our first significant TCE collaboration with AbbVie. Adding to this, we have recently entered into 2 new TCE collaborations with Vertex and with Jazz. These 2 deals are adding over $110 million in upfront cash to our balance sheet and have the potential for larger value in downstream payments and tiered royalties on net sales.

Last week, we announced our most recent collaboration, which is with Vertex, focused on TCEs for autoimmune diseases and other conditions. Under the terms of the deal, AbCellera will receive $28 million in upfront payments, is eligible for potential downstream payments and tiered royalties on net sales and has a potential option to conduct process development and clinical manufacturing.

In June, we also announced a collaboration with Jazz Pharmaceuticals that includes 3 confirmed discovery programs with $84 million in total near-term upfront payments. We have received $56 million in upfront payments for the first 2 programs, and we will receive another $28 million for the third program, which will be initiated within the next 12 months. Under the agreement, AbCellera is also eligible to receive over $2 billion in potential downstream payments, along with mid-single-digit to low double-digit tiered royalties on net sales. The deal also includes a mutual option for 2 additional discovery programs under the same financial terms and a mutual option for AbCellera to undertake certain IND-enabling activities and clinical manufacturing. The total potential deal value with all 5 programs included would be over $4 billion. We believe that this is one of the largest TCE discovery deals reported to date.

Before handing over to Andrew, I'm pleased to welcome Dr. Victor Stander and Dr. Lynn Sealy as new Independent Directors on AbCellera's Board. Dr. Stander and Dr. Sealy are experienced biopharmaceutical executives with proven and complementary expertise in development across oncology, women's health, immunology and endocrinology. Lynn and Victor bring deep expertise and development experience that will serve us well as we build our portfolio and our company. And with that, I will hand it over to Andrew to discuss our financials. Andrew?

Thanks, Carl. As Carl pointed out, AbCellera continues to be in a strong liquidity position with over $565 million in cash and equivalents and with roughly $110 million in available committed government funding to execute on our strategy. We are continuing to execute on our plans with a focus on internal programs and leveraging our process development and clinical manufacturing investments.

Looking at revenue and expenses. Revenue for the quarter was around $4 million compared to total revenue of approximately $17 million in the same quarter of 2025. Revenue this quarter is consisted mostly of research fees. Our research and development expenses for the quarter were approximately $46 million, approximately $7 million more than last year. This expense reflects the focus on investment in our internal programs. In sales, general and administration, expenses were approximately $14 million compared to $22 million last year. The large decrease in SG&A expenses relates to the conclusion of our intellectual property litigation case and to changes in the teams following the focus on our internal pipeline.

Looking at earnings, we are reporting a net loss of roughly $55 million for the second quarter of 2026 compared to a loss of about $35 million a year earlier. In terms of earnings per share, this result works out to a loss of $0.18 per share on a basic and diluted basis.

Turning to cash. Altogether, we finished the quarter with $567 million of total cash and marketable securities. That's a $6 million increase in total cash for the first half of 2026. Operating activities for the first half of the year used approximately $8 million in cash and included in the operating cash flow is the receipt of $56 million from the upfront payments under our TCE deal with Jazz. This portion of the upfront payments from the Jazz partnership was received in the quarter. Excluding marketable securities, investment activities year-to-date included approximately $6 million of capital expenditures, offset by $7 million in government grants received. As a part of our treasury strategy, we have $420 million invested in short-term marketable securities, and our investment activities for the quarter included a $15 million investment in these holdings.

As a reminder, we have received committed commitments for funding the advancement of our internal pipeline from the Government of Canada's Strategic Innovation Fund and the Government of British Columbia. This available capital does not show up on our balance sheet. And with over $565 million in cash and equivalents and the unused portion of our secured government funding, we have over $675 million in available liquidity to execute on our strategy. In addition, we have further available liquidity from our ownership of the other Vancouver lab-based office building as well as our GMP facility.

With respect to overall company expenditures, our capital needs are very manageable, and we continue to believe that we have sufficient liquidity to fund at least the next 3 years of pipeline investments. And with that, we'll be happy to take your questions. Operator?

[Operator Instructions] Your first question comes from the line of Steve Seedhouse at Cantor.

Just wanted to ask first on the upcoming -- on the forthcoming VMS data. What, in your view, is a clinically meaningful improvement in the VMS severity just in the context of that, I think, 3-point ordinal scale that's used for assessing severity? And then also, will you have threshold analyses for the VMS frequency data available with top line, something like a proportion of patients with 90% or 100% reduction in frequency. Just curious if that's something that will be with the top line. And then I have a follow-up as well.

Steve, Carl here. Thanks for the question. So first, in terms of the upcoming readout that obviously we're very excited about, our view is that success is a clean safety profile, which so far, everything that we've seen through Phase I has been entirely consistent with that and efficacy that tracks in a way that is comparable to the 2 small molecules that are approved. So on the frequency side, we are obviously looking for a response relative to placebo that's on the order of 20% at least, which is about what you see with the small molecules. And there's an additional requirement that you have at least 2 -- a reduction in frequency of at least 2 hot flashes per day, which is something that we expect to meet under the same criteria.

On the severity side, we're expecting that if we get the frequency, we're going to track with severity and have numbers that are very comparable to the small molecules. I don't think we've communicated a definitive bar on that one. But historically, the severity has been easier to hit than the frequency. And so we are really more focused on the frequency side right now.

And just I wanted to ask about the -- you made some comments, and you've mentioned this before about potential application in cancer. So I guess this would be certainly women with breast cancer, but maybe also men on androgen deprivation therapy. And it sounded like you were going to look into opening some Phase II studies along with the late-stage program in menopause. But I'm curious why -- like why not move directly into Phase III label-enabling studies in those cancer indications, just given what we've seen from OASIS-4 with LinkQuit and assuming you'll have positive Phase II data in hand yourself and dose selection would be facilitated by that. Would love to get your thoughts on that.

Thanks, Steve. It's a great question. Probably it's a question that would be best directed to Sarah, our Chief Medical Officer, since she has been obviously leading point on the regulatory strategy. My understanding is that moving it first into this patient population, which is obviously going to be significantly different given that you're dealing with patients that have oncology is the first step before moving into later-stage trials. And we expect to initiate that relatively soon as we get ready for the larger study on BMS associated with menopause. And of course, there's going to be some gap between a readout and getting the final trial closed up and getting all set up for that. So we're sequencing that as quickly as possible.

Your next question comes from the line of Srikripa Devarakonda.

I want to ask a little bit about safety differentiation. The small molecules have liver monitoring requirements. If the upcoming data from 635 confirms -- reconfirms, I should say, a clean liver profile, can you talk a little bit about what you plan to do in Phase III in terms of liver monitoring to help establish a definitive differentiation on this aspect? And also, do you think a clear differentiation on safety would help capture the first-line non-hormonal market? And I have a follow-up question.

Sure. I'm probably going to not go too deep into this since we are expecting data relatively soon, and then we'll have ample opportunity to vet all those questions. But just briefly, as you mentioned, we have been very focused on safety as a key differentiator. Both the 2 small molecules have liver monitoring. That is inconvenient, both in practice and for patients. And we believe that it is a property associated with metabolism of small molecules and one that an antibody should not have. And of course, as reported last earnings call, the data so far shows no perceptible increase in liver enzymes across any of the patients. And so that thesis is sound, and we expect that, that will continue.

In terms of how we look at that going forward, that will be on Sarah's docket, but my expectation is that we will continue to do some monitoring of enzyme levels. And make sure that, that holds going forward. But frankly, from a scientific perspective, I see no reason why that wouldn't.

The other thing that you didn't mention on the safety side is there has been a somnolence side effect associated with the Bayer molecule. That's a somnolence side effect that we believe is associated with binding of that molecule, not just to NK3R but NK1R. We have an antibody that is specific, entirely specific to NK3R. So we do not expect to see that come up. And obviously, we haven't seen any of that in the data that we looked at so far, but that's another point that we'll be pushing. We do think that in addition to the convenience of a once-monthly dosing, improved safety for a product like this is paramount, and we are so far very encouraged by the data we've seen.

Great. Just a quick question on the partnerships that you have signed with Vertex, Jazz -- it seems like the focus is on multi-specific T cell engagers. Just wondering if you can talk a little bit about the percentage of internal resources that are dedicated to this TCE platform versus the others, especially the GPTR ion channel platform?

Great question. As I mentioned in my prepared remarks, our work in TCE is now a long-standing effort. So we have spent the last 5 years putting in place some of the very important building blocks to execute on these types of therapies. And along the way, have learned a lot about what it takes to succeed in this space. So much of that is now in the bank. So we're operating now from an established platform. We have extra bandwidth because that work is done to take on additional programs.

And so I expect there will not be a big change in our allocation of resources to TCE, but it will be directed from putting the foundation in place, building the expertise and the capabilities to executing on those capabilities, both for internal programs and for partner programs. And we are very pleased to see that come to fruition and to have attracted to stellar partners in Vertex and Jazz who prioritize high innovation and are serious about bringing forward to the clinic.

Just the last point, with respect to the balance between TCEs and, let's say, GPCRs and ion channels, I don't have a hard number, but I'd say that there's significantly more effort on the GPCR and ion channel side, but TCE has been one of the strong pillars of the pipeline, and we expect it will stay that way for the coming future.

Your next question comes from the line of Stephen Willey at Stifel.

This is Josh on for Steve. Congrats on the progress. Maybe just as a follow-up to the first question asked specifically on severity. And looking at some of the historical fezolinetant elinzenetant data, it sort of seems that -- it doesn't appear that fezolinetant actually maybe shows a statistically significant difference on severity at certain time points. And it looks like elinzenetant specifically at later time points and at higher doses has kind of shown this and wanted to get your thoughts on maybe severity being something that's maybe exposure driven and how you're thinking about that with maybe CL635's differentiation with the extended pathway.

It's a great question. I don't know exactly the data that you're looking at. Both severity and frequency are important regulatory endpoints that need to be hit. That's the understanding that we're moving on. And we do think that they correlate very well. There's -- at the very least, there's well-reported data on dose escalation for fezolinetant, where a dose escalation of fezolinetant showed improved efficacy both in frequency and in severity.

And on the severity case, it did look as though that dose response lasted longer or plateaued later than it did on frequency. So I think that would be consistent with what you're saying, but I would be cautious to speculate too much with exactly how that's going to play out. And in any event, we are anxiously awaiting the data that's coming. So we're going to have that answer pretty quick, and then we'll be digging deeper into it.

Your next question is from the line of Evan Seigerman from BMO Capital Markets.

Mc [indiscernible] on for Evan. The Vertex collaboration applies T cell engagers to autoimmune diseases. And without disclosing the targets, can you discuss what technical features are required to create an acceptable therapeutic profile in these autoimmune diseases, particularly around depth and duration of cell depletion, cytokine release and repeat dosing? Appreciate it.

Yes. It's a great question. I think you highlighted the important things for cell depleters that are used in autoimmunity. And what you want is deep depletion, something that is safe, something that is tolerable. All of that is in play. But it also depends on the target and the exact application. And so without getting into the details of that, I don't think I could give you a very detailed answer on that particular question.

Your next question is from the line of Allison Bratzel from Piper Sandler.

One for me on 635. Could you just talk to your expectations for the placebo arm in the Phase II? Are the small molecule trials a good benchmark of what to expect from the placebo? And could you just talk to aspects of the Phase II trial design that are designed to mitigate placebo responses?

Yes. The trials that have been done have all shown a pronounced placebo response. And so our expectation coming into the study is that we will also have a placebo response and that it will be in the range that's comparable to what has been seen. That's our working hypothesis. We're going to know that very soon when we read out the data. In terms of trying to reduce that response, apart from good clinical operations, having a period where you're enrolling patients, not telling people exactly what the numbers need to be before they're enrolled, all of that has been put in place. We feel very confident about the execution. But I do think one of the big questions is exactly where that placebo response is going to come out. And we'll know shortly. Thanks for the question.

Your next question is from the line of Brendan Smith from TD Cowen.

Maybe another one on 635 from us. I guess, first, just quickly, can you confirm that the Phase II efficacy data will be out to 4 weeks in all patients? Or will you have any data out to 12 weeks in some patients? Just to kind of check that box there. And then maybe secondly, when you look at the commercial opportunity, I guess, in BMS, how are you kind of thinking about a potential Phase III in terms of target patients? I guess, are you thinking of this exclusively as a non-hormonal alternative? Or would you kind of consider a comparison in a pivotal study maybe with some patients on or refractory to HRT? Just kind of trying to think about how we should segment that market.

Yes. So first, the data that we're expecting very soon is going to be data that is 4 weeks in all patients, and we will not report data on other -- a subset of patients out to 12 weeks. So that's the top line data. And historically, if you look at efficacy data, there's been a very good follow-through between 4-week data and 12-week data. So we're feeling confident that we're in a great spot.

Also, I should mention that the Phase II was done with a single dose of ABCL635. And so part of the study is that we are not dosing again. And as the dose comes down, we're getting an effective dose response curve. So we would expect that by 12 weeks, the effect should be certainly diminished, although we'll see that when it comes out. In terms of the Phase III, I think it's a little bit early to talk about the design. I think it is a good question as to how you exactly design this and really speaks to the medical need. We think at the very base case, there are a large number of women that are contraindicated and that would benefit from a non-hormonal option.

As I've said on previous calls, we think that, that's roughly -- it's probably over 1 million women in the U.S. alone. In addition to that, there's a very substantial number of people that would benefit from a treatment for hot flashes associated with cancer therapy where hormones are not an option. That would include both prostate cancer and breast cancer. And then there will be some subset that are not tolerant to HRT or that decide not to. And that's a bit of a moving bar these days, but we think there's a big opportunity there as well. So we will take all that into consideration once we have the data, and we're making plans for the larger trial.

Your next question comes from the line of Debanjana Chatterjee from Jones.

On the progress with the trial. Curious if you could add any additional color on the blinded safety data that's emerging from the trial? Are the -- like the overall adverse event rates that you're seeing on a blinded basis and any potential discontinuation rates tracking within expectations? And I have a quick follow-up.

Yes. We haven't disclosed any safety data past what we did on the last call. What I will say is that there's nothing that we've seen that has given us any pause or damage our thesis. But of course, we're going to wait until the unblinding and have a close look at that. But so far, things are on track.

Appreciate it. And a quick follow-up. What's your latest take on the debate around whether targeting the median freeoptic nucleus, I mean, inhibiting the NK3R receptors there is crucial to seeing potential benefit versus just suppressing the candy neurons in the ARCUS nucleus?

That is a great question, and it's one, I think, that we've highlighted on past calls. So that is the key remaining scientific risk in the program. What I will say is that the Phase I data that we presented on the last call shows that we can get profound suppression of testosterone and that we can do that in a way that is deeper than what has been seen by the small molecules and that lasts for the entire dosing interval. So the candy neurons -- so that reads right through to the candy neurons in the infantibular nucleus. Those are believed to be the most important neurons. I think everyone would agree with that. And so from that perspective, if those are the only neurons that matter, then we would expect an efficacious drug and probably a drug that has even better efficacy than what has been seen with the small molecules because the testosterone suppression has been greater.

The open question remains as to whether also blocking NK3R in the preoptic nucleus has an effect. We have not done a conclusive experiment preclinically to prove that. The experiment to prove that is the Phase II data that we'll read out shortly. And so that's the remaining question. I'm not going to speculate further, but we're feeling very good that we have great target engagement in the neurons that are the main drivers of this, whether or not taking another kick at the can in the preoptic nucleus matters is something that we're going to find out very shortly.

There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Carl for closing remarks.

Thank you, everyone, for joining the call today. AbCellera is moving into a very exciting time, and we look forward to updating you shortly on our pipeline and our portfolio. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.

My name is Andrew Booth. I'm the CFO at AbCellera, and it's my pleasure to walk you through the company and give you an update as to where we are at with our pipeline.

Just a reminder, I'll be making certain forward-looking statements, and please check our SEC materials for all of the risks associated. Just as a quick recap of AbCellera. So AbCellera is a company based in Vancouver, Canada, also with offices in Montreal, Canada and in Sydney, Australia. Founded in 2012 out of our Founder and CEO, Carl Hansen's lab from the University of British Columbia. We undertook a mission to rebuild the focus on technology and rebuild the front end of drug discovery really focused on therapeutic antibodies.

We originally took that business plan to the market in a partnership model, where we've worked on over 100 therapeutic antibody programs for our partners, accumulating a portfolio of royalties in those molecules over a period of about 10 years or so. We were also well known for the work we did during COVID. We were the discovery engine behind Eli Lilly's COVID antibodies and had a royalty on those molecules, which brought in close to $1 billion in nondilutive funding in order to continue our investment into the platform.

And in addition, during that time, we've also partnered with the Government of Canada, bringing in additional funds to the tune of about $400 million to continue the build-out of our infrastructure and capabilities as well as advance a portfolio of programs in our own pipeline through all the preclinical work and even into Phase I. And that recently has been the real focus of the company.

Since 2023, we positioned away from the partnership model and more to a focus on our own proprietary pipeline, where we have 2 molecules in the clinic and another 2 in IND-enabling activities that are expected to move to the clinic in the near future, and I'll talk about those later in the pitch. Importantly, we are here still in a very strong liquidity position with about $655 million in total liquidity that we are using to advance our pipeline and that is sufficient liquidity to take us through at least the next 3 years of pipeline and investments and also continuing the portfolio of early discovery programs, which will be the source of future of our own proprietary clinical programs.

As I mentioned, for about 10 years or so, we worked in partnership with many different companies, really validating the discovery capabilities that we have. We would -- this was a very capital-efficient model for us to build up the capabilities within the company. And as I mentioned off the top, we have a portfolio of royalties. Looking back, perhaps the most valuable contribution to the company that this partnership model brought was working on the toughest of problems brought to us by some of the industry's best. That allowed us to focus and build our capabilities and really focus on somewhere where we believe we have a competitive advantage in discovering antibodies for difficult targets.

We would call these our complex membrane protein targets specifically ion channel and GPCR targets, working on novel modalities, including these multi-specifics and what we would call next-generation ADCs. And importantly, as we try to discover or try to determine where do we point this capability, we look at indications across different therapeutic areas because as we say, if we're already focusing on these difficult targets, the ion channels and GPCRs or areas where our competitive advantage would give us a unique ability to find therapeutic antibodies, it doesn't make sense to further close the aperture on a specific therapeutic area.

So at the moment, especially in the preclinical work and in the early clinical work, we are indication agnostic. Looking at where our current pipeline sits at the moment, we have our lead molecule, which is ABCL635. It is an antibody antagonist against NK3R, a Neurokinin-3 receptor. It is a relevant target in the indication of hot flashes really associated with menopause. And we'll be talking a lot more about that program as I progress through the pitch here.

We have a second molecule, which is ABCL575. It is against OX40 ligand. This originally was a molecule that we worked on in partnership with EQRx. EQRx had some challenges to their business model and eventually were bought by Revolution Medicines and this molecule reverted to us. We have taken it through Phase I. And initially, this was a fast follower molecule to Sanofi's amlitelimab which they purchased off of Kymab through the acquisition of Kymab.

The bet here was that if successful, this would be a very important pathway, and we looked to partner this if Sanofi had been successful. It's fair to say that the OX40 class of drugs has had a few headwinds in the past year. I think amlitelimab's readout in Phase III was -- did not really reproduce the Phase II results that they had and there were some safety signals, both from amlitelimab and also rocatinlimab OX40 that was advanced by Amgen.

Our intention here is really to take this through to the end of Phase I and then not allocate any more capital on it. We do believe it will be as advertised in terms of a long half-life suitable for every 6-month dosing, but we will wait to see if there's any partnering opportunities, but we'll not be continuing that on our own steam.

And behind that, we have 2 molecules, ABCL688, ABCL386. 688 is in autoimmunity and 386 is oncology. We haven't given very many other details about that -- about either of those programs really because it's a competitive world out there, and we would rather keep our cards close to our chest as we advance that in preclinical work until we get to the clinic, and they are both on track to be in the clinic in 2027.

But really, I'll focus a lot of the program today on the NK3R asset. So ABCL635 is a first-in-class antibody for the treatment of VMS, also known as hot flashes. It is, as I mentioned earlier, an antibody antagonist against neurokinin-3 receptor. And it has come from our GPCR9 channel work that we've done over the years, and I'll get into a little bit of the market and of the biology there.

So this is potentially a very large market. When we look at menopause and specifically hot flashes associated with menopause, approximately 12 million women by our estimates in the United States suffer moderate to severe hot flashes at any moment in time. Approximately 50% of those are 6 million seek treatment. And where we are really targeted is on those that -- where hormone replacement therapy is either -- is not appropriate, either they are contraindicated, hard or soft contraindicated or cannot tolerate hormone replacement therapy. And by our estimates, that is about 20% of the population.

So just multiplying that through 20% of the 6 million women is approximately 1.2 million women. There are 2 small molecules one by Astellas and another by Bayer that have recently received approval. Astellas is in their second year of sales had quite a successful launch, we would say, with $300 million being sold in their second year despite some of the drawbacks. And the Bayer molecule just recently received approval in late 2025. Both of those molecules are priced at roughly about $5,000 in annual cost for the treatment. And so just looking at the 1.2 million women and about $5,000 of net cost, that for us indicates about a $6 billion total addressable market for this class of drugs, really only for those where hormone replacement therapy is not an option.

And our thesis here is that women who find themselves in that category will be looking for non-hormonal options for treating one of the most -- one of the largest symptoms associated with menopause, of course, being hot flashes.

So just going into a little bit of biology here. What we see is that the pathway that we are looking at here is the NK3R, a neurokinin-3 receptor that are on KNDy neurons in the hypothalamus. Now a thesis we had early is that these KNDy neurons are exposed to -- the role of these KNDy neurons is to detect hormone levels in the blood. So we believe that despite being in the hypothalamus, they're in this part of the hypothalamus called the infundibular nucleus, which has got a fenestrated blood-brain barrier. And because of their role in detecting hormone levels in the blood, we believe that they have access to the systemic circulation and therefore, could be hit targeted by an antibody.

Now the role of neurokinin-3 here, as I mentioned, is it gets regulated by the presence of estrogen. And then in the absence of estrogen drives the GnRH pathway through to the production of estrogen to kind of balance this. And in the state of menopause where estrogen has dropped, these NK3R neurons are overstimulated and therefore, are driving sort of a feedback loop to produce estrogen. And of course, going through menopause, there is not the production of estrogen and this feedback loop then causes projections into the preoptic area of the hypothalamus which then gives signals to the thermal regulatory center within the brain that causes this pulsation of hot flashes.

So the mechanism that we are looking to engage here with our ABCL635 is to block that signal to the NK3R pathway, therefore, suppressing this kind of pulsating projections that are going and ultimately reducing the hot flashes. Now there are -- this is a well-proven biology. Really, the leaders here are both Astellas with fezolinetant that is marketed under the brand name of Veozah and Bayer, who has elinzanetant marketed under the brand name of Lynkuet. These are 2 small molecules, as I mentioned, that have received approval in the recent past.

Fezolinetant approved in 2023, does have some drawbacks. And specifically, there is required liver monitoring because of a liver signal. And in fact, it has also received a boxed warning since its launch. Despite that, as I mentioned, it has achieved $300 million in second year of sales. And elinzanetant by Bayer recently approved just in the fall of last year. They do have required liver monitoring, although not a box warning as fezolinetant does. They also have an additional warning associated with somnolence. And that is because this molecule is both an NK1R and NK3R antagonist. And it was originally developed for NK1R, which is known to cause some issues with sleep.

We are with ABCL635, just a pure NK3R antagonist, and we -- therefore, we don't expect to have those same side effects. Recently, and just on the May 11 earnings call that we had, we disclosed the results of our Phase I study, including the trial design of both SAD portion and a MAD portion. You'll see the trial design here on the page, and I won't go over it in detail, but these slides are available off of our website.

We did see a very favorable tolerability profile. You see here some of the events that we're seeing in the variety of cohorts for the SAD, and you see also the placebo effects here. We think overall, this is a very clean safety profile that we then quickly had moved -- and I'll show you some of the biomarker and PK/PD data in a couple of slides. We moved this forward quickly into the Phase II. There were a couple of adverse events that we note here, specifically on the headache that was seen in the 900-milligram cohort.

We do make some elaboration on this because these cohorts were dosed together and kept together in a room. We're in a kind of a dormitory style room with all of the participants together. They were not allowed to have kind of a joy sort of regular daily pleasures such as coffee, which we also assume, also led to some of the headache, particularly in that one cohort. You notably, you'll see there were no -- none of those effects in the 600 milligram, although we don't expect that the headache was due to the administration of the dose, but rather to those who were deprived of coffee for a couple of days.

So overall, we felt very comfortable with the safety profile, and we looked to the liver signal included in the safety profile. As I mentioned, fezolinetant did have a liver signal here -- a liver signal. And if we look here at the variety of metrics that we use to detect if we would have any liver signal, you see we're well within or well below the upper range of normal in each of the measurements we had here, confirming our belief that an antibody being not metabolized in the liver would have a clean safety profile for use in this indication.

We also looked at what the PK profile is here. Our target product profile is to have a once-monthly subcutaneous injection, and we saw that the PK profile closely matched what our modeling was that supported this administration, and we feel very comfortable with a half-life of about 25 days to support the monthly profile that we were targeting.

On the left of this slide, you do notice the similar diagram as I talked about before. Importantly, this mechanism driving the GnRH pathway gave us a nice biomarker that was used by Astellas in the progressive -- in the clinical development of fezolinetant, and that is testosterone in healthy males. So what we see is that this same pathway, the GnRH pathway that is the feedback loop for driving estrogen also in males drives testosterone.

And it was believed and actually fezolinetant provided this nice biomarker and the data, which you see on the right, that if you suppress NK3R that in males, it will also suppress testosterone. And because there is a nice steady level of testosterone in males, you could use this in order to be a measure of target engagement. The risk of entering the Phase I for ABCL635 was, can we indeed hit this part of the brain with an antibody and we were able to significantly derisk that using this biomarker.

On the right, you see the fezolinetant data. You see that on the time frame of a single day, they do get the target engagement and a dose-dependent target engagement. The orange line that you see there is close to their clinical dose of 45 milligrams a day. This is 46 milligrams that they used in this study. And the doses that give deeper target engagement of 90 milligrams and 180 milligrams are also labeled on that chart. And we see that there is this dose dependence on target engagement, which is what we were hoping to replicate with our antibody in the Phase I trial.

Here, what you see are the results of that biomarker, validating that we, indeed, with ABCL635, do engage the target. What you see on the dark blue line at the bottom is the 900-milligram dose. The blue line above that is the 600-milligram dose. That's in bold because that's the dose that we're taking forward into our Phase II. And you see that in comparison to the fezolinetant data, which with their dose, they get a number of hours of coverage of getting the suppression and engagement of the target to the tune of maybe 40% change in testosterone levels.

At our target dose of 600 milligrams, at least as a loading dose, we get, say, about 60% reduction in testosterone, making us feel very good that we do engage the target. And most notable here as well or also notable is that on the right with the fezolinetant data, which is dosed daily, you see the change in this -- with a fairly short half-life, the change in this engagement over the course of that 24-hour period.

