OmniAb, Inc. (NASDAQ:OABI) Q4 2022 Earnings Call Transcript

OmniAb, Inc. (NASDAQ:OABI) Q4 2022 Earnings Call Transcript April 2, 2023

Operator: Good afternoon, ladies and gentlemen, and welcome to the OmniAb, Inc., Fourth Quarter and Full Year of ’22 Earnings Conference Call. At this time all lines are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. . This call is being recorded on Thursday, March 30, 2023. And I would now like to turn the conference over to Kurt Gustafson. Please go ahead.

Kurt Gustafson: Thank you, Operator and good afternoon. This is Kurt Gustafson, OmniAb’s Chief Financial Officer. Thank you all for joining OmniAb’s fourth quarter 2022 financial results conference call. I’d like to remind listeners that there are slides to accompany today’s remarks. Those slides are available in the investors section of our website at omniab.com. Before we begin, I’d like to remind listeners that comments made during this call will include forward-looking statements within the meaning of the Federal Securities Laws. These forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from any anticipated results. These forward-looking statements are qualified by the cautionary statements contained in today’s press release and our SEC filings.

Importantly, this conference call contains time sensitive information that is accurate only as of the date of this live broadcast, today March 30, 2023. Except as required by law OmniAb undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Joining me on the call today is Matt Foehr, President and CEO. During today’s call, Matt and I will provide highlights on the company’s operations, partner and technology updates, and our recent financial results. At the conclusion of the prepared remarks, we’ll open the call to questions. So with that, let me turn the call over to Matt. Matt?

Matt Foehr: Thanks, Kurt. Good afternoon, everyone, and thanks for joining this, our first financial results and business highlights conference call. Since 2016, OmniAb has grown and evolved through multiple strategic acquisitions and organic technology investment initiatives to become a leader in the integrated antibody discovery space. In November last year, we completed our spin-off from Ligand Pharmaceuticals, resulting in OmniAb becoming an independent publicly-traded company. With that transaction close, I’m confident we’re well positioned with our current corporate structure, our operational focus and our deep domain expertise to now capitalize on the growth opportunities that are ahead of us, and in doing so make an enduring impact on global human health.

That promise of impacting human health energizes our team of just over 100 employees, and positions us very well for the future. OmniAb’s highly scalable business model of licensing our discovery platform globally enables our partners to rapidly develop innovative therapeutics. Our partners value that we continue to push the frontiers of enabling technologies. We believe we’re the industry’s only four-species antibody discovery platform, making OmniAb the most diverse host system for fully human and bi-specific antibody discovery. With our proven platform technology, the number of partners with access to OmniAb antibodies has grown significantly, to a total of 69 with 291 active programs now including three product approvals. I’ll get to further details on our performance metrics on the next slide.

But another point I’d like to make here is that we’re participating in a large and growing market, with global sales of antibody pharmaceutical products projected to reach approximately $279 billion in 2025, up from about $180 billion in recent years. Some of the best selling drugs today are antibody-based medicines. And these are just some of the factors that drive the industry’s demand for cutting edge discovery technology. Our technology platform continues to prove its value to partners. Our teams made great strides in growing our portfolio with the addition of 13 new partnerships in 2022, including an expansion deal with an existing partner. We added more new partners in 2022 than in any other year of this technology’s history, which we feel positions the business for future growth.

As I mentioned, we have 291 programs currently being developed or commercialized by our partners. We recognized royalty revenue from initial commercial sale of both Zimberelimab and sugemalimab in China. And it’s also important to note that the numbers in the graphs on these slides are net of attrition. Our platform continues to generate new clinical programs. And we now have rat-derived, mouse-derived and chicken-derived antibodies that have entered human clinical trials. By yearend, our platform had generated a cumulative total of 28 clinical or approved antibodies, including three new programs that entered the clinic during the second half of 2022. Each of these programs has a different modality, which further demonstrates the flexibility of our technology.

The three new programs include Merck’s antibody drug conjugate, anti-CEACAM5 in advanced solid tumors; Genmab and BioNTech’s hexabody anti-CD27 in malignant solid tumors; and Janssen’s trispecific antibody in relapsed or refractory multiple myeloma. There were two programs that came out of clinical development in 2022, as two of our partners realigned the therapeutic area focus of their pipelines. That said, the clinical attrition rate of OmniAb antibodies remains very low. There are now more than 140 different clinical trials underway or completed by our partners. More than 27,000 subjects are to be or have been enrolled in clinical trials that are testing OmniAb derived antibodies. This is a representation of the significant investments that our partners are making in downstream development of antibodies discovered using our technologies.

