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Patent, partnership court fight looms for biotech

Vancouver’s AbCellera Biologics faces legal challenge to company’s founding narrative
AbCellera Biologics Inc.’s new head office under construction in Vancouver.

By all accounts, AbCellera Biologics Inc. (Nasdaq:ABCL) has been nothing short of a made-in-Vancouver success story, leapfrogging from the research labs of the University of British Columbia (UBC) onto the Nasdaq in December 2020 with an initial public offering of US$555.5 million – a record for a Canadian biotech firm. 

The offering saw the company’s market capitalization soar to more than $10 billion, minting a new billionaire out of founder Carl Hansen “overnight.”

But a civil claim recently filed in BC Supreme Court challenges the biotech’s initial partnership deal and alleges patent infringement dating back to the founding of the company. 

When COVID-19 plunged the world into a global pandemic, AbCellera’s artificial intelligence-driven antibody discovery platform took centre stage. The company landed high-profile contracts and partnerships with major pharmaceutical companies and the U.S. Defense Advanced Research Projects Agency. But the initial excitement over the company’s stunning entry into the biotech space has since subsided, its stock price tumbling from a high of US$58 at the time of the IPO to around US$14 after the release of its latest financials– a 75 per cent drop, pegging its market cap today at around US$4 billion. 

Despite the downward trajectory of its share price since going public, the company has soldiered on under Hansen’s leadership, bringing on high-profile investors such as PayPal’s (Nasdaq:PYPL) Peter Thiel, who now sits on AbCellera’s board. Its third-quarter 2022 financials show the company is sitting on US$868 million in cash and securities, having generated $101 million in revenue, up substantially from the same period in 2021. A decade since the company’s incorporation, AbCellera now boasts partnerships with major pharmaceutical companies including Eli Lilly and Co. (NYSE:LLY) and has been touted as a true Canadian innovator in a high-risk and capital-intensive industry after spinning off from UBC. 

“We founded AbCellera on a bold idea: To deliberately rethink and rebuild the critical product creation step in bringing new antibody therapies to the world,” Hansen told shareholders in an earnings call Nov. 8, 10 years to the day after the company was formed. “After a decade of company building, we believe we now have the industry’s most powerful engine for antibody discovery. Along the way, we’ve grown from six founders in a lab, to a business of nearly 500 people spread across four countries and three continents.” 

The company’s founding narrative has been oft repeated, including by the National Research Council of Canada (NRCC), which has supported the company’s research and development efforts through its Industrial Research Assistance Program. But beyond its growing pains since going public, AbCellera and its founder now face a lawsuit from the estate of Dr. John Schrader, an immunologist and former UBC colleague of Hansen’s who passed away in 2019. In a notice of civil claim filed in BC Supreme Court in October, Schrader’s estate and a company called ImmVivos Pharmaceuticals Inc. sued Hansen, AbCellera and several affiliated companies for patent infringement and breach of a purported partnership deal dating back to 2007. 

“While at the University of British Columbia, Dr. Schrader and Dr. Hansen agreed to jointly develop a process for the rapid and inexpensive generation of high-value monoclonal antibodies with the intention of commercializing it,” the lawsuit states. “Despite jointly securing grants and funding for that purpose, developing that process, and agreeing to incorporate an entity to commercialize it, Dr. Hansen improperly excluded Dr. Schrader from participation, profit and interest in that partnership or joint venture.” 

Hansen, according to the lawsuit, incorporated AbCellera Biologics as sole director and shareholder, using grant funds and the pair’s research to launch the company to “improperly benefit himself at Dr. Schrader’s expense.” 

“He further took those steps while Dr. Schrader was seeking treatment for, and ultimately dying of, a terminal neurodegenerative condition,” the claim states. “From then on, and despite Dr. Schrader’s role as a founder of the business and a co-inventor of its technology, Dr. Hansen has held himself out as the founder of AbCellera’s business and the developer of its technology.”

According to the claim, Drs. Schrader and Hansen began collaborating in 2007, receiving grants from the Collaborative Health Research Project from the Natural Sciences and Engineering Research Council of Canada and Canadian Institutes of Health Research. Schrader was to apply his immunology and antibody cloning expertise to the partnership, combining Hansen’s background in physics and microfluidics for a commercial entity and “would divide the profits realized from that commercialization.” 

Years on, Schrader and Hansen received more funding in the form of “pre-commercialization grants” to support their antibody generation research in the lead-up to incorporating a company that would use their findings as well as license Schrader’s patents “to commercialize that technology.” 

But Schrader’s estate and ImmVivos claim Hansen incorporated AbCellera in November 2012 without telling Schrader, who found out about the company’s formation in February 2013. Hansen allegedly offered Schrader a five per cent stake in AbCellera if he agreed to give the company a “world-wide non-exclusive royalty-free licence to his patent(s),” but pulled the offer months later.

 “Ultimately, Dr. Hansen refused to provide Dr. Schrader any equity in AbCellera and completely excluded Dr. Schrader from the business,” the lawsuit states. 

At the same time, Schrader was diagnosed with “primary progressive aphasia, a rare, terminal, neurodegerative condition,” from which he passed away on Oct. 18, 2019. The patent at issue in the lawsuit then went to his wife, who transferred it to ImmVivos on Oct. 13, 2022, the day before the lawsuit was filed in BC Supreme Court. It seeks declaratory relief that Hansen and Schrader were in a partnership or joint venture, and damages for patent infringement. 

None of the allegations in the lawsuit have been tested or proven in court, and AbCellera and Hansen did not respond to multiple requests for comment from BIV on this story. The plaintiffs in the case include Schrader’s wife and executrix of his estate, Sabariah Schrader, as well as ImmVivos Pharmaceuticals. The company is a federally incorporated firm directed by Sabariah Schrader along with the couple’s daughters, Dr. Dewi Schrader, a neurologist at BC Children’s Hospital and an assistant professor at UBC, and Dr. Kasmintan Schrader, a geneticist and co-medical director of the BC Cancer Agency’s Hereditary Cancer Program. The trio did not return BIV’s calls for comment on the lawsuit and their lawyer, Bob Cooper with McEwan Cooper Dennis LLP in Vancouver, declined comment as well. 

“The claim has just been filed and hasn’t yet been fully served, so there’ll be no comment, certainly not at this time,” Cooper told BIV

“We just started the action; we set out the allegations clearly in the action.”

While the companies and Hansen have yet to be served with the lawsuit and have not filed responses to the claim in court, AbCellera acknowledged the case in its latest quarterly filings with the US Securities and Exchange Commission. 

“The company believes that the claim is meritless and frivolous in all respects and intends to defend itself appropriately,” its Form 10-Q states.

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