On the left, because we are intending to dose monthly, you'll see that the time scale is over the course of that month. So it takes up to a week in order to get full target engagement, but then you see sustained target engagement over the course of those 4 weeks. So we saw this in our Phase I and felt very good about the ability to engage the target. And on the basis of this moved quickly into the Phase II. And as I mentioned, we released this data in just a number of weeks ago in our Q1 earnings on May 11.

We also saw the reduced stimulation of the -- in other areas of GnRH pathway in FSH and LH, both meeting what we would consider to be a strong target engagement. So our target product profile here is to have favorable at least as good efficacy as the small molecules, a clean safety signal and preferred dosing of this once-monthly subcutaneous dosing. We are now moving forward into the Phase II -- sorry, I thought I had some more information on the Phase II there. We're moving forward into the Phase II, which is a double-blind, placebo-controlled trial with 80 patients with 40 patients in the placebo arm and 40 patients in the treatment arm with 4-week endpoint and 12-week follow-up. What we are testing here, if indeed -- so what we are testing here is the frequency and severity of hot flashes reported on the 4-week time frame.

And importantly, we saw this data in the Phase I of target engagement is very derisking in terms of can we engage the target in the infundibular nucleus. Unfortunately, testosterone is only a measure of target engagement and not a biomarker of hot flashes. What remains to be a risk is -- the risk that remains is if it is necessary also to suppress NK3R because it is expressed in the preoptic nucleus, which is behind the blood-brain barrier.

The current hypothesis is that it is sufficient to engage and suppress NK3R in the infundibular nucleus, which we have shown in our Phase I is we can do. And if that is indeed the sufficient biology, then we feel very, very good about reading out positively in our Phase II. But there does remain the open question as to whether it is necessary to also engage the NK3R inside the preoptic nucleus. And that, of course, is the study that we're doing with our Phase II.

We're moving forward with a 600-milligram dose with the target product profile of a 300-milligram maintenance dose because of the half-life of the molecule. We expect that 600 milligrams does kind of emulate what the steady-state engagement would be of the target at a 300-milligram monthly dose. And because of our formulation at 150 mg per mL in a 2 mL standard auto-injector, we would expect to have -- to be able to deliver that 300 milligrams in a single monthly subcutaneous dose.

So we feel very good about where we stand. And we have a highly derisking Phase II readout coming up in the not-too-distant future. We have indicated that this is going to be in the third quarter. So within the next few months, we will get this data. And of course, we'll be excited to share it once we have it.

Just looking forward at this pipeline and what we're expecting to see here in 2026 and then looking forward into 2027. We, of course, do have this Phase I/II of ABCL635. And if positive, we would continue into a Phase III study and pivotal trial in 2027. In addition, we would advance ABCL635 for the treatment of VMS in indications of oncology, specifically in breast cancer for any women on tamoxifen where you have a medically induced menopause, you also have -- you also -- those patients do suffer from VMS associated with that medically induced menopause and are looking for, of course, non-hormonal treatments in order to deal with some of the symptoms and get symptom relief.

In addition, that same pathway leads to VMS in those receiving prostate cancer treatment, where one of the most uncomfortable side effects of that treatment is also in hot flashes. So we would be moving forward a couple of Phase II studies, specifically in VMS relating to those oncology treatments.

As I mentioned off the top, we'll continue our readout of 575, and we would expect that also in 2026. And we will continue the IND-enabling activities of 688 and 386 with the intention to file those INDs and start clinical trials in 2027. We have indicated as well that we would move our next at least one candidate into IND-enabling activities in 2026 with a stretch goal of also bringing that molecule into the clinic in 2027. And importantly, we have a pipeline or funnel of discovery programs behind that, that are in some form of discovery and preclinical development with the goal, as we have said for a couple of years, to bring 1 to 2 molecules per year into IND-enabling activities and then subsequently into the clinic. The goal there is to continue this cadence of 1 or 2 molecules into the clinic over the coming years.

And as I mentioned off the top, we do have sufficient capital to continue on that trajectory for the foreseeable future and certainly for the next 3 years of execution on this plan.

And with that, I have a few minutes left here if there happen to be any questions.

[indiscernible].

Yes. The Astellas and Bayer actually have kind of blazed the trail for us here. And what we're looking for is a statistically significant and clinically meaningful reduction in the frequency and severity of hot flashes at the 4-week endpoint. Specifically in terms of the frequency, what we'd be looking for is a reduction of at least 2 moderate-to-severe hot flashes per day, and that would be on the order of what the clinical efficacy has been of the approved small molecules. And that is off of a baseline where we've been screening really moderate-to-severe hot flashes with, let's say, similar to Veozah and Lynkuet of about 50 hot flashes a week, so on the order of 7 or 8 per day. And so it would be a reduction of about that 20% of those hot flashes or 2 per day would be equivalent efficacy of the small molecules.

And of course, continuing with the clean safety profile, and we would expect to see additional data, although the Phase I data seems quite reasonable to believe that we will hit our target product profile of a once-monthly subcutaneous injection.

We do have reason to believe that Veozah left some efficacy on the table because they were dose limited by toxicity. You can see that from their Phase II study. And we will see if the -- given the mechanism of action here and the clean safety profile of an antibody, if we can access some of that efficacy that was left on the table. But really, we think that with the equivalent efficacy, the safety profile and the once-monthly injection that this is a potential blockbuster drug.

Any other questions?

Okay. Well, thank you for your time.

Bank of America's Annual Healthcare Conference in very toasty Las Vegas. I'm very happy to be joined here on stage with Carl Hansen with AbCellera. Thank you so much for joining.

It's great to be here. Thanks for having me.

Wonderful. Maybe, for those who might be newer to the story, can you give us a brief overview of the company? And again, you've evolved from a successful discovery partner into a company now focused on advancing its own clinical assets. How did that evolution happen?

Sure. So the company is now roughly 13 years old. It was started at the University of British Columbia, where I was a professor at the time. And from the early days, or in the first, let's say, decade of the company, we were really focused on a technology-forward strategy.

We were building and integrating proprietary and best-in-class technologies to make a platform for the generation of novel and highly differentiated antibody therapeutics. And the business model behind that, that drove that was a partnership business model.

So we were essentially hired guns for the industry, and we're the partner of choice when large pharma, highly enabled partners ran into antibody discovery problems where their internal technologies were not up to the task.

And so that business really drove the company for the first 10 years. And the model included early research fees as well as downstream stakes and programs, and we were running this hired gun technology access for a stake in molecules that are moving forward, sort of a royalty aggregator.

The company had a big breakout moment in 2020. We had been working with the Department of Defense with DARPA on a platform technology for pandemic response. And in March of 2020, we were able to deploy that.

And with Eli Lilly, we were successful in having 2 therapeutic antibodies that got emergency use authorization that ultimately were used in about 2 million patients in the U.S. And we had a 25% royalty on that product.

So over '21, '22, '23, that brought in about $1 billion of nondilutive capital into the company. At the -- on the heels of that, we went public at the end of 2020, raised about $650 million. And then subsequently, we were able to bring in another $400 million in support from the Canadian government.

So the company had this breakout moment in 2020. And over the last 2 years, we have been completing that project of building a highly differentiated capability for generating antibodies, much of which was crafted and perfected in the context of solving some of the toughest problems in the industry.

So in '23, we made the decision that we now have the capital, we have the differentiated capabilities. We saw some very compelling opportunities, and it was time to take that capability and turn it inward to reform the company into a classic drug development company.

And over the last 2.5 years, we've been basically heads down, reforming the company, moving those programs forward and are now within sight of a very exciting first clinical readout and believe we have the ability to follow that up again and again over time. So I have been on a bit of a push to reengage with the investment community because in a lot of ways, this is a new company profile and a new start to the next chapter of the company.

That's a great segue to the next question, which is when you think about the market's response, what do you think they're overlooking about how transferable some of these previous experiences are in terms of your success moving forward? And I guess, what gives you an edge in antibody discovery?

Yes. So I'll start first with the edge. So like I said, like we -- for 10 years, we made our living solving challenging antibody discovery problems. And in particular, I believe we now have best-in-class or best-in-world capabilities for some very important specific applications in therapeutic antibodies.

So GPCRs and ion channels is -- has been a heavy focus. Our first program, which I'm sure we're going to talk about ABCL635 is emblematic of that capability. We also have developed capabilities in multispecifics and more recently in ADCs. So the platform build is highly differentiated.

We can make molecules that are not me-toos, but they get into some new space where there's not much competition. And it's integrated all the way from discovery through now to manufacturing.

That's a very unusual setup for a company. But the market, I think, rightly, doesn't want you to talk about a platform. They want to see what is the outcome of the platform. And so for the last 2 years, we've been setting that up.

635 is the first example. Next year, we expect another 2 programs of a similar profile, ABCL688 and 386 to come forward. And I believe, over time, we're going to be judged on the differentiation of the platform as seen in the assets as well as perception that we are taking that capital and that capability and directing it to bets that are going to have high return on investment. And we're feeling really good about those first 3 programs and maybe another one coming behind it.

Got it. Let's pivot to 635. I mean, obviously, NK3R has been validated by small molecule approaches. I guess what gives you confidence an antibody approach could be potentially differentiating?

Sure. So NK3R, I think, is a great example of how we think about selecting programs. So as you mentioned, a lot of validation and now clinical validation with 2 small molecules. Coming into this program, I think our big risk was will an antibody be able to engage and block NK3R in the part of the brain that is responsible for driving the hot flash process we're instigating it, which is called the KNDy neurons in the infundibular nucleus.

We like this program a lot from the beginning because there's a well-established biomarker to test that target engagement in testosterone. And our view is that if we can get there and get strong blockade of NK3R, then we should be able to get efficacy that is at least comparable to what the small molecules have seen and perhaps even better.

So our differentiation thesis is an antibody that has at least comparable efficacy, that has better convenience through a once-monthly subcutaneous injection and importantly, that does not have the safety liabilities that exist with the small molecules.

And in particular, both molecules have a warning for liver, liver enzymes, the requirement for liver monitoring. And the first product that was launched, which is VEOZAH, post launch has gotten a black box warning for liver injury. So we believe that, that is not because of an on-target effect, but rather metabolism of the small molecules and an antibody, obviously, will not have that. So we've got a real shot of having a cleaner safety profile, better convenience and at least better efficacy and perhaps a scientific case that could lend itself to better efficacy.

Just for a minute, just parity with efficacy here. I mean, how do you expect prescribers to weigh both of those dynamics? The issues about safety and liver monitoring versus dosing convenience and enhanced efficacy.

Well, I think it's a big deal. So first of all, there's a convenience advantage, both for practitioners and for patients. So in comparing a once-daily oral to a once-monthly subcutaneous injection, we have done some third-party market research.

And that came back for equal efficacy and equal safety that about 55% of women would prefer a once-monthly injectable over a daily oral. And what's interesting is if you listen to the interviews, you see that there's a subset of patients that strongly prefer the injectable.

It's like a no-brainer. There's also a subsection that do not want an injectable, they want oral. So both are true. But on average, there's a preponderance of people that would prefer the injectable, and that preference goes up for anyone that has any experience with it.

From a practitioner perspective, both small molecule products require liver monitoring. So if you don't want an injectable, then you don't get off the hook because you still need to go for blood draws and liver monitoring.

And for VEOZAH, that liver monitoring is quite intense. It's monthly in the beginning and then a bit less frequent later on. So a product that is more convenient for the physician to administer a product that is more convenient to take for the patient and one that doesn't have the same safety considerations, we think will be highly attractive.

And in a market that gets developed by small molecules, being the only injectable is a great place to be because we expect that there's at least 2 small molecules now, and there may well be competition in that part of it as well moving forward.

Help us frame the third quarter Phase II readout. What levels of efficacy? And then what do you need to see on safety to help confirm that both are indeed differentiated?

Yes. Great question. So I think it was like 2 days ago, we had our earnings call, and we released some of the interim data from the Phase I study. The important take-home points there were, so far, we see a very clean safety profile, which is what we expected.

In monitoring liver enzymes at all doses out 12 weeks, we see no indication of liver signal. And most importantly, we saw that target engagement in the infundibular nucleus as measured by testosterone reduction was superior at doses that are compatible with our PPP as compared to approved small molecules.

So we have deeper testosterone suppression and that testosterone suppression sustained through the entire dosing period of a month versus transient suppression that happens only briefly and recovers to baseline in 24 hours for the small molecules.

So already, we have a good indication that we're going to see a good safety profile that will have the dosing profile that we want. And the last remaining question is, does the target engagement as measured by testosterone correlate with efficacy in the same way that, that has correlated with small molecules.

If that is true, then we feel strongly that we're going to have a drug, but we still need to get that readout. And for us, success is equal efficacy or comparable efficacy with what they've seen in the small molecules. That's roughly a 22% reduction relative to placebo on the frequency measure. And with that, we think we have something that could easily be a blockbuster product. In the upside, we might see that we have better efficacy, and then we'll open 2 bottles of champagne instead of 1.

We'll root for you there. Let's just briefly turn to 575 in the time we have left. But given all the growing interest in the OX40 ligand, where do you believe 575 can stand apart?

Yes. So 575, first, I'll say it's somewhat off brand for AbCellera. So it's a molecule that we got through a historic partnership with EQRx. The investment thesis for ABCL575 was that we believed at the time that the OX40 ligand class could be a huge class and that a molecule that was a terrific molecule, potent and suitable for less frequent dosing would be in high demand as the leading molecules, amlitelimab and rocatinlimab from Sanofi and Amgen needed towards their final studies.

I'd say what has happened is the efficacy of those readouts as well as the occurrence of Kaposi sarcoma, has taken the shine off of the class in atopic dermatitis. So our strategy was always to move that forward and then look for a partner.

We're going to read that molecule out at the end of the year. I think it's going to be as built. It's going to look like a terrific molecule suitable for every 6-month dosing. I think at this point, the prospects for partnering in atopic dermatitis are diminished.

So if we don't find a good opportunity, we'll hold on to it, but we don't have plans to invest further. And my intuition is that the OX40/OX40 ligand class is going to come back around, but it may come back around in a different indication or in combination.

And we're going to keep our head up and look for opportunities. But at this point, we are much more excited about ABCL635 and much more excited about the 2 molecules that we haven't yet disclosed, ABCL688 and 386 that are moving into the clinic and are much more on brand in terms of trying to get into not crowded spaces with compelling opportunities for unmet need by using an advantage in our technology.

Just real briefly, when you think about 575, is there anything about the readout that maybe doesn't necessarily help that program, but overall helps build that idea that your platform is distinguished?

I think that ABCL635 very much does that. So it's a potent antagonist of a GPCR target. That's a strength of the company. ABCL688 will do that. ABCL386 will do that. OX40 ligand, in my view, is not a particularly difficult target.

You don't need AbCellera to make a great antibody for it. So I don't know if there's a lot of read-through on ABCL575 to the rest of the platform. I do think if you had a baseball card with stats, it may well be the best OX40 ligand antibody out there.

But does that really matter, is an open question. So we do think a lot about portfolio selection and the objective is by the end of 2027, if we get the right data readout, we could have 635 in late-stage studies, 688 disclosed and moving into patient populations, 386 there, maybe even another one.

And when you look at those programs, my belief is that you will say, yes, I understand there is real differentiation in that platform. And management has done a great job of picking opportunities that make a lot of sense, and we're excited about all of those programs. But that's going to take some time to play out.

Makes sense. All right. In the time we have left, what can you tell us about 688 and 386?

We've said very little. For 688, we have said that it's from the GPCR9 channel platform, and that has been a central strength of the company. And we've said that it's a myriad of autoimmunity. For 386, we've always said it's in oncology.

So we're not saying much, and I am sympathetic to investors that want to know more about the pipeline, but we have to weigh that against what has become an incredibly competitive world. And we believe that it is in the best interest of the company and shareholders to hold our cards as close as we can until the very last moment.

Now that we control manufacturing, we don't even need to file patents until we get close to the clinic. And we are, I think, routinely going to be trying to fly under the radar as long as possible so that we get a really substantial lead in moving programs that we have conviction in. So not much, unfortunately, but it's coming.

Fair enough. Looking forward to these next disclosures. Thank you so much, Carl, for joining.

All right. Thanks so much for having me.

Good afternoon, and welcome to AbCellera's Q1 2026 Business Update Conference Call. My name is Ben, and I will facilitate the audio portion of today's interactive broadcast. [Operator Instructions] At this time, I would like to turn the call over to Tryn Stimart, AbCellera's Chief Legal and Compliance Officer. You may proceed.

Thank you. Hello, everyone. Thank you for joining us for AbCellera's First Quarter 2026 Earnings Call. I'm Tryn Stimart, AbCellera's Chief Legal and Compliance Officer. Dr. Carl Hansen, AbCellera's President and CEO; Dr. Sarah Noonberg, AbCellera's Chief Medical Officer; and Andrew Booth, AbCellera's Chief Financial Officer, are speaking on today's call.

During this call, we may make statements about our strategic priorities and financial outlook based on our current expectations and in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our statements are subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from those described. Please review the Risk Factors section of our most recent Form 10-K and subsequent 10-Q filings with the SEC for a more detailed discussion of these risks.

AbCellera assumes no obligation to update any forward-looking statements to reflect events or circumstances after today's date. Our presentation today, our earnings press release and our SEC filings are available on our Investor Relations website. The information we provide about our pipeline is intended for the investment community and is not promotional. As we transition to our prepared remarks, please note that this call is being recorded and will be available for replay on our Investor Relations website and that all dollars referred to during the call are U.S. dollars. After our prepared remarks, we will open the lines for question and answers.

Now I turn the call over to Carl.

Thanks, Tryn, and thank you, everyone, for joining us today. 2026 has the potential to be a big year for AbCellera. We started the year in a strong financial position with our platform and large infrastructure projects substantially complete and with our internal pipeline set up for multiple catalysts over the next 24 months. Our key priorities for the year include delivering top line data readouts for ABCL635 and ABCL575, advancing ABCL688 and ABCL386 through IND-enabling activities and adding at least one new development candidate to our pipeline.

In January, on the strength of early biomarker data and safety data, we announced that our lead program, ABCL635, had moved into Phase II testing. By far, the most important data readout in 2026 will be the top line readout of this study, which is anticipated in Q3. On today's call, we are excited to present interim Phase I data for this program. As a reminder, ABCL635 is a potent antagonists of NK3R, a GPCR target that has been clinically validated for the treatment of vasomotor symptoms, also known as hot flashes.

It is the first GPCR-targeting antibody from our platform to advance into clinical testing and is being developed as a potential first-in-class antibody medicine for the nonhormonal treatment of moderate to severe hot flashes associated with menopause. We believe ABCL635 has potential to address a large need and market opportunity in women's health. For most women, hot flashes are the most problematic symptoms of menopause. They can be highly disruptive to sleep, to work and to family life and present a significant burden that persists for a median of over 4 years.

At any given time, it is estimated that more than 12 million women in the U.S. experience moderate to severe VMS, of which more than 6 million will seek treatment. Menopause hormone therapy, which is an effective treatment and currently the standard of care, is unsuitable for at least an estimated 20% of these women because of contraindications, tolerability and other factors. As a result, we believe there are over 1 million women in the U.S. who could benefit from safe and effective nonhormonal treatments.

Assuming only price parity with approved small molecule NK3R antagonist, we estimate the total addressable U.S. market for non-hormonal VMS treatments to be at least $6 billion annually. From this, we believe there is upside potential in pricing as well as in broader use by patients who experience VMS caused by cancer treatments that reduce hormone levels. This includes patient populations in breast, ovarian and prostate cancers. ABCL635 aims to provide a treatment option that has efficacy comparable to small molecules, a differentiated safety profile without the need for liver enzyme monitoring and an advantage in dosing convenience with once-monthly subcutaneous self-injection.

And now I'll ask Sarah to present details about the program and our interim Phase I results. Sarah?

Thank you, Carl. I'll now discuss the Phase I data that led us to advance ABCL635 into Phase II development. The Phase I first-in-human trial was a randomized, double-blind, placebo-controlled 2-part study designed to evaluate the safety, pharmacokinetics and pharmacodynamics of ABCL635 in healthy volunteers.

In Part A, single ascending doses of ABCL635 or placebo were evaluated in 40 healthy men and postmenopausal women divided into 5 cohorts. Each cohort contained 8 participants, 6 randomized to ABCL635 and 2 randomized to placebo, and each cohort included both men and women. Participants were administered a single subcutaneous dose of study drugs ranging from 30 milligrams to 900 milligrams and followed for approximately 20 weeks. The unblinded data from the single ascending dose portion is available and will be discussed today.

In Part B, multiple ascending doses of ABCL635 or placebo were evaluated in 16 postmenopausal women. Participants received monthly doses of 300 milligrams or 600 milligrams every month for 3 months and then followed for 20 weeks after the final dose. Data from the multiple ascending dose cohorts are still blinded as the final follow-up visits are still ongoing.

This slide outlines key demographic characteristics of our study population in the single ascending dose group. Of the 40 healthy participants, there were 30 participants across 5 escalating dose cohorts in the total ABCL635 group and 10 participants in the pooled placebo group. The study targeted healthy adults between the ages of 40 and 65 with a median age in the mid-50s across treatment and placebo groups.

We included both men and postmenopausal women in the study. And while the total ABCL635 population had a greater percentage of women and the pooled placebo group had a greater percentage of men, it is important to note that every individual cohort included at least 2 male participants treated with ABCL635, which is important for evaluating pharmacodynamic endpoints. The vast majority of participants across all cohorts were Caucasian.

Baseline body mass index or BMI was consistent across most groups with the exception of the 900-milligram group, where we observed a lower median weight and accordingly, a lower BMI. We don't believe this difference had a meaningful impact on the study's overall conclusion. In terms of safety, across all cohorts, treatment with ABCL635 was generally well tolerated. To date, there have been no reports of serious adverse events, severe adverse events or adverse events leading to discontinuation.

And notably, we have observed no adverse events of liver toxicity, which is an important differentiator for this program. The overall incidence of any adverse event occurring in the study was 50% in both the total ABCL635 treatment group as well as the pooled placebo group, and the vast majority of reported adverse events were grade 1. The table displays all adverse events reported in at least 2 participants over the study period regardless of relationship to study drug.

The only potential signal identified was self-limiting headache, specifically clustered in the 900-milligram cohort. These events were generally mild in severity, typically occurred within the first 1 to 2 days post administration and resolved without complication. It is noteworthy that there were no adverse events of headache reported in the 600-milligram cohort. Injection site-related adverse events were infrequent across both treatment groups and gastrointestinal symptoms such as diarrhea occurred at low frequencies and showed no clear dose dependency or increase over placebo.

In addition, a blinded safety review of the ongoing multiple ascending dose portion of the study suggests no new safety signals. As with the single ascending dose portion, to date, there have been no reports of serious adverse events, severe adverse events, adverse events leading to discontinuation or liver-related adverse events. Looking a bit closer at liver-related safety. This slide displays liver function laboratory tests over time following treatment with escalating doses of ABCL635 in the single ascending dose portion of the study.

Overall, mean AST, ALT and bilirubin values remained stable following administration of ABCL635 with no dose-dependent findings. The dotted lines on each graph represent the mean upper limit of normal, so these values are very reassuring as our blinded reviews of liver function tests in the multiple ascending dose portion of the study. Switching gears to pharmacokinetic data, we see that ABCL635 exhibited favorable linear pharmacokinetics across doses with overall low variability.

As illustrated in the left panel, the systemic exposure of ABCL635 is approximately dose proportional, providing a predictable profile for dose selection in future studies. The estimated half-life of 635 is approximately 24 days, which we believe supports a monthly dosing schedule. The right panel displays the data from our multiple ascending dose portion of the study with 300 milligrams administered every 4 weeks. The profile confirms that ABCL635 behaves consistently upon repeating doses and analysis of our 600-milligram repeat dose cohort is currently underway. While immunogenicity assays have not yet been run, the overall PK profile and general consistency in observed clearing rates is reassuring.

Before moving into Phase I data on pharmacokinetics, it is worth reviewing the biology of NK3R, particularly in the KNDy neurons located in the hypothalamus. In addition to being centrally involved in the physiology of VMS, KNDy neurons are centrally involved in the regulation of the sex hormone through their effect on pulsatile GnRH secretion. GnRH then acts on the pituitary to release FSH and LH, which then stimulate estrogen and testosterone release from gonadal tissues.

These KNDy neuron functions are mediated by neurokinin B binding to the NK3 receptor. Therefore, the ability to block NKB/NK3 receptor signaling can be measured by evaluating the downstream effects of blocking GnRH release, namely circulating levels of estrogen or testosterone. While measuring testosterone levels in postmenopausal women is challenging due to low and variable levels within and between individuals, measuring testosterone levels in men provides a more stable surrogate marker to evaluate NK3R target engagement of KNDy neurons.

Use of testosterone levels in men was previously validated as a biomarker of NK3R target engagement in the early development of the oral small molecule fezolinetant as part of Phase I studies. The figure on the right, adapted from the 2016 paper shows dose-dependent testosterone suppression following a single administration of fezolinetant at doses ranging from 12 milligrams to 180 milligrams. This data provides a useful benchmark of NK3R target engagement and along with subsequent Phase II studies allows us to evaluate how doses associated with different degrees of NK3R target engagement have translated into efficacy on VMS outcomes.

So the enrollment of men into our single ascending dose study was important for us to address a key scientific question of whether an antibody could access NK3R in the hypothalamus and have an analogous effect on serum testosterone suppression. Importantly, we went into the study with the belief that the region of the hypothalamus where the KNDy neurons are predominantly located, namely the infundibular nucleus, was not fully behind the typical blood-brain barrier, consistent with the function of KNDy neurons in sensing hormone levels from the systemic circulation.

We have seen favorable data in nonhuman primates suggesting that these neurons were accessible to an antibody, but it was important for us to derisk this scientific question early on in clinical studies. With that background, this slide displays testosterone data over time for single doses of ABCL635 on the left as compared with data adapted from the published study of fezolinetant on the right. Data in both figures have been transformed to display the placebo-adjusted percent change in testosterone from baseline. This is particularly valuable for the fezolinetant data given the natural diurnal changes in testosterone levels that occurred during the course of a 24-hour period.

As seen on the left panel, a single dose of ABCL635 resulted in sustained dose-dependent testosterone suppression in men over a 4-week period with ultimate recovery to baseline by 8 to 12 weeks. By comparison, a single dose of fezolinetant resulted in transient dose-dependent suppression of testosterone over a period of hours with recovery to baseline within 24 hours. It's noteworthy that the approved dose of fezolinetant 45 milligrams was associated with a transient decrease of testosterone to a maximum of 50% of baseline values over several hours.

By contrast, doses of 300, 600 and 900 milligrams of ABCL635 were associated with sustained reductions of testosterone levels of between 50% to more than 75% for several weeks. Consistent with these findings of NK3R antagonism in controlling the hypothalamic pituitary gonadal axis of testosterone, ABCL635 demonstrated dose-dependent suppression of the pituitary hormones, FSH and LH with clear effects at 300, 600 and 900 milligrams. Based on these pharmacodynamic data, we feel confident that ABCL635 is able to reach the KNDy neurons in the infundibular nucleus, and we have addressed an important scientific risk for this program.

So in conclusion, the unblinded interim data from the single ascending dose cohort demonstrated that ABCL635 has a favorable tolerability profile, a PK profile that supports monthly subcutaneous dosing and strong and sustained target engagement that meets or exceeds levels previously published for the approved small molecule fezolinetant. With these data, we moved quickly to initiate Phase II trials in January of this year. We selected a 600-milligram subcutaneous dose administered once because we believe it best approximates exposures of 300 milligrams at steady-state dosing and could be a feasible loading dose to initiate therapy and potentially maximize early effects on VMS.