Based on dialogue with partners, we see potential for approximately three to five new entries into clinical development for novel OmniAb-derived antibodies in 2023, with programs addressing major unmet medical needs. On Slide 7, we break out our 291 programs by stages of development. You can see there’s a large and growing base in the discovery stage totalling 251 programs, and now 14 programs in preclinical. In the clinic, our partners have programs totalling 19 in Phase 1, two and Phase 2 and two in Phase 3. And as I mentioned, there are three approved products derived from OmniAb technologies. We believe generating large, diverse antibody repertoires of high quality antibodies increases the likelihood of success in discovering an antibody with optimal therapeutic characteristics.

Many of our partners are using a number of our different engineered animals, and in some cases, more than one of our sources for a single program. OmniChicken has been the fastest growing source species, as OmniChicken antibodies bind to diverse epitopes on human targets with high affinity and also offer excellent profiles for development. OmniFlic and OmniClic are fixed and common light chain engineered rats and chickens, designed for efficient discovery of bispecific antibodies, which are of growing interest to the pharmaceutical industry. And OmniTaur provides access to antibodies with unique structural characteristics for challenging targets. I note here that OmniRat, which is our largest source category here on this slide, has been available to our partners the longest, and was launched first.

Our partners tell us they place a high value on our ability to provide flexibility to meet their evolving scientific needs. And our technology stack can be leveraged to develop multiple therapeutic formats and modalities as shown on Slide 9. By generating large and diverse repertoires of high quality antibodies, we believe the biological intelligence of our technologies increases the probability of success of therapeutic antibody discovery, and helps limit attrition of antibody product candidates. Our partners continue to advance programs through development, and some made public announcements about their progress during the fourth quarter and into this year. Notably, we received $35 million in milestone payments from our partner, Janssen related to TECVAYLI which Kurt will talk more about in a moment.

Moving to batoclimab Harbour BioMed recently announced positive top line results from its Phase 3 clinical trial for the treatment of generalized Myasthenia Gravis. In addition, Immunovant announced initiation of a Phase 3 trial of batoclimab in thyroid eye disease, and a pivotal Phase 2b trial in chronic inflammatory demyelinating polyneuropathy. Turning to Zimberelimab, Gilead and Arcus Biosciences announced positive results from the fourth interim analysis of the ARC-7 Phase 2 clinical trial in patients with first-line, metastatic non-small cell lung cancer. And for sugemalimab, EQRx announced that the UK and European regulatory agencies accepted its marketing authorization applications for first line treatment of metastatic non-small cell lung cancer.

Photo by Emin BAYCAN on Unsplash

In addition to that CStone announced other updates in China as well. Our technology stack is driven by the biological intelligence of our engineered transgenic animals, paired with our high throughput screening technologies to enable discovery of high quality, fully human antibody therapeutic candidates for a wide range of diseases. As I mentioned, we believe we are the industry’s only four species in-vivo antibody discovery platform making OmniAb the most diverse host repertoires that are available. Our experience and our collective dialogue with our partners gives us critical insight into the industry. And it creates a positive feedback loop to advance and innovate around our proprietary platforms. We also have a suite of in-silico tools for therapeutic discovery and optimization that are woven throughout our various technologies and capabilities.

These tools include structural modeling, large multi-species antibody databases, artificial intelligence, and machine learning sequence models and more. These capabilities enhance our ability for rapid identification of candidates with the right affinity, specificity and developability profiles, and leads to more effective and efficient drug development by our partners. In addition, we have extensive capabilities centered around ion channels and transporters that were established and built around small molecules and have clear potential in multiple formats and modalities. And we think we can create possibilities for completely new paradigms for approaching ion channel and transporter targets. We continue to invest in innovating around our technology, while evaluating strategic technology acquisitions and licensing opportunities to further broaden our capabilities.

For example, in February, we entered into a license agreement with mAbsolve for its Fc Silencing Platform technology. The agreement provides us with exclusive sub-licensable access to the STR technology, which will provide our partners with the ability to efficiently silence effector functions to help discover and develop safe and effective therapeutics. This is the latest example of creative expansion of our platform. We’re also excited to roll out new innovations relating to our platform this year, and our launches of new technologies will generally coincide with major antibody engineering and antibody discovery conferences this year. As I mentioned, we believe we’re well positioned for future growth, as we leverage our highly scalable business model and support our partners’ pipelines as they expand and advance into the clinic.

Through our business development efforts, we plan to add more license agreements and more partners to our portfolio. Further, we remain committed to investing in our proprietary technology platform to enhance our position as a leader in the marketplace and to continue to offer our partners versatility in workflows. As just one example during the fourth quarter of this year, we plan to launch a heavy chain-only transgenic chicken, which we see as an important new innovation that our partners will want to access. We look forward to keeping you updated on these developments through the year. And with that I will turn the call back over to Kurt for a discussion of the financials. Kurt?

