OmniAb Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 11, 2023

Key Takeaways

  • Q1 2023 revenue was $16.9 M, up from $9.6 M, driven by milestone payments from Janssen, and the company ended March with $113.6 M of cash and equivalents to fund operations.
  • The partner base grew to 70 partners with over 300 active programs, including 27 in clinical trials and three approved drugs, and OmniAb expects 3–5 new clinical program starts in 2023.
  • OmniAb will launch OmniDeep at next week’s PEGS meeting, an AI- and in silico-driven discovery suite integrated with its transgenic animal platforms to accelerate antibody candidate identification.
  • The company plans to introduce a heavy-chain-only chicken system in Q4 2023, expanding its multi-species antibody discovery toolbox for challenging targets.
  • Operating expenses rose, with R&D at $13.8 M (vs. $10.8 M) and G&A at $8.2 M (vs. $4.1 M), resulting in a net loss of $6.1 M in Q1, though management says spending aligns with prior guidance.
AI Generated. May Contain Errors.
Earnings Conference Call
OmniAb Q1 2023
00:00 / 00:00

There are 9 speakers on the call.

Operator

Good morning, and welcome to the OmniAb Inc. 1st Quarter 2023 Financial Results and Business Update Conference Call. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. As a reminder, this conference is being recorded.

Operator

I would now like to turn the call over to Cort Gustafson, OmniAb Inc. Chief Executive Officer.

Speaker 1

Thank you, operator, And good morning, everyone. Thank you all for joining our Q1 2023 financial results conference call. There are slides to accompany today's remarks and they affect 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.

Speaker 1

Importantly, this conference call contains time sensitive information that is accurate only as of the date of this live broadcast. 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 Forre, 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 questions. With that, let me turn the call over to Matt Foehr.

Speaker 1

Matt?

Speaker 2

Thanks, Kurt. Good morning, everyone, and thanks for joining our Q1 2023 Financial Results Conference Call. OmniAb has been an independent publicly traded company for just about 6 months now. So I'd like to start off this morning by taking a quick moment to welcome our new investors and new analysts who are joining today And to just briefly describe a bit of what we do. OmniAb's business model is focused on licensing our proprietary discovery platform To enable our partners to upfront payments for access to our technology stack, from collaboration or service revenue regulatory or commercial achievement and from royalties on net sales of our partners' products.

Speaker 2

We believe OmniAb has the most diverse host systems For fully human and bispecific antibody discovery with the industry's only 4 species platform. Our technology stack is driven at its core By the biological intelligence of our engineered transgenic animals, paired with our high throughput screening technologies to enable the discovery of high quality, Fully human antibody therapeutic candidates for a wide range of diseases. Our robust base of experience coupled with our close collaborations with partners gives us critical insight into the industry and creates a positive feedback loop to advance and expand our proprietary platform. We strive to keep our technology offerings at the forefront of our industry. And in a few slides, I'll discuss our branded OmniDeep offering, which leverages in silico capabilities such as structural modeling, artificial intelligence and machine learning across our technology platforms In order to further enable our partners' work, OmniDeep is the first of our technology launches this year, as we also plan to launch our novel heavy Leveraging our highly scalable business model, the number of programs underway by partners continues to grow and that provides significant validation of the value our technology brings to our partners.

Speaker 2

And we continue to drive business development efforts to attract additional partners As we participate in this large and growing market, which is projected to reach about $279,000,000,000 in 2025. With our current resources and our dedicated staff of over 100 employees and a proven technology platform, We believe we're positioned for growth to address major unmet medical needs for Novel Therapeutics. We continue to expand partner relationships, which totaled 70 partners at the end of the Q1 with the addition of a new license with the Scripps Research Institute related to assets now being developed by Cessation Therapeutics. Subsequent to quarter end, we also signed a new platform license agreement with Neurocrine Biosciences. Our partners represent a wide range of pharma companies and we continue to attract high quality partners that are seeking our discovery platform and our team's scientific collaboration services.

Speaker 2

Approximately 20% of our partners are among the world's top That's expected to be the case with CGen and Pfizer, given their previously announced and planned consolidation. I note here too that our agreements are generally all structured so that the economics to OmniAb are tied and maintained to the program even in instances where there are changes in ownership. As I mentioned, our portfolio continues to grow and reached over 300 programs With 27 programs in the clinic were approved for commercialization at the end of Q1. During the quarter, we added a net of 10 new programs our portfolio. The pie chart on this slide breaks out our 301 programs by stage of development.