Our efforts are now focused on executing on the Phase II portion of the study in order to evaluate the efficacy of ABCL635 on the frequency and severity of VMS, which are the same endpoints we would expect to use in late-stage clinical development. The study is a randomized, double-blind, placebo-controlled multicenter study of approximately 80 patients with moderate to severe VMS. Overall eligibility criteria were designed to be comparable to what has been published for the approved small molecules during Phase III testing.

Participants are randomized 1:1 to receive a single dose of ABCL635 at 600 milligrams or a matched placebo. The primary efficacy endpoint is at 4 weeks, although patients will be followed for an additional 8 weeks to evaluate the relationship between drug concentrations and efficacy and to facilitate building a PK/PD model. Following the initial 12-week placebo-controlled treatment period, all participants will have the option to enter an open-label extension where they will receive a 600-milligram dose.

The study is enrolling well, and we are currently on track to release top line efficacy and safety data in Q3 of this year. Following that announcement, we intend to present additional data at upcoming medical conferences. We believe success in the Phase II portion of this study would be highly derisking for the program. So as a result, we have already begun planning for next steps, which would include a late-stage clinical development program for ABCL635 in treating moderate to severe VMS associated with menopause as well as additional studies to evaluate the potential for ABCL635 to improve VMS associated with common breast cancer and prostate cancer treatments.

I'll now pass the presentation back to Carl for highlights about our broader pipeline and upcoming catalysts.

Thank you, Sarah. Obviously, we are more than pleased with the Phase I data for ABCL635, and we look forward to top line results for the ongoing Phase II study, which remains on track for Q3. Turning to the broader portfolio. The top line Phase I readout for our second clinical program, ABCL575, is expected in Q4 of this year. As previously discussed, ABCL575 is a potential best-in-class OX40 ligand antagonist.

From the outset, our strategy has been only to complete Phase I studies prior to partnering it. At present, we have no plans to develop it past Phase I. Beyond ABCL635 and ABCL575, we are on track to have up to 3 additional clinical stage programs by the end of 2027. This includes our 2 undisclosed programs, ABCL688 and ABCL386, both of which we believe are compelling opportunities in large markets. We expect both programs will start clinical development in Phase I/II studies with a clear path to achieving early proof of concept in patients. We'll disclose more information on these programs as they enter clinical studies.

And finally, we are working towards selecting our fifth development candidate in the first half of this year. Although we still have work to complete, we are on track to deliver on this goal. And with that, I will hand it over to Andrew to discuss our financials. Andrew?

Thanks, Carl. As Carl pointed out, AbCellera continues to be in a strong liquidity position with approximately $530 million in cash and equivalents and with roughly $125 million in available committed government funding to execute on our strategy. We are continuing to execute on our plans with a focus on internal programs and leveraging our process development and clinical manufacturing investments.

Looking at revenue and expenses. Revenue for the quarter was around $8 million compared to a total revenue of approximately $4 million in the same quarter of 2025, in both periods, consisting mostly of research fees. With respect to research fee revenue and as we have indicated in the past, we expect this to generally trend lower as we focus on our internal pipeline. Our research and development expenses for the quarter were approximately $47 million, approximately $4 million more than last year, and this expense reflects the focus of investment in our internal programs.

In sales, general and administration, expenses were approximately $12 million compared to roughly $19 million last year. The greater than 35% decrease in SG&A expenses relates to the conclusion of our intellectual property litigation and to changes in teams following the focus of our internal pipeline. Looking at earnings, we are reporting a net loss of roughly $43 million for the first quarter of 2026 compared to a loss of about $46 million a year earlier. In terms of earnings per share, this result works out to a loss of $0.14 per share on a basic and diluted basis.

Turning to cash. Operating activities for the first quarter used approximately $34 million in cash and equivalents. Excluding marketable securities and all other investment activities, it amounted to only $3 million in the quarter. This is consistent with the substantial completion of our large investments in facilities and manufacturing capabilities that finished in 2025. As a part of our treasury strategy, we have $428 million invested in short-term marketable securities, and our investment activities for the quarter included a $23 million investment in these holdings.

Altogether, we finished the quarter with $531 million of cash, cash equivalents and marketable securities, a $30 million decrease in the cash -- in cash for the first quarter of 2026. As a reminder, we have received commitments for funding for the advancement of our internal pipeline from the Government of Canada's Strategic Innovation Fund and the Government of British Columbia. This available capital does not show up on our balance sheet.

And with over $530 million in cash and equivalents and the unused portion of our secured government funding, we have approximately $655 million in available liquidity to continue to execute on our strategy. In addition, we have further available liquidity from our ownership of another Vancouver lab-based lab and office building as well as our GMP facility. With respect to the overall company expenditures, our capital needs are very manageable. We continue to believe that we have sufficient liquidity to fund at least the next 3 years of pipeline investments.

And with that, we'll be happy to take any questions. Operator?

[Operator Instructions] Your first question comes from the line of Stephen Willey with Stifel.

Just curious as to -- as you look at the level of testosterone suppression you're able to achieve with both the 300 and 600 mg doses. I know you talked about maybe there being a loading dose strategy that could be pursued. But I guess I'm just interested in now that you've seen the testosterone suppression and I guess what you know about the testosterone as a pharmacodynamic marker in terms of what we've seen from some of the small molecule antagonists, what is your opinion as to whether or not you think that those drugs are leaving efficacy on the table? And do you think that a rationale for better efficacy could be potentially displayed in the 4-week VMS severity and frequency data?

Great question, Steve. Carl here. So first, I want to highlight that this study is really focused on evaluating target engagement on NK3R in the infundibular nucleus. And so we think that the biomarker reading reports on that directly, but it is not a direct report on efficacy. So speculating on what the ultimate efficacy will be, it's difficult to resist that, but that's exactly what we're running the Phase II study for and what we're going to know in Q3.

Furthermore, our view, our base TPP and our commercial assessment is that what is really a winning product and potentially a blockbuster would be a product that has efficacy that is comparable or equal to the small molecules, a cleaner safety profile without liver monitoring and a more convenient once-monthly subcutaneous injection. And so from that perspective, that's the bar. If we see that or something that is -- that supports that in Q3, we are celebrating.

We do think that there's a strong scientific case based on the target engagement that we've seen that we might do better, but there's still science that needs to be crossed. And I don't want to get in front of that because that's precisely why we're doing the study that reads out in Q3.

All right. Understood. And then maybe just a quick follow-up. As you think about what the next development step for 635 might be, I know you're talking about this being "late-stage" development. But do you feel like you will have done a sufficient amount of dose optimization work to potentially move directly into a Phase III study in 2027?

Stephen, this is Sarah. I think we will take a look at that proof-of-concept Phase II readout. And part of the reason that we're following subjects for 12 weeks is that we really can build a robust PK/PD model, looking at efficacy over time as drug concentrations continue to fall. And that will give us a good sense of how these drug concentrations relate to efficacy.

We believe with that data in hand and with a clear validated mechanism of action, we have a great position to stand on to engage regulators with the late-stage development programs. It may be that regulators may want us to test an additional dose in Phase III, which I don't think we would be completely averse to, although I doubt that we're going to need to do that with the data at hand, but that will be a regulatory discussion.

Your next question comes from the line of Evan Seigerman with BMO Capital Markets.

Two for me. One, the testosterone data you shared is obviously very strong. Help us contextualize how this could translate into benefit in patients with VMS. And you had mentioned potentially expanding indications beyond VMS into -- VMS into oncology. How should we think about that potential opportunity?

Thanks, Kevin. Pardon me, Evan, I will -- this is Carl here. I'll start with the first question, and then I'll hand it off to Sarah. Your question is similar to Steve's. So if you look at the published clinical development data from fezolinetant, there's pretty good data to make a correlation between target engagement as measured by suppression of testosterone levels and efficacy. And so that is data that we've been looking at.

And it's one of the reasons we think there's a strong case for increased target engagement, giving better efficacy. The caveat on that is that, that -- those experiments are done with small molecules. And so the correlation that is seen with small molecules may or may not translate to an antibody. And that's particularly the case because there is NK3R expressed in another part of the brain that is relevant. That's the preoptic nucleus, where we don't have a direct read on target engagement.

And so while we are very encouraged and we believe we are hitting NK3R on the critical neurons, which are the KNDy neurons, there is still scientific risk to cross. And that's -- as I said to Steve, that's why we're running the Phase II. If that data comes in the way that we would like, then I feel the program is highly derisked and then we would be moving quickly to develop further. And I think that's the second part of your question that I'll hand off to Sarah.

So next steps from here in addition to moving into late-stage development in VMS associated with menopause, we also believe there's considerable upside and value for patients in treating induced menopause that's associated with various cancer treatments. So for breast cancer, this would be treatment with tamoxifen or aromatase inhibitors or oopherectomy where you have a chemically or surgically induced state of menopause, which can give rise to particularly severe VMS symptoms.

In prostate cancer, treatment with androgen deprivation therapy and really androgen receptor antagonist and other therapies that decrease hormonal levels similarly give rise to the same symptoms of hot flash. So we believe and the oral small molecules have also begun to evaluate this further as well that there is benefit for patients beyond those associated with naturally occurring menopause.

Your next question comes from the line of Kripa Devarakonda with Truist Securities.

Congratulations on the data. A couple of questions from me. One, the Phase II dose of 600 mg once was -- you mentioned that it was selected because it approximates the predicted Cmax at steady state for the 300 mg regimen. Just remind us how you came to that decision. More importantly, is there a risk that the single dose of 600 milligram fails to maintain the testosterone suppression floor at the end of the 4-week window in the Phase II trial? Any risk there?

And the second one is the 600 mg dose seem to have a lower AE rate. Is this simply a case of small cohorts and not to read too much into it? Or could this be -- given what you've seen with the 900-milligram and the 300-milligram group, is this truly somehow a sweet spot for the tolerability profile?

Thanks, Kripa, and I appreciate your question. I think in terms of the durability effects over 4 weeks, both our PK data showing our 24-day half-life as well as the PD data showing sustained target engagement and testosterone suppression. We do believe that 4 weeks is going to be a good time period for being able to evaluate efficacy. Obviously, the results of that Phase II study will tell us conclusively as we're measuring VMS at every week throughout the 12-week period.

So we'll be able to answer that. In terms of the AE rate that you mentioned, I expect that it's small numbers. We didn't see much in the way of safety findings at 600, although the 900-milligram cohort, it's hard to know if this is a real finding. These events of headache, they occurred on day 1 and day 2, which really isn't when you have maximal exposures and often in a Phase I setting, these are individuals that haven't necessarily slept well in a dormitory-like setting, and they're not able to have coffee in the morning.

And so headache is often a common adverse event across different cohorts in studies. It is also worth noting that in the placebo patient with headache, that was also a 900-milligram patient. So it's possible that this is a real safety signal. It's also possible that it's just small numbers. But clearly, our safety at 600 milligrams is very reassuring.

And I'll just add to that, that -- I was just going to add to that, that if you look at the biomarker data, there's the testosterone, the LH and the FSH and all of those show at the 600-milligram dose, we have robust suppression over the full dosing window. And so that is approximately the dose that we would expect in steady state with the 300. And 300 is also one that is easily compatible with a commercially available auto-injector at 2 milliliters. So all of those things together have factored into the decision to take the 600 forward.

Your next question comes from the line of Allison Bratzel with Piper Sandler.

Maybe just a follow-up on some of the earlier questions. Just could you clarify the rationale for capping the multiple ascending dose trial at 600 mg? Was that based on a ceiling effect on target engagement or because of the headaches we saw or just some other reason? And then just on the multiple ascending dose data, I think you indicated that remains blinded. Could you just clarify if we should expect to see any of that data before the Phase II efficacy readout in Q3 or see that concurrently? Or just what's the status on that?

Yes. Thanks, Allison, for the question. In terms of the 600 milligram for the MAD cohort as the top cohort, we selected that mainly because really that starts to approximate very high exposures far beyond what we felt like we would need or even be commercially viable to take forward into late-stage development. This is really to provide a safety window at exposures that we feel are appropriate to take forward and not because of any safety signals. There was no dose-limiting toxicity that we saw across the study. And then in terms of your second question in terms of the -- can you repeat your second question?

Yes. It was just on if we'll see data from the multiple ascending dose portion of the Phase I.

We don't expect to share that. But as I say, we can look at blinded safety data, and we really have just the final safety follow-up visits ongoing. And so we don't expect much to change, although because it is still ongoing, we haven't unblinded. But no, we don't expect to unblind that before the Phase II readout.

Your next question comes from the line of Brendan Smith with TD Cowen.

I guess maybe just to put a pin in this conversation just to make sure I'm understanding, I guess, biologically what the goal is here. Since I guess, looking at the testosterone curves like on Slide 12, you're still getting well over 50% reduction out at 4 weeks on that 600 mg dose. So is it fair to say ultimately the goal is kind of reduce that testosterone and then maintain that lower level at a steady state?

And so the idea being that you wouldn't want to extend that dosing window even longer potentially just to make sure that it stays down there? Or is there actually kind of an optionality moving forward to kind of whether that's 5, 6-plus weeks? Just help us understand kind of the over under on that.

Yes. I think the goal is prolonged, stable target engagement over the course of the dosing period. We believe that based on the PK, that dosing period of every 4 weeks is appropriate. But because we're following patients for an additional 12 weeks or a full 12 weeks after treatment, we will see if efficacy is maintained beyond that 4-week period that would make us think differently about our dosing regimen. But at this point, given the sustained target engagement at 600 and what we believe would be associated with 300 steady state, we think that, that's sufficient for a monthly dosing. But obviously, the Phase II data will tell us a little bit more.

Okay. Got it. And then if I could just quickly follow up for the 2 preclinical assets, 688 and 386, I understand it's still in IND-enabling studies now, but can you -- do you have a sense of if one would come before the other in terms of clinical starts next year? Or are they roughly kind of on the same time frame for '27?

Carl here. They're advancing well. I think we're not prepared yet to make a call as to which one is going to meet the clinic first, but we'll give you an update on that as things progress.

Your next question comes from the line of Debanjana Chatterjee with Jones.

Congrats on the data. So I understand that the MAD portion remains blinded and you cannot speak in detail. However, since those are postmenopausal women with or without VMS, I'm curious if you have been collecting any kind of PRO data from the women either in the SAD or the MAD. And if you could speak to any trends of benefit on VMS symptoms that you are seeing?

Although we are treating postmenopausal women and some of them do have VMS, we don't collect efficacy in the multiple ascending dose portion. We don't have the same eligibility criteria, and we certainly are not implementing the diaries that we have saved for Phase II, and we expect a very robust answer from that Phase II in Q3.

And I have another follow. So in the MAD data you have shared for the 300-milligram dose every 4 weeks, we can see some drug accumulation effect over time. So for the 600 mg, as we think about chronic dosing, what kind of PD impact are you expecting? And do you think that there is even room for higher PD engagement? And does it have any implications for the risk-benefit ratio when we think about chronic dosing?

I would say that the 600, 300 and 900 all show very robust target engagement. And with a small number of participants tested, it's really hard to say that there is further target engagement that we are likely to see. When we compare, particularly over the course of many weeks compared to 45 milligrams of fezolinetant, we feel very comfortable that our degree of target engagement, at least in the KNDy neurons, the infundibular nucleus, that is going to be sufficient.

We don't necessarily believe that we're going to need to go higher. Clearly, with steady-state dosing, we'll get some higher exposures. So that's also why we're thinking about this loading dose strategy so that we can really be able to treat VMS quickly within the first potentially a week to 2 weeks.

And I'll just add to that. As Sarah mentioned in the prepared remarks, the half-life of the antibody is just under a month. So a monthly dosing at 300 would get an accumulation that starts to approximate what you see in the 600-milligram dose. And that's just, as Sarah just said, starting with the 600-milligram dosing and then continuing with 300 once monthly so that you get to that maximum efficacy right away and then you can hold a steady level through treatment.

Your next question comes from the line of Steven Seedhouse with Cantor.

I wanted to ask about the -- first of all, the placebo group in the comparator VEOZAH testosterone experiment had some transient reduction in testosterone in the 24-hour follow-up. And I think you noted, obviously, that's typical, the diurnal variation that would be expected. So that makes sense. But I'm curious what you saw in the placebo arm of your SAD.

And I just wanted to confirm if it was basically unchanged at steady state. And then also wanted to confirm, are you measuring testosterone given this dynamic at the same time each day at each measurement? Or is it averaged for multiple measures throughout each day? Just want to confirm that protocol as well.

Sure. So to start with your second question, yes, we try to measure testosterone roughly at the same time each day. These are participants that are coming into the clinic rather than housed at the clinic. So it's not exactly, but morning testosterone each visit is what we aim for, and I think what we were able to achieve. In terms of the placebo group, we didn't do serial measurements over 24 hours in the same way. But with an antibody, with that sustained target engagement that we were able to see, we did not see any appreciable effects in the placebo group.

Okay. And I also wanted to ask about the onset of action here with the antibody. So with testosterone basically decreasing throughout the first week post treatment, was that expected, number one? Do you think that's a function of the bioavailability in -- at the KNDy neurons in the hypothalamus or something else? And what is this target engagement sort of kinetic that you're seeing compared to VEOZAH, which the nadir was like 8 hours post dosing sort of tell you about what's going on with the pharmacology here.

Yes. I would say the main difference is just the time it takes to get to Cmax with a subcutaneously administered antibody versus an oral small molecule where the Cmax occurs relatively quickly. So it is going to take some time for absorption and to reach the site of interest at the peak level. And I think that's really the only difference. I think the fezolinetant data shows that the difference between PK and PD is very quick.

There are no further questions at this time. I will now hand the call over to Carl Hansen for closing remarks. Carl?

Thank you, everyone, for joining the call today. We are excited about the progress, and we look forward to updating you in the future. Thanks so much.

This concludes today's call. Thank you for attending. You may now disconnect.

Great. Thank you, everyone, for attending our Virtual Healthcare Forum. I'm Scott Schoenhaus, health care tech analyst here at KeyBanc. Wrapping it up for today, last fireside chat, Martin Hogan, who is the Senior Director of Strategic Finance and Investor Relations at AbCellera.

Martin, we have probably a lot of new investors to your story, and there's a lot of heightened interest and new interest on tech-enabled drug discovery. So maybe give a brief background on AbCellera and its platform, where you guys have been over the last several years and where you are today?

Absolutely. Well, first of all, Scott, thanks so much for hosting us. Pleasure to be at your forum again. I will be making some forward-looking statements, so please consult our SEC filings for risk factors and other notes around that.

Yes, we've been on a really exciting journey that now stretches for about 13 years, where for the first -- easily for the first decade, we made significant technology investments, building out capabilities to go from target nomination to now manufacturing drug product for antibody-based therapeutics with a very heavy focus initially around several core technologies where we would say the -- what allowed us to get going on this journey was technological differentiation in drug discovery and the investments that we've made since then and the experience that we've built in over 100 drug discovery programs have allowed us to build an integrated capability that is capable of pursuing the most difficult targets that one might hope to reach with an antibody-based therapeutic and now is yielding not just downstream stakes in programs that we have run in the past for partners, but yielding a pipeline of internal programs that not that long ago, advanced the first drug into the Phase II portion of its trial, effectively making us an integrated mid- to late-stage biotech company.

Great. So I want to talk about your pipeline. You have multiple molecules in the IND-enabling or early clinical stages. Maybe can you expand on how you plan on allocating resources among these assets, either to further develop them or not to?

Yes, absolutely. So there's 2 interesting angles here. And maybe I'll start with the first one, which is how do we choose, how do we prioritize target ideas and programs in our pipeline. Really, we're applying 4 criteria to each idea and program.

The first one is, do we understand the science and is the science significantly derisked, right? By that, we mean, do we believe, do we have conviction that really the challenge that is left to be solved is finding the antibody or the antibody-based construct that if you find it and it engages the target the way that you want it, that you are very likely to get the downstream therapeutic effect that you're going after, right?

So avoiding, if you will, a lot of biology risk where you're trying to figure out whether something is or isn't going to work. So we're trying to stay away from that and go after targets where that is largely derisked, and it's never completely but to a good degree, down to a technological challenge, which we feel we're in a good position to address. That's number one.

Number two is, of course, is there a significant unmet medical need for patients and is there a commensurate commercial opportunity? So are payers prepared to cover the drugs adequately that we might develop. The third one is, do we have a competitive advantage, like a clear opportunity to differentiate with our drug in -- amongst the other therapies that are looking to help patients suffering from the same condition, right? So that can be competition in class. It can be competition outside the class.

And it's a question not just of existing new therapies, but also ones that are upcoming, right? So this is another way of saying with our drugs, we are looking for opportunities to be first-in-class for treating them and to maintain that advantage for a while.

And then finally, the fourth question is, do we have a good development path for our drug if when we find a candidate that allows us with our capabilities and resources to take that drug forward through clinical trials to a point where it can be significantly derisked on our own resources, where we can then take it forward ourselves or where we could partner it. So do we know what the clinical trials need to look like? Can we afford them? Do we have the capabilities to run them?

And ideally, do they allow us to derisk or fail, if fail, we must early on in a Phase I/II or in a Phase IIa rather than having to run very expensive Phase III trial only to find out that something isn't going to work, right? So those are the 4 criteria, and that's how we choose what we let enter our pipeline and what we advance and invest behind or maybe deprioritize.

What that has led us to is most importantly, our lead program, which I'm sure we'll talk about ABCL635, scores really highly on all those 4 criteria and has started its derisking Phase II trial at the end of last year, and we're looking to read that out at the end of the third quarter this year. And that program is designed to tell us at that point whether we are very likely to have our first internally developed drug on our hands or not, right?

And then we've got ABCL575, which we can also talk about a program also in a Phase I trial reading out in Q4 little bit less on the differentiation. We can talk more about that, if you like. But then the programs behind it, 2 in IND-enabling activities and then about 20 in earlier stages generally score high on all those 4 criteria.

Great. So let's now dive into these assets and these molecules in your pipeline. So let's start with 635, the first-in-class nonhormonal treatment for hot flashes. You just talked about an expected Phase II readout in the third quarter here. Maybe talk about what you saw in Phase I that gave you the confidence to go to Phase II and what we should be looking for in this readout -- upcoming readout?

Absolutely. So let's maybe start with what is the target product profile here for this drug. So like you said, it is a nonhormonal treatment for vasomotor symptoms. First indication is associated with menopause. And effectively, what the drug does is it rebalances the signaling to the thermal regulatory core of the body that comes sort of out of whack when women go through menopause because of the drop in hormones, specifically estrogen.

So that's what the drug does. And the profile -- and so far, for women who are either contraindicated or can't tolerate the first-line treatment, which is a really good treatment when you can get it, which is menopause hormone therapy. So if you're ineligible or you can't tolerate it until just over a year ago, you were kind of left without any good options for treating your moderate-to-severe hot flashes, which frankly, are a debilitating condition, right?

I'd like they're defined as you need to stop what you're doing to work your way through the hot flash. So important unmet need. In the past 1.5 years, 2 small molecules have entered the market that do a good job at -- like a reasonably good job at reducing both the frequency and the severity of those hot flashes.

And in terms of our target product profile, we are looking to do at least as well and expecting to do as well in terms of reducing frequency and severity, which is a major improvement for women suffering that condition. However, those small molecules have some side effects, so safety and tolerability challenges that ideally, you would avoid, right?

Both of them have liver toxicities to different degrees. That's not a great trade-off. And one of them also induces somnolence sleepiness, drowsiness. And so you can only really take it at night. And that's not really something you want to have. That's an off-target effect.

By virtue of being an antibody, we are looking to avoid both of those things, right? And the target is not expressed in the liver and the antibody is integrated in the liver. So the expectation is that we're clean on all liver signals. And because we're specifically hitting our target NK3R, not NK1R, which is known to be associated with sleepiness, drowsiness, we should also be clean there.

So the profile here is comparable efficacy with a significantly better clean effectively safety and tolerability profile and with greater convenience, right? Greater convenience by being a monthly...

Injectable, yes.

Auto injectable versus a daily oral as the case for the other 2 treatments, but also greater convenience for prescribing physicians and for patients by not requiring the patient to go on...

Refill...

Liver signal -- refills exactly or liver signal. You need baseline liver testing before you go on the therapy and then you need to go again once you're on the therapy. So we're looking to avoid that treatment. So that's our target product profile.

And Phase I, we're still blinded to the results. But what we do know is that there's been nothing on the safety side that would give us any concern. So everything we know so far is fully consistent on the safety tolerability side. We also know that the -- that what we do know about the pharmacodynamics, so the half-life is consistent with an ability to deliver this drug to patients as a once-a-month single auto-injector, right?

And so the interesting thing that remains to be seen, obviously, we want to see the full data on this. The key thing to be seen is whether indeed we are getting the efficacy that we're looking for. And the Phase II part of the study is designed to give us a clear signal whether we are on track to get at least comparable efficacy to the small molecules.

Makes perfect sense. And I think, partly, you guys have mentioned that 635 could potentially go past menopausal hot flashes. Maybe talk more broadly about how you see applications for this molecule.

Yes, excellent. Thanks for asking that, Scott. Indeed, we're actually quite excited about the additional potential beyond menopause associated hot flashes. Again, those hot flashes arise when in women, estrogen levels drop and in men when testosterone levels drop. That happens for women in menopause. And it happens for men and women when they undergo certain cancer therapies for women, in particular, breast cancer and for men, in particular, prostate cancer, where you effectively have hormone suppression, right, androgen deprivation therapy, for example.

And so when as part of the cancer treatment, the production of those hormones is suppressed, you get the onset of the hot flashes and the mechanism is effectively the same as in menopause-associated hot flashes. And therefore, there's good reason to believe. And in fact, one of the small molecules, at least is already in clinical trials to prove this out. There's very good reason to believe that if the drug works in menopause-associated hot flashes, it is likely to work in hot flashes associated with those cancer treatments as well.

And here, too, those hot flashes are a major unmet medical need. We know from men undergoing prostate cancer treatments that one of the side effects that is most disconcerting is the hot flashes that come along with it.

Let's switch over to 575. So you entered that one into Phase I last year, expect to have a readout by the end of this year. Maybe talk about what early data has shown so far and maybe more of the therapeutic area. Talk about if in case investors are new to 575, what it addresses?

Yes, excellent. So we talked about the 4 criteria under which we evaluate programs. 575 scores highly on 3 of them in terms of derisked signs, unmet medical need, clear development path, it doesn't do so well with respect to differentiation. And that is because it was started not as one of our internal programs, but as a co-development program where explicitly the goal was with the partner to fast follow amlitelimab from Sanofi. So an OX40 ligand blocking antibody that acts quite upstream in an immune cascade that is involved with many significant conditions.

First and foremost, probably atopic dermatitis, but not limited to that, where amlitelimab, for example, has also shown very promising clinical efficacy in certain types of asthma. And there's a long list of additional indications that are involved. So the Phase II data from Sanofi's amlitelimab looked very promising.

And on the back of those, with a partner, we had launched that program with a goal of ideally coming up with a drug that was comparable in terms of efficacy and safety, if not identical, but may be differentiated on a longer dosing profile, right?