Kurt Gustafson: Thanks, Matt. Before I turn to a discussion of our financial results, I’d like to spend a few moments reviewing our business model and how our license agreements are structured with our partners. One of the key points of the structure of our deals is that they are designed to align the economic and scientific interests of both parties. What I mean by this is that deals are structured so that we get paid when our partners have success. We try to keep access to the technology at a relatively low cost to encourage our partners to utilize the technology as much as they want. In terms of deal structure agreements typically include an upfront payment for access to our full technology stack. There’s also a potential for us to learn to earn collaboration or service revenue, should a partner ask us to do work for them.

And there are also milestone payments related to the advancements of programs in the clinic, and regulatory approval. And lastly, royalties on net sales of our partners’ products. We believe the long term growth in revenue will primarily be driven by royalties. However, I expect that most of the growth in the next few years will be driven by milestone payments. Turning now to our financial results, as a reminder OmniAb was part of Ligand for the first 10 months of the year. So the financial results prior to November 1 were prepared on a carve-out basis. Starting with revenue, total revenue for the fourth quarter of 2022 was $35.3 million compared to $15.3 million in the prior year quarter. The revenue increase was primarily due to the recognition of the U.S. based Teclistamab milestone of $25 million in the quarter.

We expect to recognize the remaining $10 million of milestone revenue for the first commercial sale in Europe later in 2023. There are specific accounting criteria for the recognition of this milestone as revenue. And as of today, we don’t believe these criteria have been met. And so it is likely that this $10 million will not be recognized even in the first quarter, but likely later in the year. Our service revenue is down slightly as a result of less work performed for some of our ion channel partners, partly due to the success with some of these programs as they advance into the next stage of development. Operating expenses for the fourth quarter were $26.3 million, compared with $20.4 million in 2021. The increase included expense necessary to support our standalone structure as an independent public company.

This includes increases in staff costs as we’ve hired people in various G&A functions, as well as other typical public company costs. However, I would note that this quarter also included approximately $2 million of expenses that were more onetime in nature. Net income for the quarter was $6.8 million or $0.07 per diluted share, versus a net loss of $3.1 million or loss of $0.04 per share in the year ago period. For the full year 2022 total revenue was $59.1 million. The increase in revenue was primarily due to the recognition of additional milestone revenue I just spoke of, as well as royalty revenue from our partners sales of Zimberelimab and sugemalimab. Operating expenses for 2022 were approximately $85.7 million compared with $70.4 million for 2021.

The increase was driven primarily by the same items that drove the increase in the fourth quarter, and mostly relate to the growth in our R&D infrastructure, as well as OmniAb preparing to be a standalone company. Net loss for the full year of full year was $22.3 million or $0.26 per share, versus a net loss for 2021 of $27 million or $0.33 per share. I also wanted to make a couple of comments about taxes. A new federal tax law went into effect at the beginning of 2022 that changed the way R&D expenses are deducted. Under the new law, U.S. R&D expenses generally have to be amortized and expensed over a five year period. As a result of this tax law change, combined with the recognition of the Teclistamab milestone, we are going to be a cash taxpayer for the fourth quarter sub period where we were an independent company.

And we also expect to be a cash taxpayer for the full year of 2023. At the end of the day, this is really just a timing difference for taxes, as we will eventually realize the full benefits of all of our R&D costs. Let me also make a few comments about the share count for EPS. Both our full year and Q4 share count numbers used for EPS represent a blended share count for the period prior to the spin out, which was approximately 82.6 million shares, and the shares outstanding post the spin out, which was approximately 98.9 million. Going forward, the 98.9 million basic shares outstanding will be the more appropriate base figure to use for EPS calculations. Just as a reminder of various components of our capital structure, in addition to the public float shares, we have approximately 16 million of earn-out shares outstanding as well as various employee equity awards and warrants.

The earn-out shares expire five years after the close of the spin out transaction and half vest at the price of $12.50, and the other half vest at a price of $15. The warrants also have a five year life and a strike price of $11.50. You’ll see on the face of our financial statements that we have 115 million shares issued and outstanding. This is the combination of the basic share count as well as the earn-out shares. We ended the year with $88.3 million in cash, cash equivalents and short term investments. As previously disclosed in January we received $35 million in milestone payments from Janssen related to the launch of Teclistamab. With the addition of these milestone payments, we are in a strong capital position. The business has been running fairly close to breakeven cash flow on an operating basis for the last couple of years.

So we believe that our current cash balance gives us sufficient runway to fund our operations for the foreseeable future. As for specific guidance, we expect that our cash balance at the end of 2023 will be slightly higher than the balance as of 12/31/22. I’ll close my comments with a discussion of our financial outlook for 2023. For perspective, I thought it might be helpful by starting to look at our operating expenses over the four quarters of 2020. So the fourth quarter was the first quarter that OmniAb started reporting as a standalone public company. As such, the fourth quarter provides the best representative base level of our operating expenses going forward. As Matt mentioned, we will continue to invest in R&D, so I would expect our quarterly R&D costs in 2023 to grow off this Q4, 2022 base.

