Pacific Trader: How AbCellera’s stock can make a full recovery

After tumbling 85 percent from its perhaps over-exuberant IPO price in December 2020, the Vancouver-based biotech's shares appear to have found a floor over the past two months around US$9.

Credit: Abcellera

AbCellera Biologics has created an AI-enabled platform to accelerate the development of antibody treatments

Analysts’ targets suggest a 350-percent upside for the beaten-down Vancouver biotech

The stock: When I say that AbCellera Biologics‘ stock (NASDAQ:ABCL) has flatlined, that’s an improvement in its condition. After tumbling 85 percent from their perhaps over-exuberant IPO price in December 2020, the Vancouver-based biotech’s shares appear to have found a floor over the past two months, at around US$9. So the question now is whether the early optimism surrounding the antibody discovery platform developer—which at least some analysts still cling to—was justified.

The drivers: Part of the answer can be discerned from AbCellera’s fourth-quarter and full-year results released on February 24. The company posted 2021 revenue of US$375 million, up 60 percent from US$233 million in 2020. Net earnings rose to US$153 million from US$119 million a year earlier. That gives AbCellera a price-to-earnings ratio of 19, something you’d expect more of a mature, cash-flowing blue chip than a startup founded a decade ago.

“In 2021 we made significant advancements in executing our long-term strategy by growing our portfolio, deepening our platform to unlock new modalities, and expanding our deal structures to add new ways to capture value,” president and CEO Carl Hansen said in announcing the results.

READ MORE: Entrepreneur Of The Year 2021 winner: Carl Hansen engineered AbCellera’s rise to biotech powerhouse

If there’s hesitancy around AbCellera, it’s because those revenues are lumpier than the financial statements let on. (That, and the markets recent disaffection with future-dated technology profits.) The company has created and continues to hone a platform for identifying natural antibodies that can be developed into drugs.

The drug candidates come from other developers as well as AbCellera’s own lineup of proprietary medications, such as bamlanivimab, a treatment for COVID-19 marketed in partnership with Eli Lilly & Co. (NYSE:LLY). The partners recently received U.S. emergency-use authorization for a second COVID drug, the similarly unpronounceable bebtelovimab, which targets the Omicron variant. But AbCellera’s reliance on COVID-related revenue may have become a millstone in investors’ eyes, now that the end of the pandemic could be in sight.

After adding 26 drug discovery programs in 2021, bringing its cumulative total to 78, the company must prove its platform’s utility in developing treatments for other, less faddish conditions, from cancer to visual impairment. Unfortunately, these are bound to roll out over longer timelines, so AbCellera will be hard pressed to maintain its torrid pace of growth into 2023.

Word on the street: Credit Suisse, one of AbCellera’s more bullish followers, bumped up its target price to US$40 from US$39 with an “outperform” rating on Friday. The consensus price target among analysts is US$37.63, implying a 12-month upside in the neighbourhood of 350 percent.

Coming and going: Shares of Vancouver-based Standard Lithium (TSXV, NYSE:SLI) have stabilized following the release of two short sellers’ reports in the space of three months. The latest attack, by Hindenburg Research in early February, claimed that Standard had overhyped its direct lithium extraction technology, initial patents for which were rejected. Standard’s shares fell 27 percent the day the report was released but had partly recovered to $7.96 on the TSX Venture exchange as of Tuesday.