And so the data that we had preclinically and what we so far know from the, again, still blinded ongoing Phase I trial is consistent with that profile, right? So we have no reason to believe that we're not going to hit those targets of same efficacy equivalent safety and certainly longer half-life that may translate -- hopefully will translate into an extended dosing interval again for the patient of -- for the convenience of patients and physicians.

Having said that, because it's a fast follower, really, the fate of that molecule will depend on the fate of the class, right? If Sanofi's amlitelimab receives approval at the end of this year, as is expected, that will be positive. And then it's a question of how will the drug actually be used, what is it being approved for. So we're very much with that drug hitch to the fate of the class.

Also, the development in these conditions, including atopic dermatitis, is complex, is expensive, really benefits from prior experience and a strong balance sheet to explore full potential may also benefit from being tested in the clinic in combination with other treatments where combined, you can get a faster onset to efficacy.

And so for those reasons, we believe that we're not the best positioned to take that program forward, if forward, it will go. So our goal here is read out the Phase I, carry out the additional activities that really make it a Phase II-ready asset. And we've been talking to potential partners for a while yet.

So players in the industry know that if they want to have an OX40, OX40 ligand targeting drug in their portfolio, we likely have, if not the best, certainly a very good candidate for that. Those indications are broad enough, large enough that if the class is successful, there's probably room for multiple blockbusters.

So ours could still be among them. But beyond wrapping up the ongoing trial and getting it Phase II ready and finding a partner for it, it's certainly not what we're worried about at the moment. We're really excited about the programs behind it, though, which, again, we're chosen because they scored highly on those 4 criteria. We've shared the names, if you will, of 2 of them, ABCL386 and 688. Both of them with the potential to be first-in-class. 688 might face some in-class competition, but we're still feeling like we've got a super good molecule in -- both in areas of large unmet medical need, 688 in autoimmunity and 386 as our first asset in oncology.

We're playing that a bit close to our chest. We're looking to file INDs or Canadian equivalents early next year, probably first half next year. And either then or when we start our Phase I trials also next year, we would be sharing more about those programs.

I think an underappreciated part of your story or maybe just an unknown part of your story for investors is your manufacturing capabilities that you've built out in the Vancouver area. Maybe talk about that and how it allows you flexibility? Ordinarily, you have to find a time slot. And so maybe talk about the process of how you're able to develop a drug and then manufacture it. And I think it's a big differentiation, obviously, in your story.

Yes. Thanks for bringing that up, Scott. We're super happy that we were in the position that allowed us to make the investment and build out our own clinical manufacturing capability. That, frankly, as far as we know, is largely unheard of. You do not generally find biotech companies that can manufacture their own drug product.

The only reason we were able to do it was, one, having built conviction that it was a good idea in principle, but two, also getting the support from the governments of Canada and British Columbia to make that investment. We probably could not have afforded that on our own.

In fact, we very likely would not have made that investment without the additional support. Having made the investment and having completed the standing up of that team, the building out and qualifying of that facility, we are now manufacturing antibodies in that facility.

And as you rightly pointed out, there's a speed advantage. You're cutting out a bit of time by not having to negotiate with the CDMO and do external technology transfer. That's a nice advantage. With the number of programs that we're looking to bring forward, we may also get an efficiency advantage in terms of certainly lower marginal cost per batch, but the real advantages are twofold.

One is, like you point out, flexibility, right? And flexibility means that if you are manufacturing an antibody and there's a hiccup, you can just immediately pivot remediate the hiccup and move forward straightaway. Whereas with the CDMO, if there's a hiccup and you need to pause, you then need to wait for the next available slot before you can restart, losing valuable time in the process.

The other flexibility piece here is you can do things at risk because your marginal cost is low. You can do things in parallel, right? You would not, as a general rule, advance more than one antibody candidate into CMC activities if you were doing that with a CDMO.

Internally, if you say, hey, here are 2, they both look promising. It's not clear which one is better. Now you can do this and you increase your chances of finding the best possible molecule to do your clinical trials with. So that flexibility we're already finding is hugely beneficial in terms of making sure that you can quickly get the best possible molecule to be the one that start clinical trials with.

Another benefit that wasn't on everybody's radar, I'd say, and that we're happy to talk about is when you're going with a CDMO, you really need to have filed your patent for the sequence that you're transferring before you send that sequence to the CDMO, right? That is particularly true when you're sending it to China, but it is true in general.

You need to have your patent filed. And then you're looking at something like 2-plus years from that moment before you actually start your clinical trial, right? So by keeping the sequence in-house, we effectively gain an extra 2-plus years of patent protection because we now do not need to file our patents until we actually start clinical trials. And that, as you know, could have on a successful drug, a major, major economic benefit.

Yes, that is super interesting. And I definitely that's very underappreciated, Martin. I guess as we're wrapping up here, my last question, maybe focus on the balance sheet, how much cash and equivalents and maybe talk about the Canadian funding that allows you additional capacity here.

Yes, absolutely. So we are sitting at the end of last year, so a few months ago, so it wouldn't have changed much on about $700 million in cash equivalents, marketable securities and committed government funding. And when you look at our operating cash burn, having completed our investments in the facility and in the platform largely last year, we're probably somewhere around $120 million, $130 million in cash -- operating cash usage per year.

So that includes preclinical studies and to a degree, Phase I studies as well. So well capitalized to carry out advancing this pipeline through the clinic into the clinic for several years to come. I think officially, we say for -- best enough for 3-plus years of moving this strategy forward at full steam. The funding from the governments of Canada and British Columbia really is there to in a win-win fashion, make sure that we, as a Canadian biotech company, as an anchor company in Vancouver, British Columbia, can build out a domestic capability to discover and develop drugs.

And so it is fully in line with our strategy and supports explicitly also up to 17 programs through Phase I clinical trials, right? So the -- that capital is not just theoretically available for us. It is there to do exactly the things that we're looking to do under our strategy, right?

Now having said that, the -- if we succeed not beyond our wildest dreams, but if we succeed as in our firm hopes and we successfully advance programs into pivotal trials, we may be creating an opportunity to invite additional investors on board on the back of positive data. But in principle, we're very well capitalized to move forward without needing to deprioritize activities that we know are inherently high value.

Great. We'll wrap it up there. Thank you so much, Martin, for participating in this fireside chat.

Thank you so much, Scott. It was a pleasure to be here.

All right. I think we're going to get started. Welcome back to another session at TD Cowen's 46th Annual Healthcare Conference. It's great to see everybody.

I'm Brendan Smith, one of the tools DX analysts here at TD. And I'm joined on stage today by the Senior Director of Strategic Finance and IR from AbCellera, Martin Hogan. Martin, it's good to see you.

Thank you very much. Thanks so much for having us.

Great. So I know we've got a lot of topics to cover, a lot of questions to kind of sit through. But by any means, if anybody in the audience has questions throughout, feel free to kind of flag me or can send an e-mail at [email protected]. We can work them into conversation too.

So maybe, Martin, let's kind of just first level set the AbCellera of March 2026, right? So the platform has kind of evolved through a few different iterations over its lifespan. But how do you now kind of see the relative value of the company given kind of its transition to more of a biotech-like entity? And help us kind of contextualize the research fees core franchise in the context of where we are today?

Absolutely. I'm super happy to talk about that. I will make some forward-looking statements. Please do look at our SEC filings and risk factors. And with that out of the way, when you look at AbCellera today, really, what you're looking at is a company that spent the past 13-odd years investing cumulatively something like $1 billion to build out an end-to-end capability to discover and develop and now also manufacture as drug product antibody-based therapeutics and specifically in areas that are very difficult to find antibodies against.

So complex membrane, protein targets, ion channels, GPCRs, T cell engagers, multispecifics. So really from the beginning, a company built to push the edge of what's possible in antibody discovery and development. At the start line, that was a technology capability that has been sort of crystallized with upstream, downstream parallel abilities around it and honed really in the fire of having run over 100 drug discovery programs for some of the top players in the industry who often came to us with the most difficult problems that they had and which we solved successfully, as you rightly said, for fees and stakes in the downstream success.

The most valuable thing as excited as we are about the value of that emerging milestone and particularly royalty portfolio in the long run, by far, the most valuable thing that came out of that was the capability of the team and the platform to pursue those targets. And we're finding that the most valuable application of that capability really is against targets that we can identify ourselves and pursue with internal programs.

So as we're sitting here, AbCellera 2026 is a company that has really matured with an incredible platform to move into its own programs and really into later-stage clinical development with our first program having entered Phase II and reading out later in the year.

And perfect segue now. So let's maybe talk about 635, right? So this is ABCL635, kind of lead compound here. You mentioned we have some Phase I/II data expected, I think, in Q3 of this year.

Maybe before we get into expectations for the readout itself, kind of help us level set this mechanism specifically for 635 and why you see it as especially differentiated for VMS, hot flashes relative to kind of the unmet need and some of the other drugs that are out there?

Absolutely. Yes. 635 is definitely worth our time talking about as our lead program. When you look at the lead indication, and I'll say it's the lead indication is hot flashes or vasomotor symptoms, VMS associated with menopause.

In the United States, there are about 12 million women suffering from moderate to severe symptoms, where that's defined as hot flash is so bad that you need to stop what you're doing at the moment to get through the hot flash. So pretty severe interruption to the lives of women. So about 12 million experiencing that, about half of them, and I'd say only half so far, seeking treatment where the first-line treatment and the best treatment, if it works for you, is arguably menopause hormone therapy, right, where I think the awareness that this is an excellent treatment is growing, and we are welcoming that.

Unfortunately, about 12% of women are contraindicated for MHT and about 8% of women go on the therapy and then find that they can't tolerate it. So you're left with one in five women who really is looking for a non-hormonal alternative because the hormones don't work for them. And into that space launched Astellas with their small molecule NK3R inhibitor and Bayer with their dual NK3R/NK1R inhibitor, also small molecules.

We still see that there is a significant unmet medical need even past that because in the case of both of those molecules, there are certain safety and tolerability issues, if you will. And that sort of gave rise to our target product profile in this space, where what we're looking for is an antibody that has a very clean safety and tolerability profile, partly because it's an antibody and partly because it is specific to only engaging NK3 arm. And in addition, we're looking for a more convenient dosing regime.

So instead of a daily oral, having done a market research study with women, we find that roughly half of all women would prefer a monthly auto-injection, given the same safety and efficacy profile as a daily oral. And as we just discussed, we're looking for a better profile on that count.

And interestingly, the subpopulation of that survey that was auto-injector experienced had a 70% preference for auto-injectors. So we believe that we've got a compelling differentiation potential in our profile here, both on safety tolerability as well as on convenience. While we're on convenience, maybe worth adding, both of the small molecules come with liver enzyme monitoring.

And so you can look at that, of course, from the perspective of safety and maybe degree of worry for the patient, but it is also an additional burden on the prescribing physicians having to make sure that the patient goes through the baseline monitoring and then the follow-ups. So on that count alone, we believe we've got a really, really good profile. And that, of course, is in a space that is still very, very much growing.

Great. That really helps level set the conversation on 635. So I know in your earnings call last week, you also mentioned some encouraging early data that you observed in the Phase I portion of the study. What can you kind of tell us about some of those green shoots and ultimately, how they're informing your approach to the Phase II now?

Absolutely. So we are in a Phase I/II study, and we're well down the Phase I portion of that study. Of course, we're looking for safety. And so far, what we know about the safety is looking as clean as we had expected.

And the other piece, besides, of course, the very exciting news that our modeling on PK seem to be spot on. So we're seeing data in humans that matched exactly our expectations. I think the really exciting part that we're getting out of this is a biomarker reading that tells us that we are engaging the target in humans the way both that the Veozah molecule did with respect to the biomarker as well as what we've seen in nonhuman primates. It's a proxy.

It does tell us we're getting engagement on the target that we're hitting. It doesn't retire all the risk to the development yet. That really is up to the Phase II study, but we're now sitting here at a point where the drug is doing what we expected it to do as far as we can tell in Phase I.

Okay. All right. Great. So now maybe looking ahead to the Q3 readout itself. What should we expect from the data in terms of patient numbers, doses tested? You mentioned kind of a subcu formulation at some point and really kind of the clinical endpoint. So help us just kind of level set what realistically we can expect in Q3?

Yes. So in Phase I, we did a SAD/MAD portion, which allowed us to, with confidence, pick a dose for the Phase II portion. In the Phase II, we have 80 patients. So these are -- these participants are women who are expecting -- who are experiencing moderate to severe hot flashes. It is a triple blinded randomized placebo-controlled trial with, I think, a ratio of about 2:1 in terms of drug and placebo receiving participants.

And the -- besides obviously delivering additional comfort on safety, the key thing is that the study is powered to deliver an efficacy signal, right? And the target product profile on efficacy, which we haven't touched on yet, is to get efficacy that is at least on par with what we're seeing from the small molecules. And if we see that and the Phase II readout, again, probably sometime after Labor Day, is designed to -- is designed and powered to deliver that proof point. If we do see that, then we will feel pretty comfortable that we have a drug on our hands.

Got it. So it sounds like comparable efficacy at least potentially differentiated dosing and superior efficacy is kind of the ideal product profile that we're really looking for.

Superior efficacy would, of course, be ideal. There's no question about it. But our expectation and our baseline is that we get comparable efficacy. Both those drugs in terms of the small molecules, they both do work and make a very meaningful difference for women. So if we get the same efficacy, but with a better safety profile and preferred dosing, that's our target product profile, and we feel very comfortable that we've got a potential winner.

And I know also on the Q4 call, you mentioned plans to potentially expand 635 into a few adjacent oncology indications. So help us -- maybe just walk us through kind of the logic from a mechanistic standpoint and what next steps from here will kind of be included in that strategic rollout.

Absolutely. So mechanistically, what the drug is doing is it is binding to the NK3R receptor on KNDy neurons. And in healthy young men and women, those candy neurons get, if you will, activated and simulated by neurokinin, so NKB and downregulated by binding sex hormones.

So in the case of women LH, for example, and in the case of men testosterone. And so you sort of have a scale that's imbalanced with weights on both sides. And what happens in menopause, of course, is that estrogen goes away and the scale sort of tips towards the overactivation side with neurokinin. And what the drug does is it blocks the receptor and sort of removes that signal and it's back in balance.

In the oncology indications, both, for example, in breast cancer, as well as in prostate cancer, in the case of prostate cancer, androgen deprivation therapy, endocrine therapy for breast cancer, you are removing the hormone signal to the KNDy neurons, right?

Like that's what those therapies need to do to deal with the cancer. And so you have the same problem that you have in menopause, right, where the dampening signal to the thermal regulatory core is missing. And so they -- so mechanistically, the drug works exactly the same in dealing the same underlying condition of being -- having imbalanced signaling to the KNDy neurons due to a lack of -- of the sex hormones.

Got you. Okay. So help us now kind of think about the time line for 635. So we have the Phase II data readout in Q3. What's kind of the timing plan for if things look good in Phase II, when do you think you could potentially start a pivotal? And then also when -- what's kind of the plan to initiate some of these oncology indications?

Absolutely. So maybe start with the oncology indications. I think, once we get the readout from the Phase II and if it's positive, then we will move quickly into a Phase II trial on the cancer associated or cancer treatment-associated VMS trials.

And we would move at maximum speed, of course, into a registrational trial for the menopausal VMS indication. The good thing is we don't need to reinvent the wheel on the Phase III trial design. Both the Bayer and the Astellas drug have demonstrated what is required to receive approval. So we'll be very much following in those footsteps, incorporating any learnings that there may be. In terms of timing, you could imagine that we'll be racing in 2027 to make that happen. The trials are not very long, but I think we'll see the detailed plans when we get there.

Overall, and part of the reason why we chose NK3R as a target to go after in this indication to go after, as we try to do for other programs in our internal pipeline is that the -- as long as you've got the right molecule, the development path is clear. It has the potential for early derisking, right? When you think about -- we moved into patients, I think, in the -- around the middle of last year. So in just over a year, we'll have gone through full Phase I/II trials and readouts. And the Phase III trial also is expected to be on the manageable and maybe quicker side than the average trial.

And I imagine some of the answer to my next question will kind of come from based on what the Phase II data looks like. But is the plan now all looks fine or as expected in Phase II that you would carry just a subcu dose into a Phase III? Or would you potentially do an IV and a subcu dose?

The target product profile has always been to say we want -- like we are really aiming for a subcu auto-injector pen, right? And that -- from the convenience angle, that's kind of what we're looking for. That will certainly be the goal for menopausal VMS, whether that's the same or whether an adjustment is needed in the oncology treatment-related indications, I think, remains to be seen.

Okay. All right. Great. So now maybe let's pivot to 575. Let's talk a little bit about it. It is notably competitive space here for the OX40L inhibitor, 575. Help us kind of situate what the AbCellera kind of strategy is for this one now kind of -- and what's really ultimately driving your approach to this drug just in the context of competition from Sanofi and [ Regeneron ]?

Absolutely. I should probably start by saying this is our second molecule in the clinic. It is off strategy for us, right? It meets three out of four criteria that we have for internal programs very nicely. We understand the science and it really is a question of finding the right antibody. We have the capability to develop and derisk early, and there is still a large unmet medical need and commercial opportunity out there.

But there isn't significant potential for differentiation, right? It was launched as a fast follower to amlitelimab in, at the time, collaboration with EQRx, but so don't read -- importantly, don't read from that program through into how we are selecting other programs where we're very much keeping an eye on differentiation. In this case, we do still -- we still see I think as Sanofi does, targeting OX40 ligand as a very promising approach in autoimmunity or immune conditions as an AD and beyond. I think that profile hasn't changed.

Overall, the amlitelimab has proven to be a surprisingly safe drug, considering that in a way, it is an immunosuppressant. So surprisingly self drug, much better profile than some of the other things you'd see in the post-2P setting like JAK inhibitors, for example. And we're still encouraged by the data that we're seeing. Efficacy that doesn't seem to be tailing off yet at 26 weeks, a really clean safety profile.

And in terms of differentiation, there is still some room for our molecule to achieve a prolonged dosing schedule, right, where we don't know yet, like our expectation is that amlitelimab will get approved. We'll see either with a monthly or a quarterly dosing schedule. And based on the half-life extension of our molecule and the data we've seen so far, we should be able to achieve one better. So quarterly, if it's monthly or semiannual, if it's quarterly.

Got it. And still on track for kind of the next data update there by year-end '26.

Data update, exactly data update by year-end. And that's then also sort of the point to which we are looking to take the molecule at least for now, right?

We believe that this is going to be a large exciting space with likely a good number of molecules. So potential to be best-in-class, like amlitelimab in all respects, except for enhanced dosing regime. But there will likely be many drugs. We also see this space as being one that really requires a lot of experience, capacity, muscle firepower in terms of going after the full potential of a drug like this.

And that is -- that would be beyond our capabilities. Others are better positioned to do that. And we're expecting that they are based on the discussions we've had so far, keen to see us check the boxes with the Phase I data before potentially partnering out the molecule to somebody who really is a better owner.

So you are kind of in at least preliminary discussions with some folks who are kind of keeping an eye on that year-end data readout, potentially checking the box and then revisiting a partnership, out-licensing, what have you, maybe early next year. Yes.

Possibly.

Got it. Okay. All right. So then maybe moving to the deeper pipeline a little bit. So -- because you also have a few other assets are also progressing here. So what can you kind of tell us about the target indication kind of just approach for 688 and 386? And really just kind of about the unveiling strategy for each kind of additional pipeline asset now as they approach Phase I studies?

Absolutely. So both of those have the potential to -- both have the potential to be first-in-class. I think with 688, there likely is going to be some antibody-based competition. Let's see, but both are in indications that are hugely exciting. We're not revealing the details, but 688 is in an autoimmune condition and 386 is in an oncology indication.

We'd say that both have commercial potential overall unmet medical need addressing potential that is likely as exciting as 635 is, albeit different. What we are doing, particularly -- and you'll -- to the frustration of a good number of people who follow us, investors and others, we are playing our cards close to our chest, particularly where we're in this space and I told you we're looking for making sure that we're in a space where we've got real differentiation potential.

And so we want to keep that quiet and keep the competition sort of off the trail for as long as possible. So the plan here is at the moment that we would unveil the target and the indication around the time of initiating clinical trials.

All right. I -- are you able to tell us, at least within the autoimmune indication, is this something like -- we've seen some other companies when they're moving into autoimmunity, kind of trying to build out this like pipeline in a product type of approach where it's a mechanism, whether it's FcRn or something else that's applicable broadly to a few different indications. Is this something like that or a little bit more targeted specific for one indication that you have in mind?

Without going too far, there -- as you rightly point out, I think in autoimmunity, many of the mechanisms work in more than or manifest in more than one indication. And that's the case here, too. What -- which of those we pursue, how and when, I think is still part of strategy formulation for us.

Got it. All right. So now maybe kind of contextualize the run rate now. So we've got -- maybe zooming out, we talked about some specific programs. We've talked about upcoming catalysts for you guys.

So we've got Q3 readout with 635, potential expansion to pivotal study oncology indications next year. It sounds like readout in AD by the end of this year with 575 updates into Phase I for the third and fourth asset, too. So what's kind of the expected cadence as you're building out the pipeline, not just this year, but really over the next kind of 2 to 3 years?

And what's kind of guiding your strategy in terms of where you're looking, right, with the platform capabilities. It sounds like you have some options in terms of building these antibodies, but what's kind of the North Star as you're building out more biotech pipeline?

Yes, great question. And this is exciting. It's easy to lose sort of side of the force for the trees, right? When you fast forward a little bit, we're set to designate our fifth development candidate later this year and looking to move that quickly into and through IND-enabling studies so that when we sit here again in a couple of years' time, there's a reasonable chance anyway that we'll have five programs in the clinic, of which one or two might be in late-stage registrational trials already, right?

So this is -- it's a really exciting time when you consider that if we had sat here a year ago, we would have still firmly been a preclinical company, right? We are advancing a pipeline that is indication agnostic behind that of over 20 programs in various stages of discovery and early preclinical development with candidates for down-stage development to be nominated subsequently.

And when you look at how we choose them, it is those four strategy criteria and where we find those opportunities tends to be and roughly half of our programs are against ion channel and GPCR targets, where we believe we've built out what are likely the world's leading capabilities in terms of pursuing agonists and antagonists to those targets with many important indications tied to them.

The other half of the programs use some other advanced angle, be that our TCE platform, where we have a few programs in development, like in early development, other multispecifics or something else where we believe that it takes -- that it really takes the advanced abilities of our platform to bring together an antibody-based solution to a major problem. That's how we're curating them. We're screening many ideas concurrently for adding to that platform. But what we're really hoping to do is through the selection and then through the unveil of the upcoming programs to -- sort of to prove that we've got a good taste in biology and a good taste in target selection.

Got it. All right. And I guess kind of tied into this part of the conversation, too, obviously, you guys have a new GMP facility, right, that is now online and started to speak a little bit more to the scalability factor when it comes to this, obviously, pretty well capitalized for a biotech -- effectively a biotech company at this stage of development.

But I guess, how should we think about that GMP facility as it relates to kind of your willingness to go into some of these different areas? And how is that kind of impacting your strategy now as you're building out the pipeline?

Yes, great question. So the GMP facility really sort of put the finishing touch onto our platform investments and still leaves us, as you rightly point out, with $700 million of cash equivalents and committed government funding to pursue the strategy, advance, add to the pipeline. And that with a run rate that is now that those investments are complete is coming down to somewhere just north of $100 million, call it, $120 million a year. So really, really, really good runway and visibility in those investments.

What the manufacturing capability allows us to do really is control our supply chain, which in the current environment is a pretty significant factor. It accelerates CMC and manufacturing to a degree, gives us a certain degree of flexibility as well that is hard to obtain or expensive with the CDMO. But intriguingly, and I think maybe somewhat underappreciated, it extends patent runway, right?

When you are going to a CDMO, you will want to have your patent filed, and that often is 2 to 4 years before you're starting your clinical trials where you need to have it filed in any case. So for the programs that we are manufacturing in-house, we are looking to have an extra 2 to 4 years of patent life when we -- through out just by virtue of having -- not having had to file and disclose the sequence to the CDMO early.

So that's really the role that it plays. I think we're also expecting with the volume of programs that are coming through the pipeline that we will get good utilization and probably favorable economics, but the real advantage lies in the flexibility, speed and that patent IP protection angle.

Okay. All right. Great. So maybe just in the last minute here, help us think about -- we've had for 5 years or so. So the AbCellera of '23 even, kind of adding one or two assets into the clinic on average over the next few years, advance, you talked about the potential time line for some of these programs itself.

Should we think about AbCellera really as kind of this core biotech in the sense that if you're bringing an asset into Phase I, the goal really is to kind of carry it forward yourself? Or is there kind of a balance you're already where you are today, kind of looking to strike between out-licensing certain drugs given your differentiation on the actual manufacturing platform, where kind of a more mature version of the company would be whether that's 50-50, 70-30, what that looks like? Is that a core part of the actual strategy as you're building out?

Yes. One of the things that I've always really appreciated about the company is the willingness to look at the facts as they are and to understand value robustly and not to get dogmatic, right? And I think the same applies here.

So the AbCellera of 2030 if things go reasonably well, and they don't need to go very well, just reasonably well, we'll have a full clinical pipeline in late stage, maybe approaching approval and many in behind and still a preclinical pipeline to keep feeding that for a while. There will be some programs where we will have come across a better owner like 575, who was willing to pay fair value for the asset, right?

And in that case, we would be open and free to partner the asset because we will continue to have a company that can do many things and invest, reinvest whatever we receive in such a partnering transaction. So I think we are very much open. And hopefully, some of the partnerships that we built in the earlier stage of the company, we're certainly seeing those conversations carry on will support sort of some of the trust that is needed in making such a deal work.

All right. And I think with that, we are at time. Thank you, everybody, for listening in. I know we got an action-packed day still left in the back half. Martin, always great to see you. Thanks for joining.

Thank you, Brendan. Absolute pleasure.

Good afternoon, and welcome to AbCellera's Full Year 2025 Business Update Conference Call. My name is Chelsea, and I will facilitate the audio portion of today's interactive broadcast. After today's prepared remarks, we will host a question-and-answer session. [Operator Instructions] At this time, I would like to turn the call over to Tryn Stimart, AbCellera's Chief Legal and Compliance Officer. You may proceed.

Thank you. Hello, everyone, and thank you for joining us today for AbCellera's Full Year 2025 Earnings Call. I'm Tryn Stimart, AbCellera's Chief Legal and Compliance Officer. Dr. Carl Hansen, AbCellera's President and CEO; and Andrew Booth, AbCellra's Chief Financial Officer, will be speaking on today's call. Also, Sarah Noonberg, our Chief Medical Officer, is on the call with us.

During this call, we may make projections and forward-looking statements based on current expectations and in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results could differ materially due to factors as outlined in our latest Form 10-K and subsequent Forms 10-Q and 8-K filed with the Securities and Exchange Commission. AbCellera is not obligated to update any forward-looking statements, whether due to new information, future events or otherwise.

Our presentation today, our earnings press release and our SEC filings are available on our Investor Relations website. The information we provide about our pipeline is intended for the investment community and is not promotional. As we transition to our prepared remarks, please note that all dollars mentioned during the call are U.S. dollars. After our prepared remarks, we will open the lines for questions and answers.

Now I turn the call over to Carl.