On the G&A side, remember that the G&A line included close to $2 million of expenses that were non-recurring in nature. If you exclude those onetime expenses, our G&A expense level for the fourth quarter is largely in line with what we are expecting in subsequent quarters throughout 2023 with some nominal growth. One final comment, I’m pleased to announce that we’ve hired a new Head of Investor Relations. Her name is Neha Singh and I look forward to introducing her to all of you in the coming weeks. With that, I’d like to open up the call for questions. Operator?

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Q&A Session

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. . And your first question comes from the line of Robyn Karnauskas from Truist Securities. Please go ahead.

Nishant Gandhi: Hi, this is Nishant. I’m on for Robyn. Congrats on all the progress, and thank you for taking my questions. So question around royalty, I mean, I know you have signed a lot more deals with key partners last year, and then now your platform is validated with more than 25 programs in clinic. So for programs going forward, do you expect to negotiate higher royalties for any of your programs, considering you have got a lot of validation for your projects? And second on pipeline diversity, I see with programs in clinics, you have a lot more molecules in oncology. So is that a consideration for you going forward to diversify into new disease areas and sign new partnerships in new disease areas? Thank you.

Kurt Gustafson : Yeah, maybe I’ll take the first part of that, Matt and you can talk about the second part. With regards to royalties, you’re absolutely right to sort of point out that as the platform has become more validated, we’ve actually been able to garner sort of better economics on some of the deals. So I can’t predict what that is going forward. But if I go take a look at historically, and take a look at the average royalty rate for deals signed in sort of each of the last five years, you’ll see a slight trend in terms of higher royalty rates through those deals that are signed. And I think that’s just a function of, as you point out the validation of the technology has done that. So we hope that, that continues, but it’s difficult to project going forward. But Matt on the diversity question.

Matt Foehr : Yeah, Thanks, Nishant for the question. Yeah, you point out that for the programs that have matriculated into the clinic first, if you look across that and our platform now has generated a total of, cumulative total of 28 clinical programs. So it’s highly validated from that perspective. But you’re correct. The majority of those from a therapy area perspective, are in oncology, although there are some in GI-disease, in immunology, also some in inflammation. But as you look at our pie chart that we have in Slide 7 of the deck, the breakdown there as you go deeper into the pipeline, especially in preclinical as well as discovery, we’re beginning to see the platform used across therapy areas, as one might expect, things like CNS diseases, inflammation, women’s health, infectious diseases and other areas. So I think over time we’ll see that diversity build up in the clinic as those programs progress and matriculate through developed.

Nishant Gandhi: Great, thank you.

Operator: Thank you. And your next question comes from the line of Stephen Willey from Stifel. Please go ahead.

Unidentified Analyst: Hey, thanks for taking the question. This is Josh on for Steve. So I guess we’ll start with, which of your transgenic animal platform’s garnered the most interest? And how do you see the further development and prioritization of these platforms changing in the coming years? Then I have a few follow-up questions.

Matt Foehr : Great. Thanks, Josh for the question. Yeah, we included some data this time to break down a little bit the distribution of the source, antibody sourced technology that our partners are leveraging. So if you look across our portfolio, a little more than half of the programs that are being actively moved through development by our partners leverage our OmniRat platform. OmniRat was actually the first platform that we launched, the first and is a widely used transgenic rat. The mouse space, obviously, there are mice out there, but the rat is quite unique. And it’s been proven over time to produce robust antibody responses for our partners. There’s also a lot of efficiency and flexibility that OmniRat presents for our partners allowing us to feed flexibly into their work streams.

We’ve actually even set up breeding colonies of OmniRat for some of our partners who are spinning up multiple programs a year. So OmniRat, obviously is a large source. In terms of the fastest growing, in terms of percentage growth, I point to OmniChicken. The chicken has advantages largely because of its evolutionary distance. Chickens are evolutionary very distant from humans and mice and rats. That creates a lot of advantages for our partners that they like to leverage. And we’ve been able to really increase the number of partners leveraging OmniChicken by about 10x, since the time it was acquired, and became part of the OmniAb platform technology. And downstream of that, we also see nice growth in the bispecific space, both with our OmniFlic, which is a transgenic rat with a fixed light chain, and OmniClic, which is a transgenic chicken with a common light chain.

If you look across actually our downstream clinical programs that our partners are progressing through the clinic, a large number of those actually are bispecific antibodies. And that’s a growing area of interest for partners as well. Beyond that, I’d also point to OmniTaur. While it’s a small percentage of active programs today, it’s an area that is a lot of interest, a lot of inbound interest as our BD team is talking to new potential partners, given the fact that those cow-inspired antibody structural features have the potential to open up new approaches to antibody-based therapies that many partners say they’ve not been able to access before. So we’re excited about that as well.