Thanks, Tryn, and thank you, everyone, for joining us today. Today, I'll review the progress AbCellera made in 2025 and share my perspective on the state of our business and the unique setup for strong value creation in 2026 and 2027. A year ago, as we started 2025, I emphasized upsellers overarching goal of becoming a vertically integrated clinical-stage biotech and that to successfully make this transition, we would need deliver on 4 priorities: First, initiation of Phase I trials for our first 2 programs; second, nomination of at least 1 new development candidate, Third, completion of our platform investments and fourth, initiation of activities at our new clinical manufacturing facility. .

We successfully delivered on all these objectives and exceeded one priority by nominating not one but 2 development candidates, and we finished the year with around $700 million in available liquidity. Now as we start 2026, we have in place an integrated platform that a competitive advantage in antibody discovery and development, a growing pipeline with multiple first-in-class programs and important near-term clinical readouts and the capital that is needed to continue executing on our strategy. Our transition to a clinical stage biotech is complete and our focus has fully shifted from building our platform to building our pipeline.

We achieved a great deal in 2025. At the beginning of the year, our pipeline consisted of 2 preclinical programs ABCL635 and ABCL575. Today, both programs are in clinical testing. And in January, we announced that our lead program, ABCL635 had advanced into a randomized, double-blind, placebo-controlled Phase II study. In 2025, we also added 2 new programs to our pipeline. ABCL-688 is an antibody drug candidate for an undisclosed indication in autoimmunity. Announced at our Q2 earnings, this is the third program added to our pipeline and the second program that's derived from our GPCR and ion channel platform.

A fourth program, ABCL-386, was nominated as a development candidate in Q4 and is a potential first-in-class antibody drug candidate in oncology. ABCL-688 and ABCL 386 are both in IND-enabling activities, and we expect to submit INDs or CTAs for both programs and to initiate Phase I/II studies in patients in 2027. Behind these first 4 programs, we have more than 20 programs in discovery, and we anticipate advancing a fifth program into IND-enabling activities in the first half of 2026. The most important data disclosure in 2026 will be the Phase II readout of ABCL-635, which is anticipated for Q3. This readout has potential to be highly derisking and to tell us whether or not we are likely to have our first winner.

In the positive scenario, success will be data that supports our target product profile, which includes efficacy at least comparable to [ Liquid and Vosa ], a differentiated safety profile and an advantage in dosing convenience with once monthly subcutaneous self-injection. We believe this profile would support a product that has blockbuster potential. Of course, drug development is uncertain, and it is possible that we fail to see efficacy comparable to small molecules.

As we started development we identified a key scientific risk in achieving sufficient target engagement of candy neurons in the infantibularnucleus. Based on biomarker data from the Phase I portion of our study, we believe that ABCL-635 can achieve high target engagement in those neurons. Accordingly, our estimated probability of success has increased. We believe the largest remaining uncertainty is that our understanding of the biology of hot flashes is incomplete. And this question will be answered by the ongoing Phase II portion of the study.

If we get a positive readout, we intend to move ABCL 635 quickly into late-stage development. In case of a negative readout, our progression to a late-stage clinical company will be delayed. However, in either scenario, we are committed to advancing the other programs in our pipeline with a focus on developing first-in-class opportunities. Looking at the overall pipeline, we anticipate 2 clinical readouts in 2026 and the potential for multiple catalysts in 2027. By mid-2027, we expect to have 5 clinical stage programs across a range of compelling indications in large markets.

As mentioned previously, pending positive data from the Phase II study of ABCL-635, we intend to proceed with late-stage studies for hot flashes associated with menopause. And in addition, we would also look to initiate Phase II studies of ABCL-635 for hot flashes associated with cancer treatment. These pipeline developments will play out over the next 18 months. Looking at 2026. Our key priorities are to deliver top line readouts for ABCL 635 Phase II and ABCL 575 Phase I studies to advance ABCL-688 and ABCL-386 through IND-enabling activities, and to add 1 new development candidate to our pipeline. With approximately $700 million in total liquidity, we believe we have the capital to see these programs through to value inflections and to continue to press our advantage in discovery and to build a pipeline through internal innovation.

And with that, I will hand it over to Andrew to discuss our financials. Andrew?

Thanks, Carl. As Carl pointed out, Upsell continues to be in a strong liquidity position with approximately $560 million in cash and equivalents and with roughly $140 million in available committed government funding to execute on our strategy. We are continuing to execute our plans with the focus on internal programs and leveraging our process development and clinical manufacturing investments.

Looking at our business metrics. In the fourth quarter, we started work on 1 additional partner-initiated program, which takes us to a cumulative total of 104 programs with downstream participation. Given our focus on the advancement of our proprietary pipeline and as noted in our SEC filings, we will stop reporting on our partner-initiated program starts on a quarterly basis in 2026.

Turning to molecules in the clinic. Arsenal Bio received an IND authorization for AB-3028, a molecule discovery using licensed Trini technology, taking the cumulative total number of molecules to have reached the clinic to 19. As Carl highlighted, ABCL 635 advanced into the Phase II portion of its clinical trial and Invitex advanced an undisclosed animal health molecule into pivotal studies. As we have stated previously, we view the overall progress of molecules in the clinic as a potential source of near and midterm revenue from downstream milestone fees and royalty payments in the longer term. As we have been doing annually, we'll take a closer look at the progression of those 104 partner-initiated programs with downstream participation.

As of December 31, we were still actively leading or co-leading the work on 14 of these programs. For 84 programs, we have successfully completed the agreed scope of work and have transferred the resulting antibody sequences and data to our partners for evaluation and further development under their leadership. To the best of our knowledge, our partners are actively progressing 34 of these 84 programs. Of the 48 programs that are actively progressing, including those still in our hands, we believe that 37 are in discovery, 5 in preclinical development and 6 have reached clinical development.

Overall, we view the progress of the molecules that we have discovered in our and our partners' hands positively, and the attrition is consistent with our expectations. Around half of all programs with downstream participation that we have started are currently still progressing. We look forward to more molecules from our program reaching the clinic over time, and we will continue to report on these progressions to the clinic on a quarterly basis.

Turning to revenue and expenses. Revenue for the year was $75 million, comprising $27 million relating to work on partnered programs and $47 million from licensing and royalty payments. This compares to a total revenue of approximately $29 million in 2024. $35 million of the licensing and royalty stems from settling our patent infringement claims against Bruker. With respect to research fee revenues, as we have mentioned in the past, we expect these to trend lower as we focus on our internal pipeline. Our research and development expenses for the year were $187 million, approximately $20 million more than last year. This expense reflects the focus on investment in our internal programs.

In sales, general and administration expenses, they were approximately $83 million compared to roughly $86 million in 2024. Included in these expenses in both years are costs related to the now settled Bruker litigation. Looking at earnings, we are reporting a net loss of roughly $146 million for the year compared to a loss of about $163 million last year. In terms of earnings per share, this result works out to a loss of $0.49 per share on a basic and diluted basis.

Looking at cash flows. Operating activities for all of 2025 used approximately $130 million in cash and equivalents. Excluding liquidity received from marketable securities and real estate, all other investment activities amounted to $46 million for the year. We made these investments predominantly in property, plant and equipment to establish clinical manufacturing capabilities, a project, which is now substantially complete as we had expected. Notably, these investments in PP&E were partially offset by government contributions.

Compared to outsourced manufacturing, our clinical manufacturing facility allows us to control our supply chain, improve flexibility, accelerate time lines and better protect our intellectual property. Our real estate investments in our headquarter building yielded $63 million in liquidity in the fourth quarter, consisting of a loan repayment from our JV partner and flow through commercial mortgage financing. As a part of our treasury strategy, we have $405 million invested in short-term marketable securities.

Our investment activities for the year included a $70 million net divestment of these holdings. Altogether, we finished the quarter with $561 million of total cash, cash equivalents and marketable securities. As a reminder, we have received commitments for funding the advancement of our internal pipeline from the Government of Canada's Strategic Innovation Fund and the government of British Columbia. This available capital does not show up on our balance sheet. With over $560 million in cash and equivalents and the unused portion of our secured government funding, we have approximately $700 million in available liquidity to execute on our strategy. In addition, we have further available liquidity in the ownership of our other Vancouver-based lab and office building as well as our GMP facility, both of which have been financed off of our balance sheet.

The operating cash usage for 2026 will continue to prioritize the advancement of our lead programs through the clinical studies, completing IND-enabling activities for ABCL 688 and ABCL 386 and to build a strong preclinical pipeline behind these assets. With respect to our overall company expenditures, our capital needs are very manageable, and we continue to believe that we will have sufficient liquidity to fund well beyond the next 3 years of pipeline investment.

And with that, we'll be happy to take any questions. Operator?

[Operator Instructions] Your first question comes from the line of Kripa Devarakonda with Truist Securities.

This is Anna on for Kripa. Just wanted to ask a question about ABCL-575, I was just wondering how you guys are thinking about the potential for 575 as a combination regimen. Just given its profile, are there any targets that might make sense to combine with 575 to maximize the benefit?

Thanks, Anna. Carl here. I can at least start the answer here. So yes, we have, for a long time, express conviction in Oxford Ligand as a class. I think we're seeing data that is making that clear that there's a very broad effect on the immune system, one that is a bit slower to come up, but they had a durability. And we do think that the safety profile makes that an attractive target for combinations as is being investigated by some other companies. So certainly, both internally, we're thinking about that as well as having some discussions with external parties that might have an asset that would combine with it. .

For the near term, our strategy on ABCL 575 is unchanged. It's currently in the Phase I trial, and we look forward to reading that out at the end of the year.

Your next question comes from Evan Seigerman with BMO Capital Markets. Your line is now open.

Nachman on for Evan. Thinking about potential oncology-based VMS studies, what sort of indications seem most appealing for exploration there? Obviously, breast and prostate seemed like strong options, but anything beyond this? And then just a follow-up to that, do you think you need to be better than other agents like [indiscernible] in these studies? Or is it just a different profile, good enough here given limited treatment availability for nonhormonal therapies?

Nachman, this is Sarah. I'll take that question. I think you're spot on in terms of where we think there's opportunity in oncology BMS. Obviously, breast cancer being the larger of those 2 patients on aromatase inhibitors, tamoxifen that experience, particularly severe hot flashes as well as those that go on to oophorectomy. We're also interested in exploring prostate cancer patients and men who are on ADT or even those who get hot flashes from other androgen receptor or AR pathway inhibitors. So those are areas of interest to us, and we'll continue to explore that.

In terms of the second part of your question, our base case scenario is that even with equivalent efficacy, there is huge room for differentiation in terms of safety, lack of a liver signal, which is part of our target product profile and not requiring liver monitoring that is a part of the administration of the other 2 small molecules. We see that as a major differentiating factor as well as the convenience of once monthly dosing. That said, we do believe there is potential for improved efficacy. We see that as an upside and that improve -- efficacy would come from deepening more sustained target engagement. And obviously, that's going to need to play out over the course of our Phase II portion and then even more importantly, in Phase III studies.

Your next question comes from Allison Bratzel with Piper Sandler.

One question for me. Just on 635, I know you've talked about encouraging target engagement data and how that's increased your probability of success in BMS, could you just expand on that, will that data be presented or published? Or can we expect to see it in Q3 with the data readout?

And then just on 575, there have been some developments in the X40X4ligand class over the last couple of months. Just could you talk to how you view the overall class. And if you feel the bar has been raised for advancing 575?

Allison, this is Sarah. In terms of the first part of your question, we expect to release the Phase I portion of the study that we'll have safety as well as our target engagement data at the same time as our Phase II portion. And as Carl mentioned, that is planned for Q3 of this year. So we don't expect any announcements before then at this time.

In terms of 575, obviously, we're following that space fairly closely, not only the efficacy data that Sanofi has released with their subsequent Phase III readouts, but also with regard to safety and the event of Kaposi sarcoma that's -- that has put a little bit of a mark on OX40 ligand, however, not necessarily unexpected and not inconsistent with what's been reported, let's say, for JAK inhibitors. So I agree with Carl. Our overall investment thesis in 575 hasn't changed. We believe that OX40-Ligand is a pretty compelling target. We believe that there is a place for it in the market.

Either alone or in combination. We're committed to getting it through to a Phase I readout and be Phase II ready, and we'll continue to look at opportunities as well as engage potential partners. But I don't see at the event of copoly sarcoma meaningfully changes its value proposition. It is a very potent immunomodulatory, it acts upstream. And so it's not unexpected. But overall, we still see that the safety profile of this class of drugs, particularly OX40 ligand is overall very favorable with respect to other members of immunomodulatory drugs.

And Carl here, I was just going to add on top of that, that coming into clinical bump the OX40 ligand asset, our view in atopic dermatitis was that Oxford ligand as a class would end up as second line to DUPIXENT. I think we still believe that's going to be the case and the data that's been presented by Sanofi supports that. So that, as a monotherapy, it looks like it's going to be a drug. It's probably going to be a very important drug, perhaps not DUPIXENT like, but an important drug that has indications -- indication potential well beyond atopic dermatitis.

And as per the question before, we think it also is a class that has good potential in combination. And the response of the Kaposi sarcoma is perhaps a bit overblown given that the class has been so safe to date. And I think that's one of the things to remember that overall, the safety profile has been excellent thus far for the class.

Our next question comes from Brendan Smith with TD Cohen.

I actually just wanted to follow up a bit more on 635 to kind of just dig in. Can you maybe just give us a sense of what that Q3 update will really look like in terms of at least what you know now in terms of the patient numbers, maybe a range of doses tested and really duration of follow-up there. And I'm just trying to benchmark really what we'll see in terms of follow-up in Q3 between the Phase I and Phase II that you're running?

Sure. So in Q3, the readout should include the Phase I portion, which is both a single ascending dose portion and a multiple ascending dose portion. The multiple ascending dose portion has 3 doses spread 4 weeks apart, as well as importantly, the randomized double-blind, placebo-controlled Phase II part of the study and that key readout, the proof of concept will be at 4 weeks. And we believe that's more than sufficient to be able to see the pharmacology and the degree of efficacy and safety in a placebo-controlled cohort.

The efficacy readouts are quite typical of what would be seen in a Phase III study, so frequency and severity of hot flash as well as preliminary looks at quality of life measures at 4 weeks.

Your next question comes from Stephen Willey with Stifel. Please go ahead.

Just curious, so as this pipeline begins to expand and I guess you have 2 additional compounds now in IND-enabling studies. It sounds like there'll be another 1 nominated to move into IND enabling here before the end of the year. How much clinical trial infrastructure can you maintain at this point? How many programs can you actively have in development? And I guess that question also contemplates moving 635 into a potentially pivotal study next year.

Steve. Carl here. I'll take the start of it, and Sarah might want to add something after. So in terms of clinical development capacity, in late 2023, we made the decision to move from the partnership business to clinical development. Over that time, we have completely reshaped the company internally and moved a lot of resources into biology, translational medicine early development and now increasingly in clinical development.

So if you look at that slide that went up in terms of the expectation of programs and when they might get into the clinic, as well as the upcoming Phase III study and perhaps another program with a new development candidate coming in the first half of this year, it's clear there's going to be a lot of things happening at once. And we have the resources and the means and the intent to build up that operational capacity to make sure that we meet those goals. But of course, there's still work to be done, but we're excited about the programs, and we want to make sure we don't under resource them.

Okay. And then maybe just to dig in a little bit more on 575. I know you're talking about 2027 will be kind of a decision point in terms of either further development or out-licensing -- how much of that decision will be determined by what you are seeing from that molecule internally from Phase 1 versus some of the external extrinsic factors in terms of partnerability, strategic appetite, et cetera, et cetera? How do those things weigh? .

I would say largely, it's going to be based on external factors. We've had some good preclinical data that's allowed us to estimate their half-life. And overall, in terms of the Phase I study, we haven't hit any surprises. And so we're very confident that we have a molecule that meets its expectations in Phase 1. But I would say that the bigger decision is going to be based on the external aspects of the landscape and what we may find in terms of potential partnership opportunities as well as continuing to think about how we may use 575 either in combination or potentially as a bispecific.

There are no further questions at this time. I will now turn the call back to Carl Hansen for closing remarks.

Thank you, everyone, for joining the call today. We believe AbCellera is at an exciting point, and we look forward to providing updates over the coming year. Thanks very much.

This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon, ladies and gentlemen. Welcome to the 2026 JPMorgan Healthcare Conference. My name is Varun, and it is my absolute pleasure to introduce on stage AbCellera Biologics, joined by the CEO, Carl Hansen, who will talk about the company and their growth for the year. So please give a huge round of applause for Carl Hansen.

All right. Thank you very much, and thank you to the organizers of JPMorgan for the opportunity to speak. So today, in my prepared remarks, I'll try to keep pretty brief. For those that don't know us well, I'll give a little bit of history in the company. I'll then give you an update on our portfolio and in particular, our lead asset, ABCL635 and then maybe lay out for you why we're excited about the future of the company, why we think the next 6 months to 18 months is very interesting in terms of the development of our portfolio and our transition from what has been historically a technology and platform-based story to a clinical company with multiple assets and some pretty interesting readouts that are coming soon.

So for those that don't know us, AbCellera is a biotechnology company. The center of mass is located in Vancouver, Canada, where we have roughly 500 employees. We also have facilities in Sydney, Australia with about 50 employees and a clinical development group in Montreal, Canada. The company was founded in 2012 from my academic lab at the University of British Columbia, where I was a professor. And so we have now been at this. We're coming into our 14th year. Through the first decade, AbCellera was really focused on building an engine or a platform focused on integrating technologies for antibody discovery and on being able to put everything together from concept right through to clinical development.

Along the way, we have managed to put in place a platform that we now believe is best in world and have put in place infrastructure and a fully built team, which I mentioned, but that includes headquarters in Vancouver as well as a newly completed GMP manufacturing facility. AbCellera went public in 2020, right around the time of COVID-19. We did a substantial financing at that point, just over $600 million. And since then, we have been successful in bringing into the company roughly $1.5 billion additional in nondilutive funding. The biggest part of that coming from our success on COVID-19 and working with Eli Lilly, where we brought the first COVID antibody to the U.S. for emergency use authorization and then a second one after that. That partnership with Eli Lilly ended up bringing about $1 billion in royalty revenue.

And in addition to that, we've been successful in securing contributions and support from the Canadian government and from the government of British Columbia to the tune of roughly $400 million. Because of that, we have managed to do the significant build. So as I mentioned, about 600 people, about 300,000 square feet of facilities state-of-the-art capabilities and significant infrastructure, and we still find ourselves today in a terrific liquidity position with roughly $680 million in total liquidity as of the end of Q3.

Our competitive advantage is really having invested for over a decade in the technologies to solve very challenging antibody discovery and development problems. That platform was built through our first business model, which is really focused on striking discovery partnerships with biopharma companies, both big companies and small companies. And over the course of that 10 year, starting in 2014, we have worked on over 100 therapeutic antibody programs of various types that include downstream positions, typically in the form of milestones and low to mid-single-digit royalties. And through that work, have also worked with about 40 companies, and many of the logos are on the screen here. To date, about 16 of those molecules have moved into the clinic.

And we do believe that, that portfolio that's been assembled by doing discovery work has value that will continue to mature and be recognized as those molecules move forward into the clinic. I'm often asked about the recent shift that we did in our business model, moving from the partnership business to internal development. And one of the things that I always point out is that had we not spent the 10 years building those relationships and really putting our technology through the paces, we would not have been in a position that we are in now to start moving our business towards making first-in-class and highly differentiated molecules based on a technology that has been hardened by working with some of the best people in the industry on some of the most challenging problems.

As I mentioned, AbCellera's competitive advantage really lies in that 10 years of work, integrating technologies, both the single cell discovery technology, traditional state-of-the-art sequencing, biology, high-throughput workflows, computation and other methods to be able to solve the really challenging antibody discovery problems. In particular, we believe that we have special expertise in antibody discovery against multipass transmembrane proteins, in particular, GPCRs and ion channels. That represents about half of the discovery programs that we currently have in our pipeline. And we are also focused on developing novel modalities. We've done considerable work in the space of T-cell engagers and more recently, starting to build out capabilities and platforms in ADCs. Because we have a broad technology platform, and we have decided to change our strategy to building an internal pipeline, we have taken an approach that is indication agnostic.

What we're really looking for are high unmet medical need, strong scientific rationale, good differentiation and a clear development path. And we want to find those wherever we think that our technology can bring us an advantage and where we think that we have a real case to win. So it was in September -- excuse me, it was in September of 2023 when we made the definitive decision to start to ramp down the partnership business, and we still have some of those activities, but that's growing smaller all the time and to turn these capabilities to work on our own behalf to start to build the pipeline. Last year, when I came up and presented, I think I had a similar pipeline slide, and we had our first 2 molecules, ABCL635 and ABCL575 that we're getting ready to go into clinical development.

So you can see based on this chart, we've had significant and impressive progress in the pipeline since that time. Just point out a few changes here. One that is new is we have added an additional program, ABCL386, which is a new development candidate in the space of oncology and one that we'll talk more about as it moves towards IND filing and clinical development. Earlier last year or early last year, we announced another additional development candidate, ABCL688. ABCL688 has been disclosed as a GPCR or ion channel targeting antibody in the space of autoimmune conditions and one that we'll talk about more as it moves into clinical development. And our 2 clinical assets, ABCL575 is a half-life extended Ox40 ligand best-in-class molecule that is in Phase I, and we expect to read out near the end of this year.

And just earlier this week, we announced that ABCL635, which was not even in clinical development a year ago, has now progressed through Phase I in a Phase I/II study and is now in Phase II and will -- and is setting us up for what will be quite an exciting readout in Q3 of this year. So I'll spend most of the rest of the talk here telling you a little bit about ABCL635 and why we are so excited about this program and think that this could really be a step change for AbCellera as a company as we get this data readout in Q3 and potentially get it ready to moving -- for moving into late-stage studies. So ABCL635 is an antibody treatment that is designed as a first-in-class antibody for the non-hormonal treatment of vasomotor symptoms associated with menopause.

It targets a GPCR protein called Neurokinin-3 or NK3R. And it is a program that is designed as second line after hormone therapy or for women that are contraindicated for hormone therapy that allows for reduction of what are the most severe symptoms of menopause or the most troublesome, which are hot flashes. I mentioned how we think about programs. This is a program that we love, and we love it because it scores really high in the 4 categories that are our framework for picking targets. I'll go into more of this a little bit later in the talk. But first of all, from a science perspective, the NK3R pathway is very well understood. And it has been clinically validated now with 2 small molecules, fezolinetant and elinzanetant. And it is also a pathway that allows for early studies of target engagement based on biomarkers.

We believe this is a very significant commercial opportunity. Just before this talk, I was at the session on women's health and a session on -- and a panel session on menopause. And it's clear that this is a very large and traditionally underrecognized opportunity. The stat was put out that 6,000 women in the U.S. move into menopause every single day and that there are roughly 60 million women of menopausal age in the U.S. We believe that if you look just at the women that are currently experiencing moderate to severe hot flashes associated with menopause that it's at least conservatively 6 million patients, of which a significant fraction of those will be contraindicated for hormonal therapies.

From a differentiation perspective, we believe, as I'll tell you later, that we have an opportunity to have a product that is more convenient, that has a better safety profile and also that has potential to be more efficacious in reducing both the severity and the frequency of hot flashes. And we are moving this forward very rapidly, now only 6 months from the initiation of clinical development to the initiation of Phase II on a development path that has been trodden before by small molecules. And we are so far encouraged and excited about the progress of that program. So one of the questions that should be asked is how does this product that you're developing fit into the broader landscape of therapies that are available for women that are suffering from hot flashes associated with menopause. And there has been a lot of recent activity and discussion on hormone therapies as a first-line treatment.

And of course, recently in November, the black box warnings that were broadly on hormonal therapies were removed. We think that's a terrific thing, and it's a good step to raising awareness and to having more women have options for this kind of therapy. And so we do think that the first-line therapy will be a hormonal therapy for most patients. There are, however, a significant portion of patients that are either hard contraindicated or that cannot tolerate hormonal therapies and our estimate that, that is roughly 20%. And that is either because of risks associated with oncology, previous experience in oncology with cardiovascular conditions or family history that can increase risk.

So about the science. NK3R is a target that is expressed in the brain, but it's expressed in a part of the brain that is part of the hypothalamus called the infundibular nucleus. One of the questions that immediately comes up when you're developing antibodies for brain targets is can you get target engagement on the receptors that are on the neurons in that part of the brain. So it turns out that the infundibular nucleus is designed to be able to sense and respond to peptides and other hormones that are in the blood.

And so that part of the brain has a semipermeable barrier that is basically -- that consists of fenestrated vessels. On this diagram here, I've shown schematically the infundibular nucleus on the left. And in the infundibular nucleus, there are neurons called KNDy neurons. And the KNDy neurons are sort of where the action happens in the initiation of a hot flash. So in normal -- for women pre-menopause, KNDy neurons are kept in balance through a suppressive effect of estrogen and an activating effect of NKB. As you pass through menopause, estrogen levels fall and when estrogen levels fall, NKB starts to ramp up and the neurons become overly excited.

What happens then is that you get periodic firing of the neurons. And those neurons fire both to the kisspeptin pathway, which is trying to bring up hormone levels, but also that penetrates across the blood-brain barrier to another part of the brain called the preoptic nucleus, which is the part of the brain that governs the thermal regulatory net or circuits that govern body temperature. So when that happens, then you get a spontaneous and rapid vasodilation, sweating and in moderate to severe VMS, these are conditions that are difficult or impossible to ignore.

It disrupts sleep, it disrupts activities. And it is something that is extremely difficult and negatively affects the quality of life of women that are dealing with this. So the idea for small molecules that have been developed as well as for our antibody is to block NK3R, which is sending that signal to hyperactivate the KNDy neurons. And we have designed ABCL635 to get to those neurons and to bind them and to shut them down very potently. That normalizes the activity between the infundibular nucleus and the preoptic nucleus and suppresses both the severity and the frequency of hot flashes. That pathway, as I mentioned, has been clinically proven. There are recently, within the last 2 years, 2 approved products, both small molecules. The first is a product of fezolinetant, brand name VEOZAH from Astellas. It was approved on May 12, 2023. It's a daily oral treatment, and it has been proven to be safe and effective for treating hot flashes, but has some liabilities on the label, which includes a box warning for liver toxicity and the requirement for liver monitoring.

More recently, Bayer has a second molecule. This is both an NK3R and an NK1R antagonist. It was approved in October of last year. Again, a daily oral treatment. It does not have a box warning, but it does have a requirement for liver monitoring. And it also has some warnings for somnolence or CNS depression, which is believed to be associated with antagonism of NK1R. So our differentiation thesis is that we believe an antibody treatment can engage with this target and have, first, improved dosing convenience. So we are designing our TPP to be a once-monthly subcutaneous injection. Second, because, first of all, antibodies do not metabolize or concentrate in the liver and because we do not believe that the liver signals that have been seen with the small molecules are on-target effects, we believe that our antibody should be clear in a liver signal and so not have that liability and toxicity.

And finally, because we do not antagonize NK1R, we do not expect to see somnolence as one of the adverse events. Because we believe that we won't have to dial back the concentration due to liver toxicity, we believe we can get the antibody to a concentration that achieves better target engagement. And this is particularly exciting given the clinical development of fezolinetant, where in the early studies, particularly the Phase II, it was evident that both the efficacy and the biomarkers, which are a signal of target engagement were better at doses that were unable to be taken forward into Phase III.

So in Phase II, fezolinetant was tested up to 180 milligrams per day. And ultimately, it went into Phase III and has been approved at 45. And so we believe that it has left considerable or there's potential for a considerable improvement in target engagement and hence, for efficacy. With respect to elinzanetant or LYNKUET, it appears that the efficacy of that product is similar to VEOZAH. So if we can beat VEOZAH, we would expect also to be able to beat elinzanetant. But of course, we need to prove that through clinical studies. So as I mentioned, ABCL635 started enrolling early last year. It has moved through the first part of a Phase I/II study. And we are anticipating full data or a full data readout that includes safety and PK data from the single and multiple ascending dose as well as early safety and efficacy in a Phase II portion of that Phase I/II study, which is a placebo-controlled randomized study, double-blind that has -- that is using endpoints that are the registrational endpoints.

So we believe this is an extremely exciting and important catalyst for us that's coming up in the next few months. And with that catalyst, if it works out the way that we want, we would have significantly derisked that product. And we are in anticipation of that, thinking about how we would set up and take this forward into late-stage studies next year. So just to sum up, and then I'll open up for questions. Last year, I believe I had this slide up, and it was a presentation to you, the investment community of what our priorities are going to be for 2025. It was to take our first 2 programs into clinical development. That has been achieved. It was to nominate an additional development candidate. We have, as I've just told you, now nominated 2, both ABCL635 and ABCL386. And we have also completed our platform investments, which includes what has been a multiyear build infrastructure and our GMP manufacturing facility, which is now up and running.

And of course, the last one there is to have initiated the use of that facility. And in December of last year, we did begin the engineering runs, and we are now using that facility to manufacture products for our pipeline. We ended last year with about -- on the third quarter of $680 million in liquidity. And when we look forward to 2026, our priorities are all about the pipeline. It is, of course, first moving ABCL635 to that big readout that I told you about. We expect to have a readout of ABCL575 at the end of the year. That will be safety and PK. And the 2 development candidates that are now in IND-enabling work, ABCL688 and 386 continuing to push those forward as well as to nominate one additional candidate.

So whereas we were a preclinical development candidate, transitioning from platform to product development last year, this year, we find ourselves in a very interesting place where within the next few months, we have our first big readout on ABCL635, our lead program. We'll have a readout coming up on ABCL575 near the end of the year. And then much of the attention and effort in the company is to set up what can be a very interesting late '26, early '27 with potential catalysts, including initiation of trials for ABCL688, ABCL386, nominating new development candidate and as I mentioned, bringing our lead program into late-stage studies.

So with that, I will open up for questions, and thank you all for your attention.

And just before we begin, I might invite Sarah Noonberg, our CMO; and Andrew Booth, to come and join me on the stage as I expect some of the questions might be better handled by them. Do you need a mic or we are going to...

Can Can you talk about any difficulties in finding skilled labor for manufacturing, lots of companies your size would be using a CDMO. Can you just talk about that decision?

Yes. I'm happy to start, and I'll maybe hand off to Andrew because he could give you more color as to the motivation and how we got into this. So we have -- it was in 2020 that we made the decision to build the manufacturing facility. That was, of course, at the height of the pandemic. And the government of Canada was looking for opportunities to start to build up bioresilience within the country. So there was a strong motivation nationally to do that. AbCellera was highly involved in COVID-19.

We had a good relationship, and we took on that project to build what is now really the only fully enabled antibody manufacturing facility in the country. I've often say, had I known how difficult it would be to stand that up from 0, particularly in a country where there hasn't been a big presence. I might have bought at that. But we put it together. She's not here today, but Veronique Lecault, our Chief Operating Officer at the time and now Chief Technical Officer, did a magnificent job of doing that.

And we feel very fortunate that we have now done that. So we see it as a very strategic asset. It allows us to be more flexible, to be faster. And increasingly, it's apparent that not having to file your IP early is a big advantage for the company. So we're very pleased with that.

Yes. And in terms of the talent, I think initially, it was also one of the tasks in standing up that facility to recruit all of the people that we would need that had the expertise to do that, not only establish it, but then run it. We brought in a number of key people as a part of that in the recruitment and have managed to fill out an exceptional team, not only in the process development, so upfront cell line development, the manufacturing team and the quality team that is in place. So that was a big lift over the last 4 years, but now that team is in place, and they're looking forward to doing their first manufacturing on these new development candidates that Carl mentioned earlier in 2027 -- or 2026 for the clinical trials in 2027.

I might just add a little bit of context that's related to your question. So in 2023, I mentioned we had built the company really to be a high-volume partnering machine. So it was an early discovery machine. The decision to turn towards development requires a lot of things that change within the company. And one of the things that I think is not apparent from the outside, but it's been a lot of work is reorganizing the company and moving a lot of weight from the early discovery where it's really about scalable delivery of the early part of drug development and moving that towards the development side of the organization.

And so there's been probably well north of 150 people that have moved over or that have been hired into that part of the organization. And by way of this answer, I'll also say that bringing Sarah on recently as CMO to lead that part of it completes that transition from my mind. Not that we don't have to build some more still, but we feel like we're in really good shape.

I just wondered I was surprised to see that on the slide that the injectable is preferred over the...

Yes. Great question. So we did a market survey through a third party, and we asked women that were experiencing hot flashes of the correct age, given an equal product -- given an equal efficacy and safety profile, what would be preferred. We weren't sure which way that would go. So it turned out that in the whole sample, which was about 70 women, 55% said they would prefer a once-monthly injectable to a daily oral just based on convenience. And when you look at the subgroup of women that had experience with injectables, that preference was much stronger. It was about 75%. And we attribute that in large part to the fact that auto-injectors have become very good, like 20 -- you don't see the needle, it's 20 seconds. It's relatively painless.

And the prevalence of people using injectables, particularly with the GLPs, I think has normalized that in a way that there was for many women, a strong preference to not have to worry about a pill to be able to travel without that and just have a single injectable every month.

Is the goal here, we have 7 years of dosing once a month?

It'd be once monthly injectable for the duration where the symptoms last, yes.

Average how long is that 4 to 7 years?

Roughly 7 years on average.

Great.

You think so...

Maybe I'll take the next one. Firstly, it's very impressive how you guys have changed the company into a development company over the last couple of years. But if I want to understand for your lead assets, say, ABCL635 and the broader pipeline, what is your appetite about in terms of investing in the later stage as well as balancing out broadening your portfolio as a whole? And how do you guys think about that?

It's a great question. I think it's a question that every -- or that many biotech companies deal with. It's a question we really think about because we do have the engine that can continue to bring high-quality assets forward. And our default is that we only bring things into the portfolio if we have strong conviction and we think like owners on the programs. So the default is we're going to take these forward as long as it makes sense.

If we have a positive readout, ABCL635, and we're feeling very good about that outcome, but biology can surprise you. So we have to wait to get that data. Our expectation is that we will take that into late-stage studies. And if that helps to lower the cost of capital, then maybe there's an opportunity to even fill up the balance sheet again. That will be -- Andrew might comment on that.

But without doing that, given our liquidity position, we can take that into late-stage studies and advance the assets that I have on the slide without needing to worry about that in the near term. If you start to have multiple late-stage assets, of course, that becomes a different conversation, but that's a first world problem that we would welcome.

Yes. Maybe just one additional piece of color on that is for 635, certainly, and Sarah can speak to the Phase III or the pivotal trial there. As far as pivotal trials go, relatively inexpensive in terms of number of patients and the cost per patient. And so we look at these all on a case-by-case basis. So in contrast, ABCL575 in advancing it because of the nature of the indication, we're not going to be doing a broad Phase II in ABCL575, the Ox40 ligand. That will be maybe too expensive for us, and we have said openly that we're open to partnering that asset. And really, the biggest value inflection point on that is going to be the readout for Sanofi's amlitelimab, which they were quite bullish on earlier this week, and we're looking forward to seeing that data in the first quarter.

Just a follow-up to that. So what was the data in Phase I that led you to feel confident about moving 635 to Phase II? And for Phase II, what would you be looking for?

Great. I'll take that. So in any Phase I study, the most important thing we're going to be looking for is safety. And obviously, with the safety profile, in particular, the box warning for VEOZAH and the warning on liver tox for LYNKUET, liver monitoring, ALT, transaminases, bilirubin is going to be a key part of safety. So seeing that as well as ensuring we don't see any crossover of NK1R, we certainly wouldn't expect it with the biology, but making sure that the safety profile differentiation that's our hypothesis is bearing out.

So I think that's first and foremost. Second, we're going to be looking for target engagement. I think as Carl highlighted, a key scientific risk was, could we get sufficient target engagement in the hypothalamus in the infundibular nucleus to be able to modulate these KNDy neurons so that they're at the heart of thermal regulation control. And so seeing the dose-dependent effects on our biomarker really gives us a sense of, yes, we can achieve target engagement and a clear sense of what our likely target dose is to move forward.

So that's second. And then third, we did some modeling on the preclinical side as to what we expected our half-life to be and our target product profile is once a month. We wanted to make sure we were reasonably on par with that. So those are the key aspects that we're looking at in the Phase I data that give us a lot of confidence to move into Phase II. What we expect to learn from Phase II, this is a Phase II study. It's randomized, double-blind, placebo-controlled. So it has the appropriate bells and whistles and robustness to tell us in the target patient population with the registration endpoints, do we have treatment effect that is on par or greater than the established oral small molecules.

And it will also tell us a good bit and confirm what we believe is the likely dose to take forward into late-stage development. So that's going to be a pivotal readout. It will propel us, if positive, into global regulatory discussions to rapidly align on a Phase III path. And the Phase III path is not something we're going to have to start from scratch. It's a pretty tried and true. And as Andrew mentioned, these are very sort of straightforward endpoints. They're patient reported. It doesn't require central review or scans or other kind of more complicated safety aspects. So we believe this is a highly efficient clinical development path.

And Sarah, just a follow-up. Is there a potential for increased efficacy?

As Carl mentioned, we do believe that that's a real potential, both because when you look at the Phase II dose range finding data from VEOZAH, what you really saw was up to 180 milligrams per day, in particular, with improving severity of hot flashes. But even to a lesser but still observable perspective, improving frequency of hot flashes, those higher doses were more effective, but they also saw a dose-dependent effect on liver function test. So they had to scale back that Phase III and registrational dose. So we believe that they left some efficacy on the table because of the need to control for an overall benefit risk.

We not only have the ability to dose higher to have a higher degree of target engagement. But if you look at the PK/PD relationships that VEOZAH published in their Phase I data, they're only seeing robust target engagement for part of the day. It's got a relatively short half-life. With a monoclonal antibody, we get target exposure over the course of many, many, many days. So both of those features give us reason to believe that we could see improved efficacy. That said, even if our efficacy was on par, if we have a drug that doesn't require liver monitoring, doesn't induce drug-induced liver injury, doesn't have drug-drug interactions, has the convenience of once-monthly dosing, even equivalent efficacy, we see as an improved option for patients.

I feel like I've been hogging the stage. Is there anyone else who wants to ask a question from the audience? Well, in that case, then I might actually continue. So I've understood quite a bit around the 635, but we understand there are quite a few -- there are 2 to 3 different programs that are coming to the clinic in 2027. Can you talk to us about your strategy on how you select these programs?

Yes, sure. I can take that one. So our view first is that the space or I'd say, antibody therapeutics in general, maybe biotech and biopharma in general, is becoming increasingly competitive for a variety of reasons. People are enabled. There's been a lot of discussion at this conference here about the degree of activity and the speed, both of discovery and development in China. We believe in order to really win and create value, you need to find those big opportunities where you have really moved the needle on unmet need and where you're really bringing innovation. So we -- in order to do that, one, we have a technology platform that supports that work. And two, we have quite a large activity. I'd say an unusually large activity in discovery because we are looking for those really big win projects, and those are going to be harder. They're going to take longer. There'll be more attrition.

But we want to take that attrition in discovery. The things that ultimately rise to the surface are the ones that meet our framework. And that means we've got unusually high conviction in the biology. We understand the biology. Ideally, it has some clinical evidence. We need to have a clear case for differentiation. So not just incremental, but something that is really moving the needle that will win in the marketplace. We need to have a development path ideally where we can get more conviction at a reasonable amount of time and money, particularly for a small company like ourselves. And...

Commercial...

And commercial. And of course, you're looking for a large unmet medical need and a big market opportunity. And so trying to find things where it's a technological advantage, where it's a contrarian idea, where maybe there's a new modality that allows you to come at known target biology a new way that has a significant advantage. That's what you're going to see coming into the pipeline. And so when you look forward maybe to mid-'27, if everything stays on track the way we're looking, we should have 5 clinical programs. Outside of the Ox40 ligand program, which is a spectacular target, but is following a few years behind amlitelimab. And really, the differentiation there is extended half-life and maybe 6-month dosing. Apart from that 575, you're going to see molecules where there's a lot of innovation and where these are swings where we think there's a good chance that these could be blockbusters if, in fact, they turn out the way we hope and the way we intend in clinical development.

Perfect. And given the time we have -- I think we have time for one last question. I think, Andrew, this one is for you. You guys are starting off with a really, really good liquidity position with $630 million. But moving forward, how do you look at cash burn for the business, especially given the backdrop of your portfolio and the projects that you guys are working on at the moment?

Yes. And the liquidity position at the end of Q3 is about $680 million or just over $500 million in cash and the balance being from the contributions that we've worked out, as Carl mentioned, with the Government of Canada funding and Government of British Columbia funding. And in the past, our -- so that's an admirable liquidity position. And in addition to that, over the last number of years, we've made big investments into the GMP facility and our lab office buildings. We've actually funded those entirely off of our balance sheet.

So we own them -- we are the tenant, we are the landlord, we are the bank behind those actually. And so that's an opportunity for us to get additional liquidity off of those assets. And of course, you see them on our balance sheet that's not reflected in that liquidity number that I mentioned. Having said that, we -- in our operating cash flows, we're using about $30 million a year -- sorry, $30 million a quarter, so about $120 million a year -- and in the past, you'll notice as well large investments in the PP&E. Those large investments are largely done.

So where our GMP facility is ready to go. So you won't see those going forward. It will turn more into kind of CapEx maintenance significantly lower. And so with that cash burn and that cash burn includes advancing 635 through its clinical trial and advancing that other portfolio and bringing them into the clinic in 2027, we'll use about $120 million in operating cash flow. And so we have more -- we have quite significant amount of liquidity and runway, at least the next 3 years, as we like to say.

Perfect. And with that, thank you so much, AbCellera team.

Thank you.

Let's go ahead and get started. My name is Ashleigh Acker, a biotech analyst on Allison Brassel's team here at Piper Sandler.. Thank you for joining us at the Piper Sandler Healthcare Conference. It's my pleasure to introduce AbCellera Biologics. Joining us today for a fireside chat, we have Senior Director of Strategic Finance and IR, Martin Hogan. Thank you for joining us for this fireside chat. This is meant to be an informal format. So if anyone in the audience has any questions, just raise your hand.

So just to level set for investors, Martin, could you give a quick overview of the company, the AbCellera platform, what you've built over the last decade and where you are with partnered and pre-partnered programs? And then we'll jump more into a fireside chat program with Q&A.

Absolutely. Well, first of all, thank you for hosting us, Ashleigh. It's a pleasure to be here again. I will be making some forward-looking statements today. Please take a look at our SEC filings for a full description of the risks involved. Yes, when we think about AbCellera, we're at a super exciting time in the company's history. We started out really with a strong technological advantage based on searching deeply in natural immune systems for antibodies that could make good therapeutics.

And that was really a technological platform advantage that we had built coming out of the University of British Columbia and Dr. Carl Hansen's lab. And we then were faced with a question of how do you deploy that capability. And clearly, it was in finding antibodies that could make good therapeutics, but we had none of the capabilities around that. And so the right way to take that forward was by engaging with large and small pharma, biopharma, biotech companies who had ideas for antibody-based therapeutics, but didn't have those same capabilities. And so we worked in partnership with them and overall, did that for over 100 programs.

And in the process, really built out the knowledge, the capabilities refined so that today, we feel quite comfortable saying that particularly where it comes to difficult targets, we probably have the world's best capability of finding antibodies against those. What then also happened organically in partnership was that we increasingly had partners who were looking for us to do more of the downstream assessment of the antibodies that we found.

And we also realized there's a whole set of very difficult targets that many companies won't even touch because it's unclear whether finding antibodies against them is feasible or not. And so 5 years ago, we started working on GPCR and ion channel targets, particularly ion channel targets in-house to develop the capability, prove to ourselves and others that it is possible for us to discover antibodies against those. And that was really the core of what is now the shift towards internal programs. So having built those capabilities, having demonstrated them against some of the industry's most difficult targets for some of the most sophisticated partners that we have, we're now in a position where we can deploy those capabilities against targets that make sense to us internally. And so we're now very much focused on developing what is a growing and highly attractive internal pipeline.

Excellent. So let's talk about that transition a little bit. So you recently transitioned from a platform-focused company to a clinical stage biotech. What investments or capabilities were built to support this transition, particularly as you're running early-stage clinical programs? And how seamless has this process been?

Yes, that's a great question. And we always knew that this was a large investment and a big lift for us to do. I think most importantly, what we needed to build out were downstream capabilities, downstream from discovery and early antibody assessment. So really being able to do translational biology to do biophysical assessments and then also to move into the manufacturing space on the one hand, with CMC and manufacturing capabilities, where we just started operations for clinical manufacturing in our own facility in Vancouver, British Columbia.

And then, of course, also the regulatory and clinical side of the business. And we're super happy to say that this big corporate goal that we had for this year, which was completing the investments and standing up those capabilities has now been met. And when you add to it the investments we made in target assessment at the very front of the business, which, of course, in a partnership business, you don't need to have so much where partners select the targets. We can now honestly say that we are end-to-end integrated from assessing targets all the way through to manufacturing the clinical materials in support of studies.

Great.

How does that go? There are always challenges, but I think overall, we're looking at teams that are integrated, that are, by and large, co-located with 90% of the company in Vancouver, British Columbia, all within, call it, a mile radius. So highly integrated teams, both in terms of location, in terms of how they work together, and I think we'll touch on that a bit more. So we're very happy to be where we're at, and we feel we are entirely ready to execute on using that capability to build an attractive internal pipeline.

Excellent. So really quickly, I just wanted to talk about the partnership strategy evolution. So historically, partnerships were core of AbCellera. How has the recent shift to internal programs influence your approach to partnerships?

Yes, it's a good question. Partnerships indeed were absolutely critical to the business. And of course, through the partnerships, I think, over 40 partners for which we've successfully delivered over 100 drug discovery programs. The most important element to that was it allowed us to really refine our capabilities to prove them, refine them to a point where we can be confident that whatever antibody discovery and development challenge we're taking on, we are the ones to do it and particularly in the space of very difficult, very difficult targets. How has that approach changed?

I think we're now at a point where really late in 2023, we realized that we were at a bit of a crossroad where we had to make a choice about the kind of company that we wanted to be and to become.

And we chose to become an independent drug developer. And when you make that choice, you do need to prioritize accordingly. So we have stopped actively looking for new partnerships. We do still have ongoing partnerships where we're committed to our partners, firmly committed to deliver antibodies against the programs that we've agreed to work on.

Would we selectively accept additional programs, particularly from existing partners, but also from exciting new ones? Quite possibly. They would have to meet the same criteria as our internal programs, and I'm looking forward to talking about those a bit more. But in addition, of course, they would have to be situations where we believe that we could not successfully prosecute that target by ourselves, right?

A good example of this was in the antibody drug conjugate space where we had no experience. And so a partnership at that time made really good sense. And so where we're standing now is we're looking at both the experience, the corresponding data that we've gathered on those programs. And of course, we've built out what we internally believe is a very attractive and over time, hopefully, others will agree valuable portfolio of downstream stakes in drugs that are -- many of them yet to move into the clinic and some of them hopefully to get approved over the next years.

Excellent. Let's pivot to your internal programs. So let's talk a little bit about ABCL635, which is a nonhormonal treatment of moderate to severe hot flashes, so vasomotor symptoms associated with menopause. So you recently disclosed the target and indication for this asset. Can you walk us through the start of the program? What makes the target and indication attractive?

Yes, absolutely. That's a great question. And indeed, it is our most advanced program and probably the one that's most tangible, certainly from an external perspective. So what made 635 such an exciting program for us to pursue was that it really met the big criteria that we're looking for in terms of science that is clear and largely derisked in this case.

We've had other biological evidence, but most importantly, also at the time that we started the program, -- we had seen the Astellas molecule, fezolinetant already demonstrate that engaging NK3R as a target works for significantly reducing hot flashes. And so we had derisked biology. We saw a large unmet medical need, which we'll talk about in a second. And we also saw the potential for differentiation in addition to a very clear development path.

Also importantly, when it comes to differentiation for us was NK3R is a GPCR target, so a difficult target. And so we felt this was a great opportunity to deploy our capabilities in a space where we were not then and as of today, still aren't aware of anyone else advancing a biologic against the target. When we look at the market opportunity or the unmet medical need importantly, there are about 40 million women of menopausal age in the United States alone. About 1/3 of them suffer from moderate to severe vasomotor symptoms, hot flashes that can be absolutely debilitating, right, impacting quality of life, impacting career opportunities.

And so really a condition that needs to be addressed. The standard of care as of today is menopause hormone therapy. About half of women suffering the symptoms seek treatment, but also about 20% of women are either contraindicated or cannot tolerate MHT. And so that leaves over 1 million women seeking treatment, but up until recently being left with no treatment option. And so in this space, the need really primarily is for nonhormonal options for treatment. And with the 2 small molecules, fezolinetant and elinzanetant, those now exist. Both of those molecules have been approved, but we saw that there's an opportunity to do better on a couple of counts at least with an antibody treatment.

Great. Let's talk a little bit about the Phase I trial that's currently evaluating this molecule. So can you just walk us through the trial design? It also includes both menopausal women and healthy male volunteers. Can you just unpack the rationale behind that decision? And what are the key efficacy and biomarker measures you're looking at and how that will help inform further development?

Absolutely. So when you look at the Phase I design, it is really set up to prove out the 3, I think, main -- the 3 main things that we're looking for. The one, of course, which we kind of know going in is that we're seeing the kind of PK and PD dynamics that we're -- that we've seen in preclinical studies. Importantly, of course, we're looking at safety, where our expectation is that being an antibody and there not being any target-specific safety signals from the 2 molecules that we've seen go before that we're expecting a very clean safety profile. So of course, we're evaluating that. And of course, we're looking for the right dose.

In addition to that, and this is done with quite -- as you would expect, with a SAD arm and the MAD arm to the study. But importantly, we've added a third proof-of-concept arm, where we're including 80 women who are suffering from moderate to severe vasomotor symptoms and where we are looking to see first efficacy signals. So -- you asked about biomarkers. We're looking at a range of hormones.

One of them and the rationale for including healthy male volunteers in the SAD arm of the study is that engaging NK3R in men leads to a significant reduction in testosterone. And it is a very clear signal, much clearer than equivalent hormones in women, although we are looking at those as well. And that is giving us a signal as to whether we're getting good target engagement or not. And that's the -- that really is the -- is or one might say was the most important question as to whether it made sense to pursue the proof of concept. So that's the rationale for including men.

And in the proof of concept with a fully double-blinded study design and 80 participants, we are expecting to get an efficacy signal, both in terms of frequency, severity as well as some other endpoints that should give us the conviction as to whether we are looking at having a likely drug in our hands.

Excellent. I also want to spend some time on your other internal program, ABCL575. So that's a treatment for moderate to severe atopic dermatitis. And there's also potential applications for other inflammatory and autoimmune conditions. So can you just quickly go over the mechanistic rationale? It's an OX40 ligand rather than the receptor. Can you explain the scientific rationale and how it differentiates this molecule?

Certainly. So ABCL575, when you look back at the criteria that we discussed for where -- that we are discussing of where we're looking to focus with internal programs really kind of falls outside a little bit in terms of it being a follower to Sanofi's amlitelimab in many ways. And it came to us through a partnership, a co-development partnership with a partner ultimately backed away. So we're not -- like this isn't a molecule where we're looking to be first-in-class or potentially only in class as with other programs in our pipeline. But we are very excited about the large role that blocking the OX40, OX40 ligand axis can play, particularly in immune conditions.

And we believe that this space is so large that there is room for many more than just a single molecule to win. So that's where -- that's why we decided to continue pursuing the molecule even though it doesn't quite fit all of our normal criteria. In terms of differentiation, really, the most important thing, and this is also what we're looking to demonstrate with our Phase I trial is that it is an exceptionally well-behaved molecule, right, that it is -- we've got every reason to believe that it is going to be completely well tolerated and safe.

And also importantly, we're looking at PK and PD, of course. And in the one angle where we may have room for differentiation from amlitelimab really is in half-life. We know that our antibody has a longer half-life. Whether that translates into a more extended dosing regime for patients or not is yet to be seen. But overall, what we need to demonstrate here is that we are on all counts, at least as good as amlitelimab in terms of behavior of the molecule.

You also touched on the rationale for targeting OX40 versus OX40 ligand. Based on our understanding of the biology, it shouldn't really make a difference. I think the Amgen molecule targeting OX40 is not Fc-silenced. So that causes likely some of the side effects that were that we're seeing. But with an Fc-silenced molecule and there are a number out there in other developers' hands, it from our understanding, shouldn't really matter which side you target. Although so far, in fairness, the clinical data have been -- have looked slightly more favorable for targeting OX40 ligand, which is what we're targeting.

Excellent. So I think something that we're thinking about is the path forward for this molecule. What's gating Phase I trials? And what would you specifically need to see in order to move this forward? And also, are you looking to partner this program or advance it independently?

Yes. We believe that the class overall has large potential. Really all that I think we're looking for and the potential partners for the molecule are looking for is confirmation that indeed the molecule behaves as well in the Phase I study with respect to PK/PD safety, in particular, as amlitelimab does.

The excitement about the class stems from applicability far beyond atopic dermatitis and other immune conditions alone, potentially more likely in combination with other agents. Given the complexity and the potential across so many indications, it almost certainly makes more sense for the molecule to be developed by a larger player that has the capabilities that we don't and where we believe our -- this is going to be capital intensive, and we believe our capital is better deployed against the other exciting programs in our pipeline, 635 but then also beyond.

So we are both on the back of the attention that 575 has already gotten as well as through all our partnerships in the past. We've been in conversations with players across the industry. And I think they, like us, are looking for Phase I data to decide whether this would make sense for them to develop alone or in combination with something else.

Great. So let's talk about some of the earlier pipeline assets and some upcoming assets. Can you share any updates on ABCL688 or any other programs that you expect to enter the clinic in 2026? And are there any specific therapeutic areas or modalities that you're focusing on?

Yes. Thanks for asking about the earlier pipeline. It's easy to get focused on what is in the clinic already. We disclosed 688 as our third internal program earlier this year. We said it also comes from our CMPT, so complex membrane protein, GPCR and ion channel platform. So that's exciting about it. We've also disclosed that it is targeted at autoimmune conditions. We're playing our cards close to our chest with respect to everything else, but we are expecting to make an IND or Canadian equivalent CTA submission in the middle of 2026. And at that point, we then also disclose more about the molecule.