Unidentified Analyst: Awesome, I guess that feeds nicely into my second question with regard to how do you typically prioritize partnerships between kind of smaller cap biotech companies to large pharma? Is there kind of a large discrepancy you’re seeing? And then are you generally seeing less BD activity from smaller cap companies as a function of kind of macro R&D budget tightening?

Matt Foehr : Yeah, I’ll make a couple of comments, and Kurt may want to want to add in others as well. We’re coming off a year, last year where we did more new partnerships than we ever have in the history of the technology, right. And a large majority of those partnerships are driven by what I’ll term inbound interest or scientist migration, scientists who’ve had positive experiences at one licensed partner and then moved to a new company and then want to get access. So we see that as interesting and important because I think it also speaks to the opportunity which is why we have been and are expanding our business development team really to manage that increase in inbound interest to get access to cutting edge technologies as the industry has shifted more and more towards antibody-based medicines.

We have — a number of the partners we’ve added have been funded biotechs, earlier in their lifecycle, but many of them have a lot of really interesting biology. We obviously already have existing partnerships with a number of big pharmas. And they are prolific users of our platform. And at any one time we’re always in dialogue with many parties at various stages of development, are always negotiating new license deals or negotiating terms. And those include large pharma players as well who I think understand, especially now post — with our new structure, our commitment to continuing innovation and our commitment to remaining on the cutting edge of antibody discovery. Those are the kinds of things that attract not only biotechs with interesting biology, but the large pharma players as well.

Kurt, I don’t know, if you want to add anything to that or anything else.

Kurt Gustafson : I guess the only thing I would add is, in general, we don’t really need to prioritize these things, right? Because that would be, maybe what you would have to do if you had a capacity issue. And we don’t really have a capacity issue. In many situations, for example, if we talk about work that’s done with the OmniRat, most of those situations, our partners, we’re shipping the rats to them, and they’re doing all of the work. So that business model is almost infinitely scalable for us. And so there’s really not a need to kind of prioritize doing one deal over the other. We’re — this is about sort of signing up as many people as we can and encouraging them to use the technology as much as much as we can.

Unidentified Analyst: Great. And then lastly, just regarding the new J&J tried specific asset, do you dissipate this to be a royalty bearing asset? Or will it have similar deal structures, same with Teclistamab?

Matt Foehr : Yeah, the deal with J&J was struck very early after OmniRat was launched? And actually it was a deal that was signed by a predecessor company that we acquired, O&E. And the way that deal was structured is that upon commercial launch there’s a payment in the U.S. and then a payment in Europe. So it’s simpler than the Teclistamab deal, right? So that’s $35 million in payments for those markets for that asset.

Unidentified Analyst: Great. Thanks for taking the question.

Operator: Thank you. And your next question comes from the line of Joe Pantginis from H.C. Wainwright. Please go ahead.

Joseph Pantginis: Hey, guys, good afternoon. Nice to have your first independent call under your belt here for earnings. So the first question I want to ask is about your underlying BD efforts. So — and your business model. So first, obviously, the numbers that you have, the numbers of partners and number of programs in development almost act as an inherent marketing tool. So I guess, how would you describe your 2023 efforts currently with regard to push and pull, meaning, how much of your current BD is from inbounds versus like the levels of marketing that you had to do?

Matt Foehr : Yeah, thanks, Joe. Your point about it being an inherent marketing tool it couldn’t be more correct. I think we’ve benefited historically by partners, talking about the success they’ve had with our platform at podiums at antibody engineering or protein engineering conferences. And that happens, consistently. We see it. I can think of an example of Amgen recently highlighting their successful use of OmniFlic at one of the antibody conferences just very recently. And that drives a lot of the inbound interest. And the majority of the deals we’ve struck have come from that sort of thing where partners are talking about their success with the platform, and that drives others to understand it. Also the level of clinical validation, I think is important as well.

And now with the number of clinical programs that have been produced by our platform, that creates increased visibility for others who are in the antibody discovery space. One of the things we are focused on and have been more recently is really expanding our business development reach, one to capitalize on that opportunity. We’re actually increasing our attendance at both business development-related, licensing-related, and related conferences this year. We’re partnering with some of our partners for joint presentations, and publications. And we think all of those things position us to really capitalize on the opportunity that’s been built on the innovation and the continued innovation that we’re committed to going forward. So as I said, at any one time we’re always negotiating new license deals, new partnerships, and we’re excited about the way we’re positioned now and the way our team’s managing it.

Joseph Pantginis: That’s really helpful. Matt. Thanks for that. And I guess the other aspect with regard to your underlying business, you alluded to in your prepared comments, you said OmniChicken, for example, in your prepared comments was the fastest growing, and new technology, you’re constantly working there. And you’re looking to present at like antibody engineering conferences. So maybe, without giving away the special sauce right now, but what kind of general tech improvements are you looking at, and you’ll be able to share with the street.

Matt Foehr : Yeah, thanks, Joe. As I said, well, we plan on launching innovations around our technology at major antibody engineering or protein engineering conferences through the year. There are elements — it’s a never ending process in our view in terms of continuing to innovate around the platform. We have a really unique, and I think important seat in the industry, with 69 partners, and number of active programs where we really can have that deep collaborative dialogue with partners to understand not only what they need now, but also to predict where they’re headed technologically. When you start hearing the same things out of multiple big pharma players and smaller biotechs, you really do get a good sense of what innovations will be leverageable broadly across the industry.

One example of that that’s really in the past was where we were a couple of years ago with launching OmniFlic and OmniClic, right really seeing the bispecific field forming years and years ago. And that’s one of the reasons why we started engineering, heavy chain only chicken a couple of years ago. That was done in collaboration with one of our big pharma partners. But it will become available, and we plan to launch it in the fourth quarter of this year. Heavy chain only antibodies that have a lot of interesting and desirable characteristics. We’ve turned them into antibodies or pica bodies in some instances, but they can open up new therapeutic approaches and have other biological benefits that we think will be something that is desired by our partners.

So that’s one that we expect to launch at a major conference in the fourth quarter.

Joseph Pantginis: Great, thanks for the color guys.

Matt Foehr : Thanks Joe.

Operator: Thank you. And your next question comes from the line of Steven Mah from Cowen. Please go ahead.

Steven Mah: Great. Thanks for the questions. I have a two-part question on your active partners. If I’m doing the math right, looks like there is 13 new partner ads and 12 rolling off in the quarter. So the question is of these 12 programs that rolled off, were any of these paused or were they just terminated? Or could they possibly resurface? And then the second part, could you give us a sense for these 12 partners that rolled off? Are they mostly big pharma or large biotechs or small biotechs? Thanks.

Matt Foehr : Yeah, thanks Steve. I’m not — I don’t think I’m following your math. The one thing I would point out, we added 12 new partners last year, right through the year. And one of — and then we did an agreement that was an expansion with an existing partner. So we might — there might be a mix up or maybe we’re talking about — you’re talking quarter versus annual. We did not have partners rolling off. So there might be a clarification there, or maybe a interchanging of programs or partners .

Steven Mah: No, I didn’t do I didn’t do my math right. Yeah, sorry — I was looking — sorry. This is my first call with you guys. But yeah, it was annual versus quarterly. Okay, yeah, got you. Got it.

Matt Foehr : Good.

Steven Mah: And then on the 13 new partner adds, could you give us some color on the partner type and then pharma or biotech, and then you said OmniChicken is growing the fastest. Could you give us a sense of what percentage of these new partners added for OmniChicken?

Matt Foehr : Yeah, I think I can give you a little color there. Of the 12 new partners added last year the majority were biotechs and these are companies with — well-funded companies who are bringing a program forward. We have a high standard for what we count as an active partner and an active program. And we have some really interesting biology that I think excites our scientists and have the impact and potential for impacts on health in interesting ways. So that is an area our team is continuing to be excited about. In terms of how many are leveraging our various technologies, it’s really a mix, right, in terms of what attracts partners to our platform. One is the flexibility to use on the chicken, say for a program where that is an ideal approach.

But at the same time some of those new partners may also be using OmniRat or OmniFlic as well. So it really is a mix and partners do value the fact that they get access to multiple technologies when they take a license with us. And we can really have a deeply scientific dialogue and pair the technologies with their needs, not only from a scientific perspective, but also from an operational perspective in terms of what works best for them.

Steven Mah: Okay, great. And then if I can sneak one last one in, this agreement with mAbsolve, could you give us a sense of the deal structure on that is? Is it like a joint venture? Or is it just a strict licensing fee? And are they eligible to receive any milestones or royalties from you?

Matt Foehr : Yeah, I’ll give you a little more color there of it at first. Well, first I’ll answer the economic question. There’s no downstream economics to mAbsolve. It’s a license agreement, where we’re able to exclusively license their STR FC Silencing technology to our partners with antibodies that are generated with the OmniAb platform. And then there’s no downstream to mAbsolve. Now stepping back a little bit, just to give a little more color on that it’s — obviously the FC-mediated immune effector activities are important, are really an important part of an antibody’s natural function. But in many therapeutic antibodies those interactions are not desirable or can lead to adverse effects. And obviously, there are a variety of approaches to eliminate effector function.

But they have a lot of limitations. So we were impressed with the STR Fc Silencing Platform that mAbsolve developed. It was recently described in detail in a PLoS ONE paper, but it delivers from what we see as the most truly silent FC mutations that have been described to-date. And therefore it has the potential to improve safety and efficacy for therapeutic antibodies and FC fusion proteins. And so now it’s something we can offer to our partners downstream. So hopefully that gives you a little bit more color.