We are excited about it. It's looking really good in our preclinical hands, if you will, so far but you'll have to be patient with us to disclose more on that molecule. Behind that is a pipeline of, I think we've disclosed over -- I think at this point, over 20 internal programs, many, about half also in the complex membrane protein target space. And the other half in other modalities. So some of those include T cell engagers, where we've built a really attractive platform. And then there are other often novel mechanisms that we're exploring that we're able to explore because of our capabilities in difficult target discovery. So we're excited about those.

We think there are many potentially differentiated assets in there, selected based on our criteria of do we understand the science? Is there a significant medical -- unmet medical need and market opportunity? Are we able to differentiate from current and upcoming competitors? And do we have a clear development path. And we've got in that pipeline, that's how we've selected the programs, many programs that do really well on all 4 criteria.

Great. So we have a little bit more time. Maybe to wrap up, can we talk a little bit about your capital allocation? You've mentioned being well capitalized and backed with government funding. Can you discuss your runway and capital allocation strategy moving forward as you focus on fully owned assets?

Absolutely. So we continue to be in a very strong capital position, partly based on the royalties that we earned on our success in COVID, where we continue to have about $680 million at the end of last quarter of available liquidity, which is certainly enough to keep advancing our internal pipeline for many years to come.

I think our official statement is well over 3 years of continued investment in the pipeline that we can support with that. And that is the main use of the capital, right? It's going to be -- we've got the capabilities. We've completed those investments this year. And so now it really is putting those capabilities to use in our internal pipeline with the committed government funding as well as the cash and equivalents that we have on hand to prosecute the programs that are in the pipeline, make selective additions to it and hopefully, advancing through the clinic with 635 and following molecules successfully.

Excellent. Well, thank you so much for joining us today.

Thank you. Thank you, Ashleigh. It was a pleasure.

Great. Hello. Good afternoon, everyone. Welcome to the final day of the Jefferies London Healthcare Conference. It is now my pleasure to introduce AbCellera. We have the CEO, Carl, here with us today. I'll now hand it over to Carl for a short presentation, and time permitting with audience Q&A at the end. So yes.

Thank you. All right. Thank you, everyone, for hanging in there for what is, I think, the second last or the penultimate last presentation of the conference. So I'm Carl Hansen, Founding CEO of AbCellera. Looking forward today to giving you an update on the company for some of you introducing you to our company. I think we're in a really interesting spot, and I will try my best to be brief and leave time for questions. So please, as I go through, if there's anything that's in your mind, save for the end, and we'll have a conversation.

The regular disclaimers. So first, a bit of an introduction. AbCellera was founded back in 2012. I founded it out of my academic lab at the University of British Columbia. It was originally founded based on a technology that combined microfluidics and single-cell analysis to do a deep search of natural immune systems in order to find antibodies that look like they have the properties that you would like to develop for therapeutics.

Over the first decade of work at AbCellera, we have focused primarily on building out that technology platform, both upstream and downstream. So right from concept through to what is now complete GMP manufacturing capabilities in Vancouver, and also working in a partnership business that I'll talk about on the next slide.

Through that time, we've been successful in building the company from what was 6 founders to about 600 employees, 540 of those are located in Vancouver, Canada. That's our headquarters. We also have a significant site doing R&D in Sydney, Australia.

One of the big wins we had along the way was in 2020, we were successful in working with Eli Lilly and supported by the Department of Defense in the United States to find the first COVID-19 antibody and then follow that up with the second one, bamlanivimab and bebtelovimab. Those were used through '21, '22 and '23. I think ultimately, for Lilly, that brought in about $4 billion of revenue and brought in a 25% royalty that was about $1 billion into AbCellera.

So that, combined with some government funding that we secured over that time, has allowed us to take about $1.5 billion in nondilutive funding into the company that has been used to help advance the platform and get us into what I think is a terrific position to move forward.

As of today, we have about $680 million of liquidity. We have built out our capabilities. And as I'll tell you on the subsequent slides, we, in 2023, have decided to move from an existing partnership business into focusing on building an internal pipeline and have taken our first 2 molecules into the clinic and have quite a robust, and I believe a very exciting pipeline coming behind that, we'll be able to show you in the coming years.

So AbCellera built -- or I would say, our competitive advantage, because you need something to win in this space, is in tackling very difficult antibody discovery programs. We built that capability over 10 years of running a partnership business. That business was essentially AbCellera acting as discovery for hire for large biopharma and small biotech companies. Through that time, we've worked with about 40 partners. We have worked on over 100 programs, and we needed to build that business by solving the problems that many people were struggling with. That has allowed us to build differentiated capabilities in many areas of antibody discovery on the early side, and in particular, on working on GPCR and ion channel programs.

The way that this business was structured was that we got paid early on fee-for-service for the work that we're doing. And then we always got some tail on the molecules as they move forward. So through that work, we have accumulated a portfolio of ownership positions in molecules that are, at various stages of being advanced in preclinical and early clinical work with our partners, which includes some large pharma companies and also some smaller companies. So that has built a valuable asset. It's an asset that takes a long time to mature. And despite a lot of discussions over the years, I think we have resigned ourselves to the fact that the market will not value that until it's actually generating cash flow, but it is part of the business and something that we hold on as a valuable asset that will be increasingly recognized through time.

Probably one of the most important things of the partnership business is it allowed us to work with very enabled partners and to direct the platform R&D so that we could solve problems that really matter for the industry.

As I mentioned, in September of 2023, we made the decision to start to wind down the partnership business. We still have activity, and we still have valuable partnerships because we had some multiyear programs or partnerships going on, but we are no longer out searching for additional partnerships, and instead to use the capital that we have and our capabilities and turn that internally to build an internal portfolio.

Within the portfolio, we are emphasizing differentiation. We want to make sure that we get into some clean space. And our advantages are in GPCR and ion channel targets that represents about half of the 20-or-so preclinical programs that we have. Also working on novel modalities, including antibody drug conjugates, and we are doing that in an indication-agnostic way, really taking a broad platform capability, and looking for the most attractive opportunities that we can take in-house and move forward into the clinic.

Since that decision, we have been successful in taking our first 2 programs into clinical development. Our lead program is ABCL635. That is a first-in-class antibody for the treatment of vasomotor symptoms or hot flashes associated with menopause or with androgen deprivation therapy given for cancers, including breast cancer and prostate cancer. I'll spend most of today's talk going over the details of that and why we're so excited about that program.

Our second program is a follower. It's a program in OX40 ligand. I'll mention that briefly at the end of the talk. And a couple of quarters ago, we announced that a third candidate, ABCL688, has moved into IND-enabling studies. This is another program from our ion channel and GPCR capability, and one where we have not yet disclosed the target, except that it's in the area of autoimmune conditions. And we expect to have that one move into CTA or IND filings near the end of next year.

For our lead program, as I mentioned, is ABCL635, this is a first-in-class antibody that targets NK3R or the Neurokinin 3 receptor is being developed. That's a GPCR protein. So a good example of applying our differentiated discovery capability to solve a difficult problem on the antibody side. It's being advanced for the nonhormonal treatment of menopausal hot flashes. And so obviously, that is in the area of endocrinology and women's health. And that one is currently in Phase I and should be moving into a proof-of-concept study sometime early next year.

This slide here, just to give you a sense of how we think about programs. I do think that ABCL635 is a great example of the type of program that we are trying to prioritize within the pipeline. So we have 4 dimensions we look at. One is the science. We want to take as little scientific risk as possible. So we are looking, in particular, for things with good human genetics and ideally where there's both robust preclinical evidence as well as clinical evidence often for GPCRs and other targets like that, that comes from small molecules that have already been through the clinic.

We're looking for a good commercial opportunity, obviously, differentiation and a development path that is relatively straightforward. And I'll touch on all of these on the subsequent slides. So first, menopausal hot flashes. This is a condition that affects an immense number of women. It's estimated there's about 40 million women in the U.S. of menopausal age, and roughly 1/3 of those will have moderate to severe hot flashes. For a long time, I think this was underrecognized as how important -- how disruptive this is to people's lives. It causes a lack of sleep, it causes chronic fatigue, a loss of employment opportunity and general reduction in quality of life.

We believe that there's roughly 6 million women that seek -- that would seek treatment that have moderate to severe hot flashes, and of those, roughly 20% are contraindicated for the use of hormone therapy. So menopausal hormone therapy is a first-line therapy. We believe it's an excellent option for most women. And just recently in the news, the black box warnings that were put in place as part of the women's health initiative have been removed. So we expect that there'll be an increasing awareness and increasing activity of women seeking treatment with hormone therapy.

Yet, there are still 20% of women that are either hard contraindicated, about 12% or 8% that end up discontinuing menopausal hormone therapy within a year because they can't tolerate it well. So if you do those numbers, we believe that a conservative estimate is that there's 1.2 million women in the U.S. that are contraindicated that have moderate to severe hot flashes and that need options outside of hormone therapy.

The most validated pathway for treating hot flashes is the NK3R pathway. NK3R is a GPCR, and it's expressed on neurons called KNDy neurons. So kisspeptin, neurokinin, dynorphin neurons, KNDy neurons that are in a part of the brain called the infundibular nucleus or the arcuate nucleus. KNDy neurons are suppressed by estrogen, and they are activated by NKB, which is the ligand for NK3R.

During menopause, estrogen falls, which results in hypertrophy of those neurons, they grow, and that's been shown through studies of cadavers of women as they pass through perimenopause and into menopause. And what happens there is you get a dysregulation where you have too much signaling through NK3R that leads to the firing of those neurons, which have protrusions that go through the blood-brain barrier into a part of the brain called the preoptic nucleus, and that triggers the thermal regulatory effect or the flushing.

So the concept is and what has been shown both preclinically and clinically is that if you block NK3R, you can normalize that activity and suppress the initiation of hot flashes. So our molecule is designed to be injected as a once-monthly subcutaneous injection to penetrate the part of the brain where it needs to engage with KNDy neurons to block NK3R and then to suppress the triggering of those neurons that then triggers hot flashes. And that has been shown clinically with a couple of molecules.

So just in the last couple of years, there are 2 small molecules that have been now approved for the treatment -- for the nonhormonal treatment of BMS. The first of them is fezolinetant, brand named VEOZAH that is in its second year on the market by Astellas and tracking, I think, this year to roughly $320 million in sales. And the second, just recently approved is elinzanetant. I believe there was a talk just an hour ago by Bayer, where that one has now been launched, which is not an NK3R -- strict NK3R antagonist, but rather an NK3R and NK1R antagonist. Both of those have recently provided options for women that cannot use or choose not to use hormone therapy, and we think that's a wonderful thing for women and also a wonderful thing for our product, as this will provide some time for these bigger companies to start to build the market.

So our drug that we're developing, we believe, has 3 potential angles of differentiation. The first of which, as I mentioned before, is that it's designed to be a once-monthly subcutaneous injection. We have done a market study with women asking them, given equal efficacy and side effects if they would prefer a once-monthly injectable or an oral. And in that study, we found that a majority, 55% said that they would prefer the once-monthly injectable. And amongst women that were experienced with injectables, that number went up to 75%. And I think that is a reflection of what has happened with the GLP-1s and the general improvement of auto-injectors and acceptance of that as a way to inject. So there's an advantage in convenience for many women.

We also think that we will have -- or we have an excellent chance at having a product that has a cleaner safety profile. Wait a second, sorry. We also believe we'll have a cleaner safety profile for a couple of reasons. So fezolinetant was launched without a box warning, but ultimately ended up having a box warning for liver injury. And so it has -- and that was consistent with the early clinical development where you saw elevated liver enzymes during development.

Elinzanetant has a warning, but not a box warning for somnolence, and we believe that the somnolence is a result of antagonism of NK1R. NK1R is also expressed on KNDy neurons. There's not strong evidence that, that is a pathway that results in a suppression or activation of vasomotor symptoms, but it has been explored before for mood disorders, and we believe that, that is an on-target side effect for NK1R. That is potentially advantageous since sleep is also a problem, but we think it's something that should not be combined with NK1R as a product.

The last area where we think we may have differentiation is in efficacy. And that's something we haven't said much about, but we believe that is true based on looking at the clinical development, particularly the Phase IIa and IIb for fezolinetant, where they showed a better suppression of biomarkers and better efficacy, particularly in severity when they dosed at higher levels, so 90 BID or 180 milligrams per day. Due to the liver toxicity, that drug actually was developed in Phase III at 45 milligrams per day, and we believe there's still room for better in target engagement with an antibody and engagement that would not fluctuate through the day because the antibody has a long half-life.

So we are developing this with the intent of having a drug that is more convenient, has a cleaner safety profile, and potentially even has higher efficacy, although, of course, we need to prove that in clinical studies.

So ABCL635 began clinical development in, I think, the first or second quarter of this past year. That study is set up to start, as you might expect, with a MAD and then a SAD version. As part of that evaluation, we have included healthy male volunteers. And the reason for that is that suppression of testosterone in males is the most reliable biomarker of target engagement for this particular pathway.

Based on successfully demonstrating target engagement with these neurons, we'll then move this forward into a proof-of-concept study that we are optimistic we will start enrolling and dosing patients in early next year. That study is designed essentially like a Phase II. So it's 80 patients in a double-blind, placebo-controlled study in postmenopausal women with moderate to severe hot flashes with endpoints of severity and frequency, which are the approvable endpoints.

So for us, this will be a very important readout for AbCellera. I'd say in 2026. If you're looking for a catalyst, the biggest catalyst will be a full readout of both the MAD, SAD and the proof-of-concept part of this Phase I. If all goes as we hope, touch wood, we will know whether or not we have a drug, and we are certainly getting ready and doing preparations to take that quickly into a pivotal trial.

Just briefly on our second program. The second one is a follower. It's ABCL575, and it's a half-life extended best-in-class antagonist of OX40 ligand that has applications in atopic dermatitis and a variety of other autoimmune conditions. This is a program that's somewhat off-brand for AbCellera. We're focused on areas where our technological differentiation can get us into some white space.

The OX40 ligand class has become somewhat crowded. There are 2 incumbents. One is amlitelimab by Sanofi, the other one rocatinlimab, which is the same access, but on a different protein, OX40 by Amgen. Behind that, there is, maybe half a dozen or so molecules that are in a similar stage to ours.

Our excitement about this program largely relates to what we think is the immense potential of the class. So OX40 ligand has read out positive in atopic dermatitis. It has also been advanced into Phase III by Sanofi for asthma. And there are ongoing studies in other indications, which include alopecia and celiac disease and scleroderma. So we think this class has immense potential. In our hands, we are focused right now on executing on the Phase I. We expect to read that out sometime next year. And I don't expect any surprises. So I expect that this molecule will prove to be as advertised, as potent as amlitelimab, a half-life of around 2 months and a clean safety profile.

And the biggest catalysts for this program are going to be what happened outside of our shop with additional readouts from Sanofi and from other players that are validating the OX40/OX40 ligand access in different disease indications.

At this point, given our conviction in ABCL635 and also the pipeline that's coming behind it that we're very excited about, we think it's unlikely that we would make the investment to put this ourselves into Phase II. And so we are on the lookout and setting up to hand this off to a larger company with investments in dermatology or other areas where this makes more sense with their portfolio.

And lastly, just to summarize where we are as a company. On the screen here are our corporate goals for 2025. We have now hit all of those. So we brought our first 2 molecules into the clinic. We are definitely focused on ABCL635 as the most important near-term catalyst. We have already nominated an additional candidate, ABCL688, again, from our GPCR and ion channel platform. And we do expect to nominate an additional candidate before the end of the year that we'll probably report on at the full year earnings sometime early next year.

The other thing I didn't mention much is that we've -- after 13 years of investments in the technology and the platform, we have completed those investments. That now includes over 300,000 square feet of laboratory facilities, a GMP manufacturing facility, and of course, all the technologies and know-how that sit behind it. And we have just recently started activities manufacturing our own drugs in Vancouver.

So we're in a terrific place as a company. We have a fully built capability for discovery that we believe is best-in-world, particularly in these areas that I highlighted. We still have $680 million of liquidity, and we have our first 2 molecules going into the clinic, and we expect to be bringing 1 or 2 additional candidates into that pipeline every year moving forward, at least for the next year or 2. And the name of the game right now is to get that compelling data that shows that we have a drug. If we do that, I think we're off in a way, and we can continue this path into the future.

The vision of the company here is to start from scratch and have an organic ability to generate differentiated assets and to finally integrate into being a global biopharma. A lot of water between here and there, but I think we're in a great spot to try. So with that, I'll end. And if there's any questions, I would welcome them. Thank you.

[indiscernible]

Right. So as I mentioned, we are hopeful that we'll be dosing patients in the POC part. That's really where the rubber hits the road early next year. And we anticipate having data on 4-week efficacy for all patients recruited by Q3 of next year. So that's relatively quick. And enrollment, obviously, is not that challenging because it turns out that there's a very large number of people that are looking for solutions here. In terms of the later-stage studies, I wouldn't put a number on it, but you would expect that you're going to run 2 Phase IIs at about 500 patients and then have at least a year of exposure. So that's probably a 2-, 2.5-year study. Please keep it coming.

This is working now? Great. For 575, a lot of interest in that space. As you say, it's quite crowded. Is the molecule suitable for combination with or whatever?

Absolutely. So the question is for 575 is a molecule suitable for combination? Absolutely. I think that's one of the very attractive things about OX40 ligand as a target. And in the recent readout from Sanofi in atopic dermatitis, one of the highlights was it definitely worked. Perhaps the efficacy was not what people expected, but I'm less bearish on that because we don't know what the patient population is that they tested, and there may well have been a significant number of patients that were post-JAK or post-Dupixent in there.

So the fact that it didn't have the same efficacy that it had in the Phase IIb when it went in naive patients is understandable, but the other thing I was going to say is it was very, very clean. And so given the trend towards combination therapy, I think OX40 ligand today, based on what we know, is an outstanding candidate that could be combined with many, many different modalities.

575, by my reckoning in terms of metrics is unmatched by other assets that we know. So it's high formulation, very stable, long half-life, potent molecule. And the Sanofi data has also shown that you don't need all that much to have a lasting effect. So even if you wanted to do a co-formulation, I think something like this would lend itself to that very well. And as far as I know, the most advanced development of OX40 ligand in combination that's not a bispecific is by Apogee, and so we'll be watching that with the IL-13 and see if that reads out. If it does, we may well get interest from other players.

And I think you've said on earnings calls that you are active in discussions on that front. Is that correct?

We have definitely talked to many groups. I think right now, our focus is really on 635. On the 575, we're running it through, and we want to wait to see what happens with some of the other readouts that are coming up, both in atopic dermatitis and other indications. And it's really a matter of, hey, we're positioned to move quickly if someone needs one. And the interest is going to depend on catalysts that sit outside of the company. So we're ready. And if that comes to pass, then we can engage quickly. And we have those relationships, both from talking about 575 and also from the partnership business. We've built connections across the industry there.

Are there any more questions?

Great slide, very, very good scientific communication, top-notch in industry. I wanted to maybe ask you to tell us more about your strategic shift from focusing on platform to more of a pipeline business, and you've been widely successful in your platform partnerships. And how do you think about that shift now that 2 years, 3 years after, what could have done differently? How -- why did you decided to wind down one rather than having them both going?

Sure. So the question is, can you say a little bit about why you made that shift and how it's going? Is that basically right?

Yes. And why are you winding it down rather than having both going in parallel?

Those are great questions. So first, I think from the outside, the shift probably looked more abrupt than it felt inside because we were working on internal programs in parallel to doing the partnership business for some years. So that -- you can't start that from nothing. You have to be building that up for some time. In '23, a few things came together.

One, we are getting close to finishing the capabilities. We had moved assets forward that we had a lot of conviction in, particularly 635. We're like, hey, we're excited about this. This could be a blockbuster drug. And at the same time, the partnership business was getting more difficult mostly because of the macro, what was happening to biotech. So if you're partnering, you're engaging with companies that are starting new things. When the market is rough, people are starting fewer things and that gets tougher.

So at that point, we decided, okay, we need to really focus on doing the drug development. In the past, we had tried to do both. I think it's a cliche, but it's very difficult to get a company to do two things simultaneously. You have to have an identity, and it's definitely been my experience that by focusing on the internal programs, a lot of the tension in priorities and resource allocation dissolves and you make much faster progress on the programs.

And if you had asked us even at the very beginning of the company, where would AbCellera ultimately end up? I would have told you we're an -- we want to be an integrated biopharma from the beginning. The partnership business is the right way to get there, but I'm very -- I was convinced in '23 and everything I've seen since has made me even more convinced that the path forward right now is to bring drugs forward and own them and control our destiny to generate the most value. So that's where that.

The last part of your question was how is it going? I do think when you make that transition, you get some skepticism because there's a lot of examples of companies that are platform companies that struggle to make that transition, and it's definitely not easy. So we had a bit of a -- there was some reorganization. You have to shift priorities, you have to communicate differently. I'd say we're fully through that. So the company is through that. We have the first 2 programs. We're executing well. And while we still have work to do on the development side, we're feeling very well positioned and very on track to deliver over the coming years.

Any more questions? Okay. Thanks, everyone.

Thank you very much.

Thank you very much.

All right. Good morning, everyone. I'm Stephen Willey, one of the senior biotech analysts here at Stifel. And glad to have with us here to kick things off this morning from AbCellera Biologics, CFO, Andrew Booth. Andrew, thanks.

Hi, Steve. Good coming. Thank you for having me.

Here. Maybe before we jump into Q&A, if there's any, I guess, any opening statements or introductory comments you want to make about the company?

Yes. I'll just -- first of all, thank you for having me here and the regular disclaimers that I may be saying forward-looking statements, and please check the SEC filings for all of our necessary risks or reported risks.

Okay. So you're obviously you've made the transition, right, from kind of becoming a portfolio platform-focused company to one that is now developing your own clinical assets. And that's definitely kind of a transition I want to talk to you.

But maybe we can just kind of talk a little bit about the partnership side of the business and kind of what drove that transition from kind of being not necessarily kind of a service provider, right, but kind of being more in control of your own drugs, wanting to take ownership of that. And should we expect that, that ownership potential for the wholly owned assets that you move into the clinic should also possibly increase over time in terms of the amount of economics that you want to retain?

Yes. Happy to comment on that. So actually, the kind of lead up to that is AbCellera has now been around for about 13 years. It was founded in 2012. And you're right, at the beginning, the investments were all on the capability building in the platform. And we were doing that working on some of the hardest programs out there that were funded by our partners.

So we were able to, for the majority of the first decade of the company, use the partnership business and the partnership model as a way to invest and build up our own capabilities with the goal of really focusing on the highly differentiated, very difficult targets. So we've talked about those in the past. So antibody discovery and development programs that have some kind of technical challenge that need to be overcome.

And we believe we could invest in that capability to get to a different technology curve for finding therapeutic antibodies. And we focused in on that by bringing this capability to our partners. And as you say, not really in a service model, but in a way where we would get paid for what we would do. But importantly, we would retain some of the upside in the success of the molecules that we discovered, participating in downstream milestones and then ultimately royalties. And over time, as the company built, the focus for us was capturing that long-term value.

So increasing in the royalty position, moving into co-development where we would have like a 50%-50% stake. And even then back in 2021 or so, really making a shift, not solving for volume there, but really solving for working on difficult problems where we believe our technology could make a difference and with partners who we believe had the wherewithal to get them through to the clinic and then move them on ultimately to patients.

Now during that time, there was a real focus on building those capabilities. And now, as you say, we have made a transition into using those capabilities still for our partners. We have some strategic partners. They're really the big pharma partners that we're focused on with Lilly and AbbVie. And that has been a conscious shift, and you've watched it over the last number of years.

And recently -- or about 2 or 3 years ago, we made the decision to say, no, and we're also going to move forward our own assets. And it took some time to get those into the clinic. And as you said, kind of we would consider that transition complete this year in 2025 as the first 2 of those wholly owned assets moved into the clinic in the second quarter.

And in the third quarter, we also announced that there's -- the next one has moved into the IND-Enabling studies. So I think that, that has been received well by the market as well as by our employees and the focus and direction on that, where when we said we were going to move, that was the strategic choice. And then we followed that up with the execution and hit the time lines of bringing these first 2 assets to the clinic, and we're pretty excited about that, and we'll have the first readouts in 2026.

Okay. And like you said, I think there's still some -- you're still entertaining partnership opportunities, right? So maybe you can explain to us what that checklist needs to look like in order for you to choose to work with a partner now.

Yes. And we have worked on over 100 programs with partners. And we have -- on an annual basis, we do give more color as to what that portfolio of downstream positions look like in terms of how many are we still working on and how many do we know are not being pursued by partners.

And we still occasionally will do that. But we actually put those programs to the same test that we put our own internal programs through, like do we like the science? Do we think there's a big commercial opportunity? Do we have an angle on differentiation? And is there a good clinical development path. Those are typically -- that's typically the framework that we use.

And in the case where it's a partnership, it's also got to be a molecule program where we don't really have an angle on our own how we could pursue that. The partner is typically bringing something to the table that we wouldn't be able to pursue that program without the partner, whether it's their clinical development expertise or some other technology, which has been the way we have gotten into these co-development ones. If it's a smaller company, we've actually managed to negotiate a full co-ownership of a molecule that uses both our own capabilities as well as that of a partner.

Okay. Are partners or potential partners now maybe a little bit more cautious in the sense that you are developing your own pipeline of drugs, right? And I think before that kind of wasn't the case. And so I guess as a partner now coming to AbCellera, how do you, I guess, solve for those 2 things in doing a deal?

Yes. We get this comment quite a lot. We have for years actually, but we don't see it in the day-to-day.

Generally, partners and well-enabled partners come to us because maybe they're stuck and they see that we might be able to -- and there's a partner -- there's a program that's important to them, and maybe we can get them unstuck or bringing some technology to the -- or capability to the program that they just wouldn't have access to. A good example of that is recently in this year, we announced a T-cell Engager deal with AbbVie.

So we've been talking about and working on the T-cell Engagers because it's a particularly difficult antibody discovery program of how to engage T-cells and engage them and activate them in just the right way. But then partner them in a bispecific format or even a multi-specific format. And that is a program that AbbVie we're pursuing with AbbVie, some of our own internal programs and with AbbVie with the ones that are important to them.

And for us, that actually helps us build a relationship with those companies. They get to understand the scientific rigor and the level of quality we have in discovery and development. And if anything, it builds that relationship in the event we might want to partner one of our assets maybe at a later stage. So it's almost a presale activity, you could say, in that licensing.

If there are assets in our portfolio that we would want to license, it's great to have those relationships.

Yes. That's a good point.

And I think that's a win-win actually. And so I don't think -- we don't see that as a deterrent or we don't get that response from those select partners that we choose as a deterrent. It's more of a feature.

So you talked about the -- I guess, the scientific acumen that you've built up in the T-cell Engager space. I know you've also built up some acumen in the GPCR and ion channel space. Are those primarily kind of like the 2 silos where partners now are coming to you for antibody generation?

Yes. I know -- and I know it's part of the legacy of like we've been in the partnership business for some time, but really, the focus is on the internal pipeline. And -- but yes, the difficult targets are particularly difficult antibody discovery program is what we believe we're known for and what our capabilities are well suited for.

And we have historically done that and continue to do that for our partners should they ask. And we have a great set of partners with Lilly, Regeneron, Novartis and others. As you know, there's great validation on the capabilities from those partners that we've worked with. But the focus has turned to really applying that capability to our own internal pipeline. And the case in point is ABCL635, which is a GPCR target. And I know we're going to talk about that one in a second.