Steven Mah: Yeah, that’s helpful. Thank you. And apologies for the mix-up on the new partners.

Matt Foehr : No problem at all.

Kurt Gustafson : Thanks Steve.

Operator: Thank you. And your next question comes from the line of Puneet Souda from SVB Securities. Please go ahead.

Puneet Souda: Hey, guys. Thanks for taking my questions, Matt and Kurt. So first one is on, maybe if I could ask a high level question on, obviously the small biotech funding is a major question out there. We are seeing that from the companies that provide tools and capabilities to the small biotechs. Sort of maybe give us a view of what you’re seeing from your perspective. How are you including that in your calculation for the year? And if you can, I’m wondering if you can talk about the programs sort of for the full year. I know you talked about ion channel partners were slightly down. But you also talked about clinical attrition remains very low, which is a positive in my view, but wanted to — wanted you to just calibrate us on what’s going on among the small biotechs? Is that something you’re considering into your calculation for the full year?

Matt Foehr : Yeah, Puneet. Thanks. This is Matt and then Kurt will probably have some comments here too. Obviously, we’re keep an eye on the space and understand kind of the global landscape. We are coming off a period where there has been a lot of funding into biotech companies, right. So — and I’m speaking kind of in the past here. That we’ve found as we talk to our partners has led to really a focus on investment, I mean, again, coming off a year last year with more new partnerships ever. And there really does seem to be a sustained commitment to discovery, right. I think, on a macro level discovery is obviously important and from a cost perspective with partners we haven’t seen kind of the effects, you’re kind of implying, based on our dialogue with partners.

You go to the conferences, we are at, all they want to talk about is new ways of approaching antibody-based targets, structural elements that our scientists may be the only ones who can elucidate or provide access to. There really is a real focus on remaining at the cutting edge of innovation for that discovery phase. So obviously we continue to watch the landscape etc. But we’re coming off a year where we signed up more new partners than we ever have. That shows a commitment on new partners to want to access the technology to in many instances, quickly ramp up projects. But hopefully, that gives you a little bit of color. Now Kurt, anything you want to add there?

Kurt Gustafson : I mean, I think that’s right. I mean, had you told me a year ago that we would sign more deals in 2022 than ever, I might have questioned that just given the sort of the state of funding in the biotech universe. But clearly, we’re still seeing interest.

Puneet Souda: Right, that’s great and encouraging given the backdrop we’re seeing out there. One other question on maybe for Kurt, on the cash side and position you have and when you look at the capabilities that you have currently on the animal platform, diverse platform across the board, that’s where the strength is. But when you look at the overall technologies hit the stat in terms of screening, identifying the right antibodies down the line, assays and whatnot, given that valuations have sort of come down across the space in some of those technologies, and maybe even to the private markets, how do you think about the overall, your technology stack and capabilities, and investments into that? Should we think about more internal work or organic? Or should we think about more opportunities that you can explore out there to improve that capabilities?

Kurt Gustafson : I think the short answer is both. But I don’t think we need to go do M&A in terms of really, there’s nothing that sort of is missing on the technology stack. That being said, we’ve got — we have our eyes on certain technologies that we think would be synergistic with the technology stack that we have today. And we’re on the lookout for those. And some of that could come through an acquisition of technology that’s external to us today. Some of it will be some internal investment that we’re going to make. But we’ve got an internal strategic plan of how we want to build out our technology stack further. And we’ll execute that. And I think it’ll be a combination of both internal investment as well as some acquired — acquisition of new technology.

Puneet Souda: Got it. And then last one on the OmniChicken platform, you were talking about potential additions to that with cow-inspired ultra long CDRs. So can you just provide update on that, where that stands?

Matt Foehr : Yeah, yeah, thanks, Puneet. Yeah, we didn’t cover it in prepared remarks today. We were highlighting the launch of the heavy chain only chicken that we will do in Q4. But you’re right to bring up part of the rationale for the OmniTaur platform and for acquiring the business where that originally resided, was that it opens the possibility for us to engineer those unique cow-like properties of long CDR-H3 into a humanized chicken host. And there’s a lot of science behind that. And our team is doing great work progressing that, something that we are very excited about, and we feel we’re uniquely positioned, perhaps the only people on the planet that can do that. And that is a program we will be talking more about in the future.

And it’s the kind of innovation that I think attracts partners to us, because they realize the impact that, that can have, especially in areas like CNS diseases, or other infectious diseases or emergency settings or variety of targets that having that structural characteristic built into a humanized chicken host creates some pretty substantial and meaningful opportunities downstream, especially well matched with our capabilities around ion channels and transporters, as well, because ion channels and transporters are targets where that technology could be even more meaningful. So you pair that with our extreme high throughput electrophysiology capabilities that were built up over many, many years, we’re talking decades that we believe we may have some of the largest capacity in the world, anywhere in the world for screening ion channel and transporters.

So you pair something like that capability, they are engineering in, in OmniTaur, OmniTaur like chicken, if you will, to just use general terms, that’s something that could have a pretty significant impact to the industry downstream. And that’s something we expect we’ll be talking more about in the future. But it’s just another example of some of the things we’re working on around tech expansion and advancement internally.

Puneet Souda: Got it. Super, and congrats on the first quarter call and it’s a solid one. Thank you.

Kurt Gustafson : Thank you.

Matt Foehr : Thanks Puneet.

Operator: Thank you. And your next question comes f rom the line of Yuan Zhi from B. Riley. Please go ahead.

Yuan Zhi: Thank you for taking our questions. And I have two of them. Matt some of your peers are using AI to generate antibodies. Just want to hear when you talk with your potential customers, has this topic being discussed with them? And what factors of your platform do you think will account with customers, your platform is the right choice.

Matt Foehr : Yeah, thanks. So a couple of comments I’ll make. Really we — at the core of our technology is what we call biological intelligence, right. And that’s based in a foundation really that antibodies generated in vivo are superior from other sources largely because they’re naturally optimized through an iterative process that preferentially selects antibodies with excellent specificity and developability profiles, right. And that ability of the immune system of our engineered transgenic animals is something we’ve been uniquely positioned to do, but also is developed over millions and millions of years of evolution, right. So those optimized antibodies, and the ability of our animals to do that is what we call biological intelligence.

This approach really increases efficiency and probability of success. It’s what drives a lot of partners to us. And we believe it also helps limit the attrition of antibody candidates in the clinic. That said, we obviously leverage in silico tools here all the time, right, spread across our three scientific sites here in Emeryville, in Tucson, Arizona, where we have a dedicated in silico team with a long history of modeling and structural modeling, and a whole host of other capabilities, as well as our team in Durham, North Carolina. So I think it may be a little under appreciated that here for many years, we’ve built up a suite of in silico tools for therapeutic antibody discovery and optimization that are really woven through and paired with our technologies.

These two tools are, as I said, structural modeling, but they’re paired with large multi species, antibody databases. And that’s a really key part. If you’ve been through as many programs as we have over many years, deep collaborations with partners. And we then use that and we also leverage AI and machine learning here as well. And that is something else that I think our partners value, may not be as well known that we do that because to us, it’s good science, you weave it together. But unless you’ve got that biological intelligence source that was built over millions of years of evolution, those tools are hindered without that. We obviously leverage that as well. And we’re proud of the fact that that we advanced programs for our partners, pairing those internal capabilities, obviously with our novel transgenic animals.

Yuan Zhi: Yes, got it. That’s very helpful and thorough review of your platform. And Kurt maybe one for you, understand the uniqueness of your business. As you know there are active royalty deals on the markets. And can you remind us the discussion you may have had with these loyalty players to monetize your future royalty or potential collaborations or any of your thoughts will be very helpful?

Kurt Gustafson : Sure. These folks come and we have conversations with them. So we’re certainly aware that those are options that are out there. I think in terms of where we stand today, though, as I kind of talked about, we’re sitting in a strong capital position, right. This business in some ways a fairly mature business. It’s fairly close to breakeven cash flow. And given the amount of money that we have on the balance sheet today, we’re sort of set. As I look forward into the future, I don’t foresee the need to raise additional capital, barring some sort of acquisition that we might do. So we talk to those people. We were aware of what’s out there, but it’s sort of not part of anything that we’re contemplating at this point.

Yuan Zhi: Got it. That’s all our question. Thank you.

Kurt Gustafson : Great, thanks Yuan.

Operator: Thank you, Mr. Foehr, there are no further questions at this time. Please proceed.

Matt Foehr : Great. Thanks. I’d like to thank you all for joining today’s call, and for your questions and engagement. And as I close out the call here I also want to take a really quick moment to thank our employees as completing a split out — from a public company is a substantial project and takes some business stamina, relentless attention to detail and collaborative teamwork to do. And we’ve had that to do that all while running and growing the business, support our partners, innovating around the technology as well. So I want to I want to thank the employees. And I will say that together, we feel great about our positioning and our ability to build value for all stakeholders, which includes, of course our partners, and of course importantly, you the investors.

So we keep these things top of mind here at OmniAb. And so just wanted to close out with that. I’ll also mention that we’ll be at a couple of investor conferences in the near term. We’ll be at the H. C. Wainwright BioConnect Conference at the NASDAQ headquarters in New York City on May 2, and we’re also planning on attending the EF Hutton Global Conference on May 11, which is also in New York City. So we’ll look forward to keeping you updated on our progress and hope everybody has a great day. Thank you.

Operator: Thank you. That does conclude our conference for today. Thank you all for participating. You may now disconnect.