Yes. So let's talk about 635. And maybe you could just kind of at a high level, introduce the genesis of this thing. And these targets, I guess, have been historically very challenging. And so I guess from a discovery perspective, how does -- how did your platform differentiate in this instance and allow for the nomination of this asset?

Yes. So ABCL635 is an antibody against the NK3R Neurokinin 3 receptor. And how we came about this asset is it went through that framework that I kind of quickly overviewed previously. It's like do we like the science? And in this case, the NK3R pathway is actually well validated by small molecules, and we can talk about that in terms of the competition that they are building the class of nonhormonal treatments for hot flashes associated with VMS.

So the science, we think, is very well validated. The commercial opportunity is huge, and we can go into some of those numbers, but women experiencing moderate to severe hot flashes as a result of VMS and menopause is -- it's a giant -- it's a large market and a big unmet medical need. Do we have the opportunity for differentiation? Well, we're the first-in-class monoclonal antibody. We see an opportunity, especially in the dosing regimen and that from the studies that we have done, we see that the majority of women actually would prefer a monthly injectable to a daily oral.

That's if safety and efficacy are equivalent, and we have reason to believe why we might be safer than the small molecules. And clinical data will tell us if we've got more efficacy. And lastly, the clinical development path. Actually, it's a very straightforward clinical development path with a single injection, we expect to see -- we have strong biomarkers that we will test in Phase I.

And we do also, as a part of our Phase I, have a proof-of-concept study that is being done on postmenopausal women with experiencing moderate to severe hot flashes. So without a lot of outlay of capital, we are going to be able to see a signal, which will give us real conviction that this antibody is going to eventually be a drug. And I can go into any one of those.

Yes. No, let's hit them all. So I guess on the scheduling side, you talked about this being once monthly. There's a half-life extended antibody. Do you think that there's maybe an opportunity to even extend the frequency of administration beyond a month?

Yes, it is possible. Right now, our target product profile is for a monthly subcutaneous injection with an auto-injector. And we think that, that would fit and be well received by the market. So that is a source of differentiation. I think it's a great source of differentiation.

Just to go back to these statistics, we polled a number of women who are experiencing hot flashes and asked if they -- what they would prefer, either a daily oral or monthly injectable. And over 50% of women said that they would prefer the monthly injectable. And when you segmented that to women who have experience with needles or injectables, either through diabetes or GLP-1s or any other type of subcutaneous treatment, it's over 75% that preferred the injectable. And with the increased use of GLP-1s, maybe that would skew the entire field to vastly preferring and into monthly injectable over a daily oral. So that's a real opportunity. And the one thing I didn't talk about in terms of our framework of the science, the commercial opportunity, the differentiation, the commercial development path.

And it leads to the investments we've made in the platform is that the novelty on this one and the ability to others -- for others to follow. It is an antibody against a GPCR target that hits a part of the brain that is not normally do you go after antibodies even for trying to hit a target in this part of the brain, and it is a GPCR target. So we think we have quite a differentiated asset here that played to our strengths of the years of investment in technology.

I would imagine CNS penetrant is maybe one of the first things that folks are trying to screen out for actually, right?

Yes. Well, actually, the -- we have said quite clearly, and I think that the major risk on this program is target engagement. So can we engage the target? And we are going to find that out in the Phase I. So again, that leads to the -- that lends itself to this conviction on the clinical development path for not very much capital we are going to make -- get a good biomarker data and then also see if the engagement of the NK3R Neurokinin 3 receptor is sufficient to lower hot flashes by kind of in the middle of next year.

And that engaging that part of the brain and engaging it sufficiently to actually be able to send the signal past the blood-brain barrier to the thermal regulatory spot of the brain is the major risk in this program, and that kind of broadly is the target engagement. And we will know by the middle of next year, which is a very exciting time for AbCellera.

Okay. Maybe talk a little bit about the Phase I. I know that's being done in development with this grant, I think it is with the Canadian government. So maybe you can just talk about how many patients, how you expect the utilization of Canadian trial sites to impact or not impact the pace at which you can enroll patients. And then maybe you can just talk a little bit about the biomarker that you're going to be looking at that's going to allow you to claim proof of concept sometime next year.

Yes. So the -- you alluded to this Government of Canada and Government of British Columbia funding that we received. So this was announced in 2023. This is an opportunity for us to get government funding in order to help build the clinical trials ecosystem in Canada, certainly for early phase clinical trials and where we get essentially $0.45 back on the dollar provided the activities are done in Canada.

This is for discovery and development. to the end of Phase I. And both our 575 and our 635 programs we're advancing with Health Canada through the clinical -- through getting a CTA and then establishing our key opinion leaders there and then our clinical trial sites. And that has been going extremely well. So it turns out that there are great key opinion leaders and trial sites and CROs available in Quebec specifically and also in Ontario, and we're establishing sites in British Columbia for these trials.

And it has not been any impediment to the progression of the trial, which has been excellent. Including going through Health Canada. Their treatment of the submission was as you would expect and no delays that we experienced there whatsoever. So it has all gone extremely well. And recruitment and establishing these sites and recruitment also has gone off thus far without a hitch.

So we have managed to start our recruitment on site initiation and recruitment on schedule as we had planned. And what that meant was we separated the Phase I into both a single ascending dose and a multi-ascending dose to test for biomarkers, and we're looking for -- we have recruited both healthy males and females. Because the primary biomarker we're looking at is reduction in testosterone.

So if we engage the target, it's our expectation to knock down testosterone. It's a very easy biomarker to test. And we will see that through our single ascending dose, which is -- that's the part of the trial that we've been initiating thus far, and everything has been going to plan, and it's on track. We would expect to finish those dosing, but then have to follow the patients for some time, I think, by the end of the year or the early part of next year, and be able to start the proof-of-concept study, which are in about 60 or 80 patients.

And the first study is also in about 60 or 80. I think the grand total is about 140 patients in the Phase I. In the Phase I plus this proof of concept that's being done under the Phase I registration. And that proof of concept study with postmenopausal women experiencing moderate to severe hot flashes would start in the new year with a single dose and then we would follow and have them keep a record to see if we get a reduction in the frequency and severity of the hot flashes.

Okay. So the disclosure that you guys have been guiding to some point next year, that will include that 60 to 80 patients worth of proof of concept data.

That's correct. Yes. And importantly there, and it's something we really like about this program and the opportunity is the competition, let's say, is also helping to grow the markets, so these small molecules. First of all, there was even some news just last week regarding treatments for menopause and specifically that the hormone replacement therapy that's had a black box warning for some time [indiscernible] box removed which is excellent, I think.

Because actually hormone replacement therapy is quite -- is a good therapy when you look into it, and it has been definitely been suppressed since the Women's Health Initiative in the early 2000s came out with these extended risk factors or black box warning. But there are, of course, risk factors associated with hormone replacement therapy and many women are contraindicated.

About 12% of women are contraindicated or sorry, like have the risk factors associated with getting hormone replacement therapy. And another about 8% don't tolerate it for some and have to stop receiving the hormone replacement therapy. So that's about 20% of the population don't have hormone replacement therapy as an option. And there are many who certainly have some reservations about taking hormone replacement therapy.

So that's already a large number of women. We estimate about 1.2 million patients in that contraindicated kind of segment. Now that opens up an opportunity for nonhormonal treatments for hot flashes associated with menopause. And Astellas has launched Veozah and just recently, Bayer got an approved FDA approval for Lynkuet.

Now Astellas, the Veozah does have a black box warning on it for liver toxicity and required liver testing. And -- but still have been increasing the prescriptions, and they're doing a good job in the market.

I was surprised, I guess, to see that, that drug was already annualizing, I think, like $200 million, $300 million.

That's right. Yes. It goes to show you the large unmet medical need even with the box warnings.

And with the [slot] product.

Yes. Well, with the safety field, liver toxicity is a serious issue and -- but it shows you how much there is an unmet medical need here. Now the Bayer molecule, Lynkuet, they're quite excited about. They are anticipating at least $1 billion in annual sales, which is not too difficult to imagine.

I mentioned that about 1.2 million women are contraindicated or cannot, for one reason or another, take hormone replacement therapy. The net price on the small molecule is about, say, $5,000, $4,500 to $5,000. So that's already like a $6 billion addressable market. And Bayer saying they would take $1 billion of that. I think if anything, it's a conservative estimate. But we're very happy and rooting for both Bayer and Astellas success here because they're building the market and the awareness for non-hormonal options for the treatment of hot flashes.

And we think if we can come in some 5 or 6 years later with a molecule, hopefully, we'll see has superior efficacy and certainly isn't expected to see the safety signal of liver toxicity or the Bayer molecule because it is both an NK1R and NK3R acting molecule does have a signal of somnolence and there is a warning on the label of sleepiness or drowsiness.

And if we were able to come in with a molecule that has at least the same efficacy without either of those safety signals and ideally even better efficacy and differentiated on dosing, which we think would be preferred by women, we think that's a good setup, particularly if Astellas and Bayer have spent a good number of years helping to build the market for these nonhormonal options.

And can you remind us what the registrational programs for those assets look like? And just in terms of like resourcing patient numbers.

Yes. In terms of the Phase II, Phase III, I don't have that number on the top of my head. And actually, we've just hired a new Chief Medical Officer, Sarah Noonberg, who'd be anxious to introduce you to, and she is working out a lot of those details. I don't want to get ahead of that. But certainly, for the next time we speak or that is a focus of her efforts at the moment is trying to think about what do those later-stage trials look like.

Yes. It would just be interesting to think about the opportunity for you to be able to retain more of that value, maybe kind of push this a little bit further through the clinic.

Absolutely. So we definitely have the conviction to do the Phase II. And then a big question mark we have is like the commercial channel here is quite diverse and one where it would be a real challenge for us to come up with the capital to build out the reach into all these obs and gynae or even primary care doctors who might feel comfortable prescribing a monthly injectable, where we do know there's some reticence to primary care doctors prescribing hormone replacement therapy.

Normally, that's reserved for obs and gynae specialists. But that is a -- there's a lot of water between here and there, but that is a consideration for that program.

Okay. Maybe we could touch on 575. So this is the OX40 Ligand antagonist. I guess what's your approach here? And maybe you can kind of compare and contrast what has been talked about in terms of the advantages of targeting the Ligand itself versus a lot of the other assets, which actually have been targeting the receptor directly.

Yes. So I think this OX40/OX40 Ligand pathway is like upstream of some of these other pathways that are blocked in, in I&I indications, specifically by [lebri and Dupi]. And that -- the idea there is that this might be more effective in treating some of these I&I conditions. And certainly, on the OX40 ligand case, Sanofi is leading the charge.

And on the OX40 case, you've got Amgen and rocatilimab that's been out there. Now rocatilimab in addition to blocking OX40 is a depleting antibody. So it has had some side effects with fever and chills and things. And that's more effect of the depleting antibody than it maybe is of that pathway. I think our contention has been blocking the pathway either should work. But Rocha has got these additional side effects from being a depleting antibody. What we do see and since we spoke last, we've seen some extra data from Sanofi. And actually, we thought that the data was quite encouraging.

So it definitely showed that this pathway works, that it is safe, that is very long-lasting, but very slow onset. Their 4-week and their 12-week dosing showed basically the same efficacy or this versus placebo at the 6-month period and not yet better than DUPIXENT, but it was not clear as well how that trial was designed and were they treating people who are unresponsive to DUPI.

There were a lot of details that weren't in there. But importantly, it was still showing improvement at this -- it hadn't been asymptotically kind of approaching some limit. And so it was still on a pretty steep curve. It just showed that it's still too early, which actually bodes well for some of these chronic conditions.

And they said that they would show more data 6 months from now. So I think those things are there are some positives in there, certainly for the class that this will be -- this could be a giant class, not only for atopic dermatitis, but for asthma and alopecia. It's being tried in a number of different indications, including in combination. And what we'll see is the later data from Sanofi about 6 months from now. But we think that's positive. Where it actually challenged us is we had differentiated -- we believe we have a beautiful molecule.

It has a longer half-life than the amlitelimab molecule, which is from Sanofi. But given the data that they have, this value of differentiation is perhaps diminished because it looks like they're already going to get quarterly dosing. And why we believe we're going to get 6-month dosing that our modeling would suggest how differentiated is that is quarterly an okay frequency for the dosing? Or how much differentiation is 6-month dosing if you have a quarterly asset.

So it's still early days. It also is getting advanced through the funding mechanism we have in the Canadian government. So it's not that much capital to keep that program alive and wait to see the major card flip from Sanofi with amlitelimab.

Okay. I know you kind of just talked about the new IND candidate, ABCL688.

That's right.

I know early, but is there anything that you can say about the biology, not necessarily the target, but...

I'd just say it's similar to 635, it's one that uses are discovery capabilities against GPCR targets,

Ion channels Channel GPCR targets. And I would just say, look, mid next year is when we expect to be bringing that into a CTA. So in Canada again, and We'll disclose more about that target at that time.

Okay. And maybe just lastly, what does the balance sheet look like? And what does that allow you to execute on?

Yes. The balance sheet -- so we just had our Q3 earnings, over $500 million in cash and equivalents and still just under $200 million in available liquidity from this government spending. So that brings us to a very healthy around $700 million in total available liquidity.

And that does not include the fact that we have been the bank funding the buildings that we're in, the research building, and we didn't get to talk about the GMP manufacturing, but maybe for another time. And it puts us in a place where we have sufficient liquidity for at least the next 3 years. And you've been following the story for a long time, and I think we've been saying we have at least 3 years of liquidity for at least 5 years now. So I hope that will continue.

All right. Well, it was very good catching up, Andrew. I appreciate the time. Thanks a lot.

Yes.

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Good afternoon, and welcome to AbCellera's Third Quarter 2025 Business Update Conference Call. My name is Cameron, and I'll facilitate the audio portion of today's interactive broadcast. [Operator Instructions] At this time, I would like to turn the call over to Tryn Stimart, AbCellera's Chief Legal and Compliance Officer. You may proceed.

Thank you. Hello, everyone. Thank you for joining us for AbCellera's Third Quarter 2025 Earnings Call. I'm Tryn Stimart, AbCellera's Chief Legal and Compliance Officer. Dr. Carl Hansen, AbCellera's President and CEO; and Andrew Booth, AbCellera's Chief Financial Officer, are also on today's call. During this call, we anticipate making projections and forward-looking statements based on our current expectations and in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results could differ materially due to several factors outlined in our latest Form 10-K and subsequent Forms 10-Q and 8-Q (sic) [ 8-K ] filed with the Securities and Exchange Commission.

AbCellera is not obligated to update any forward-looking statements, whether due to new information, future events or otherwise. Our presentation today, our earnings press release and our SEC filings are available on our Investor Relations website. The information we provide about our pipeline is intended for the investment community and is not promotional. As we transition to our prepared remarks, please note that all dollars referred to during the call are U.S. dollars. After our prepared remarks, we will open the lines for questions and answers. Now I'll turn the call over to Carl.

Thanks, Tryn, and thank you, everyone, for joining us today. Last quarter, we completed our transition from a platform company to a clinical-stage biotech with the initiation of our Phase I clinical trials for ABCL635 and ABCL575. Both trials are progressing to plan and remain on track for readouts next year. I'm pleased to report that this quarter, we have also started activities at our new clinical manufacturing facility, and we have substantially completed our platform investments.

We ended the quarter with approximately $680 million in available liquidity to execute on our strategy. And as we close out the year, we are confident in achieving all our corporate priorities, including advancing at least one more development candidate into IND-enabling studies. A highlight of this quarter was the appointment of Dr. Sarah Noonberg as Chief Medical Officer.

Sarah is a physician-scientist with over 20 years of clinical drug development experience. She is a broad -- she has worked across a broad range of modalities and indications and has led programs through all stages of development from discovery through to approval.

You can expect Sarah to join future earnings calls to provide updates on our clinical pipeline. With Sarah taking the helm, Dr. Geoff Nichol will be stepping down as our SVP of Development. I'd like to thank Geoff for his leadership in building development as we transitioned from a platform company to a clinical-stage biotech. And with that, I will hand it over to Andrew to discuss our financials. Andrew?

Thanks, Carl. As Carl pointed out, AbCellera continues to be in a strong liquidity position with approximately $520 million in cash and cash equivalents and with roughly $160 million in available committed government funding to execute on our strategy. We are continuing to execute on our plans with a focus on internal programs and leveraging our CMC and GMP investments. Looking at our business metrics. In the third quarter, we started work on one additional partner-initiated program, which takes us to a cumulative total of 103 programs with downstream participation.

With Phase I trials for ABCL635 and ABCL575 underway, we maintained the cumulative total of molecules to have reached the clinic at 18, including both our own pipeline and those led by partners. As we have stated previously, we view the overall progress of molecules in the clinic as a potential source of near and midterm revenue from milestone -- from downstream milestone fees and royalty payments in the longer term. Turning to revenue and expenses. Revenue for the quarter was $9 million, predominantly from research fees relating to work on partnered programs. This compares to revenue of approximately $7 million in the same quarter of last year.

With respect to research fee revenue, as we have mentioned in the past, we expect these to continue to trend lower as we increasingly focus on our internal pipeline. Our research and development expenses for the quarter were $55 million, approximately $14 million more than last year. This expense reflects the focus on investment in our internal and co-development programs. The increase over the recent run rate expense levels in Q3 is largely due to specific investments of $15 million on 2 internal programs. In sales and marketing, expenses for Q3 were just under $3 million, a small reduction relative to the same quarter of last year.

And in general and administration, expenses were approximately $22 million compared to roughly $19 million in Q3 of 2024. Included in these expenses are the ongoing expenses related to the defense of our intellectual property. Looking at earnings. We're reporting a net loss of roughly $57 million for the quarter compared to a loss of about $51 million in the same quarter of last year. In terms of earnings per share, this result works out to a loss of $0.19 per share on a basic and diluted basis. Looking at cash flows. Operating activities for the first 9 months of 2025 used approximately $97 million in cash and equivalents.

Excluding investments in marketable securities, investment activities amounted to $49 million year-to-date. This is predominantly in property, plant and equipment, driven by investments in establishing clinical manufacturing, which are now substantially complete as we had expected. The investments in PP&E were partially offset by government contributions. And as a part of our treasury strategy, we have $413 million invested in short-term marketable securities. Our investment activities for the quarter included a $62 million net divestment of these holdings.

Altogether, we finished the quarter with $523 million of total cash, cash equivalents and marketable securities. And as a reminder, we have received commitments for funding for the advancement of our internal pipeline from the Government of Canada's Strategic Innovation Fund and the Government of British Columbia. This available capital does not show up on our balance sheet. And with over $520 million in cash and equivalents and the unused portion of our secured government funding, we have approximately $680 million in available liquidity to execute on our strategy.

In addition, we have available liquidity in our ownership of both Vancouver-based lab and office buildings as well as our GMP manufacturing facility, both of which have been financed off of our balance sheet. The operating cash usage for the remainder of 2025 will continue to prioritize advancing our 2 lead programs through their Phase I clinical studies and building a strong preclinical pipeline.

With respect to our overall company expenditures, our capital needs are very manageable, and we continue to believe that we have sufficient liquidity to fund well beyond the next 3 years of increasing pipeline investments. And with that, we'll be happy to take your questions. Operator?

[Operator Instructions] The first question comes from the line of Malcolm Hoffman with BMO.

Malcolm on for Evan. I want to ask how to think about partner-initiated programs in the clinic. These look somewhat stagnant since 2024. And to be clear, we appreciate the conversion to more AbCellera-led development. But just wanted to understand why these partner-initiated programs may not be progressing clinically. Is it just a timing issue? And then a second one about Dr. Noonberg and her new role as CMO. Can you comment on why you felt like now was the appropriate time to bring Dr. Noonberg in? And what do you think she uniquely brings to AbCellera that the company may have lacked before?

Sure. So I'm happy to take that one, Carl Hansen here. So first, on the partner-initiated programs. So as you know, in the early stages of the company and through until 2023, our business was primarily focused on a partnership mode where we were doing discovery on behalf of partners and keeping a position in the resulting molecules, both in royalties and in milestones. We have handed off a large number of those. And as Andrew mentioned, I believe we have initiated about 103 programs to date. We do expect that some fraction of those are going to move forward into clinical development, and we continue to report on that.

I would say that our experience has been that it takes longer than we had initially anticipated. So we have examples where programs that were handed off ultimately go into clinical development as much as 6 years later. So it's difficult to make an assessment as to what will be the number of those that ultimately make it into clinical development. But we do think that there is value there that's going to accrue over time, as mentioned by Andrew on his prepared remarks. Moving to the question of bringing Sarah on. Obviously, in 2023, we made the definitive decision to back away from that partnership business and to move into doing drug development on our own behalf.

Over the past few months, we've succeeded in bringing the first 2 programs into clinical development. We have a robust pipeline coming behind that. And as the portfolio matures, we definitely thought it was time to bring in a senior executive with experience in clinical development and also that the company was at a position where we would be able to attract someone that was absolutely top-notch. So we're thrilled to have Sarah on board, and we look forward to working with her and with you over the coming years as the pipeline matures.

The next question comes from the line of Andrea Newkirk with Goldman Sachs.

Carl, I was just wondering if you might be willing to speak a little bit on the data disclosure strategy that you plan on taking for the Phase I 635 study, particularly given you do have the various cohorts, SAD/MAD dosing as well as the proof-of-concept section where you're evaluating efficacy. Just curious if this will all come within one disclosure. And then if you could help frame expectations for the profile you would deem supportive to continue advancing this further into a Phase II study? And then I have one follow-up following that.

Thanks, Andrea. So to your first question, our expectation is to make a single disclosure after we have completed the proof-of-concept part where we have a double-blind, placebo-controlled evaluation of ABCL635 in the patient population that it's intended for. We do expect that will come sometime in the new year. I think we had said before around mid-new year, but give that a couple of months on either side for error bars.

What we're looking for is that we have a safety signal, and we have efficacy that shows that we're in the game to have a competitive product against the other products that are now in the market. And the study is powered to do that. So somewhere around midpoint next year, we should know a lot about this program. So far, we're encouraged by what we're seeing. Everything is on track. And if that continues on track, then we're getting ready to be in a position to aggressively move it into later-stage trials.

Got it. Okay. And if you do achieve your desired target product profile when you see the data emerge next year, how validating would that be for your platform and technology? And do you think there is read-through to the rest of your pipeline?

It's a great question. So we have highlighted before that one of the areas where we've been investing for a long time and where I believe we have world-class capabilities is in making antibodies against ion channel and GPCR target. Obviously, NK3R is a GPCR target. So it's the first from that platform to move forward. I think that's strong evidence that the platform is working and that we can make highly differentiated molecules. Of course, evidence of a platform doesn't happen with a single asset, and our intent is to follow that up again and again with other molecules from that pipeline that we're equally excited about.

The next question comes from the line of Stephen Willey with Stifel.

This is Josh on for Steve. Is there anything you can tell us about how enrollment is going in the Phase I trial for 575 and maybe potentially some color on some of the doses you've reached in this cohort?

Sure. So in terms of enrollment, as I mentioned, the program is going as expected. So everything is on track and at the pace that we anticipated. We are not disclosing preliminary results in terms of how far we got in dosing. But as I said, we're encouraged by what we're seeing. And so far, everything is as expected.

Okay. Great. And then just another quick one. I know you said on the 2Q call, you were in line to declare a potential fourth AbCellera-led candidate by the end of this year. Are you guys still on track to do so?

Yes, that's correct. I think I said that in my prepared remarks that we are on track before the end of the year to bring an additional development candidate forward, and that would be the fourth in the pipeline.

The next question comes from the line of Faisal Khurshid with Leerink Partners.

On 635, could you speak to us about whether there's a specific benchmark or bar that you would want to see on testosterone reduction in healthy male volunteers?

Sure. So I wouldn't point out a specific level, but there is good literature out there disclosing testosterone levels from small molecules that were in development, particularly fezolinetant. And so we would, within the power of the study, look for something that shows that we're getting engagement that is at least as good as that to move forward.

Got it. Okay. And then could you also discuss the risk of engaging this target with a mAb given it's a CNS target?

Sure. That's a great question. I think it's one that I touched on an earlier call. So we believe that the pathway, the NK3R pathway is very well validated. And so that if we can engage NK3R in the relevant neurons, that it's highly likely to be an efficacious drug. The NK3R is expressed in KNDy neurons in the arcuate nucleus. And those neurons connect both to the endocrine system and also go through the blood-brain barrier into the thermoregulatory center of the brain.

So we expect that we should be able to engage NK3R in the arcuate nucleus. And given our understanding of the biology, we believe that, that should be sufficient to be efficacious in treating VMS. But of course, we have not yet proven that. And so we need to wait for the proof-of-concept study and that readout to have conviction to move the program forward.

Next question comes from the line of Steve Dechert with Key Corp.

It's Steve on for Scott. I was hoping you could talk about what the benefits are of 635 versus existing hormonal treatment for hot flashes. And then as a follow-up, are there any molecules currently being developed that would compete directly with 635?

Sure. So 635 is not being developed as a substitute for hormonal therapies. It's being developed as an alternative to menopausal hormone therapy. I think as I mentioned on a previous call, there are roughly 12% of women that have a strong contraindication against using menopausal hormone therapy. In addition to that, about 8% that end up discontinuing because of adverse events or tolerability. So there's a significant portion of women that have fewer options or cannot avail themselves of MHT, which is the first-line therapy for treating VMS.

In terms of alternative therapies, of course, there are now 2 molecules that have approval. One is VEOZAH by Astellas and one is Lynkuet by Bayer. Those are both now on the market. We believe that we have -- we're in a great position to have these 2 products out there, providing good options for people that need these treatments and build the market for us so that we can come in with a molecule that we believe can be differentiated in dosing, in safety and potentially also in efficacy, depending on how we do a target engagement.

The next question comes from the line of Brendan Smith with TD Securities.

This is Jackie on for Brendan. Just a quick one and maybe just to remind us, with earlier in competitors like DUPIXENT [ and Sanofi's assets ], what do you expect we need to see from the Phase I data for 575 to really solidify the drug's positioning within the pretty competitive landscape?

Sure. So 575 is obviously coming behind amlitelimab and also rocatinlimab from Amgen. And our differentiation thesis when we began this program was really about less frequent dosing. What has happened recently, particularly with the readout in the COAST trial with amlitelimab is that they have shown that the class is efficacious, although not as efficacious as was expected -- as DUPIXENT had been on previous trials. So it looks like it's going to be approved as a second-line therapy. But they also showed that the 1-month dosing and 3-month dosing were relatively equivalent.

So at this point, we have a drug that the data would suggest would allow for even less frequent dosing, perhaps 6 months. It's unclear how important that's going to be in a clinical setting. So our position in 575 right now is that we have a terrific molecule. The early readouts are going to show safety, obviously, but also PK and half-life that would support that dosing hypothesis. And probably the most important catalysts are going to come from outside of AbCellera, and they will be readouts on amlitelimab or the OX40/OX40 ligand class in other indications that are being evaluated by Sanofi and by others.

There are currently no questions registered. [Operator Instructions] There are no additional questions waiting at this time. I would now like to pass the conference back for any closing remarks.

Thank you, everyone, for joining us today. This is an exciting time for AbCellera, and we're moving into 2026 with some exciting progress in the pipeline, both in programs that are coming and what's in the clinic. And we look forward to updating you on future calls. Thanks so much.

That concludes today's call. Thank you for your participation, and enjoy the rest of your day.