Speaker 2

The discovery phase is large and growing with a base totaling 260 programs. In addition, in the clinic our partners have 20 programs in Phase 1, 2 in Phase 2 and 2 in Phase 3. There are 3 approved drugs utilizing OmniAb derived antibodies and we're recognizing royalty revenue from commercial sales of zembrolumab and sugamelumab in China, both of which are also being pursued in other markets. In the Q1, we had a new program answer the clinic with Cgen, who initiated a Phase 1 clinical trial of SGN BB228, which is a CD228 and 4 1BB bispecific molecule that's in clinical development for advanced melanoma and other solid tumors. As I mentioned on our last quarterly call, based on discussions with partners, we see potential for 3 to 5 new OmniAb derived antibodies to enter the clinic in 2023.

Speaker 2

We strive to provide utmost flexibility to meet our partners' evolving scientific needs as we believe generating large and diverse repertoires Of high quality antibodies increases the likelihood of success, the science behind the individual programs drives our partners' use of our different engineered animals. And in many cases, they use more than one source for a program. Partners currently have antibodies in clinical trials that are rat derived, Our partners made a number of public announcements about their clinical and commercial progress during the Q1 and in recent weeks. Notably, in January, we received $35,000,000 in milestone payments from Janssen related to TechValley, which Kurt will discuss. Regarding other progress, I'll start with batiplamab.

Speaker 2

Abatoclumab is in clinical development by Hanol, by Harbor Biomed and by ImmunoVant. Harbor Biomed announced positive top line results from its Phase 3 clinical trial in China for the treatment of generalized myasthenia gravis. Hanol has announced that they're making progress on plans to initiate a Phase 3 In Japan, later this year, also for the treatment of generalized myasthenia gravis. In addition, ImmunoMan announced that it expects to report initial results from its Phase clinical trial in Graves' disease in the second half of this year. Immunovant is also running clinical trials in generalized myasthenia gravis, thyroid eye disease and chronic inflammatory demyelinating polyneuropathy.

Speaker 2

And for the next generation anti FcRn IMVT-fourteen oh two, Which was discovered using our OmniRAT technology, Immutavant announced plans to initiate a Phase 1 clinical trial for autoimmune diseases. I want to make one clarifying note regarding the economics for both vatoclimab and the 1402 programs, which is that these molecules were originally discovered by Hanol Using Omni Rad and any payments that we receive will come from Hanol through defined sharing economics that are built into our agreement with them. As I mentioned, Seagen recently initiated the Phase 1 clinical trial of SGN BB228, a CD228 and 4 1BB bispecific molecule in Advanced Melanoma and Other Solid Tumors. And a comment also here on ASCO, I'll note that based on the titles and presentations that have been We expect a number of our partners will present new clinical data for OmniAb derived programs at the ASCO Annual Meeting that is taking place coming up here in June. As mentioned in our press release this morning, we'll be launching our Omni Deep platform at next week's PEGS meeting in Boston.

Speaker 2

Our Head of Systems Engineering, Bob Chen, will be presenting case studies highlighting OmniDeep. OmniDeep is a suite of in silico tools for therapeutic discovery and optimization that have been woven throughout OmniAb's various Technologies and Capabilities. These tools include structural modeling, molecular dynamatases, AI and machine and deep learning sequence models and additional features. Leveraged with the biological intelligence of our engineered animals our screening technologies such as exploration, OmniDeep allows for rapid identification of candidates with the right affinity, Specificity and developability profiles to lead to more effective and efficient drug development. These providers recently expanded them, especially for programs with some of our larger partners.

Speaker 2

Our extensive capability is centered around ion channels Transporters also leverage OmniDeep, which we have capabilities that are particularly effective for difficult and high value ion channel targets. These capabilities were originally established and built around small molecules and are now being applied to Not only do we value the relationships we have with our partners, we also help to create value through their feedback on the discovery process and areas that they find of interest to their pipeline expansion plans. We utilize this input to further enhance and innovate our technology platform to maintain what we see as a leading position within the industry. We have therapeutic candidates into the clinic by our partners as well as to continue to do new deals with structures that create value for all stakeholders and also that expand our portfolio with new partners. And we look forward to keeping you updated as we execute on this strategy.

Speaker 2

So with that, Let me now turn the call back over to Kurt for a discussion.

Speaker 1

Thanks, Matt. As a reminder, the financial results reported from Prior year period are prepared on a carve out basis, which were derived from Ligand's historical accounting records as if OmniAb were an independent company. This makes certain comparisons difficult primarily for operating expenses given the differences in the methodologies we're reporting. Now let's Walk through a few of the highlights for the quarter. Total revenue for the Q1 of 2023 was $16,900,000 compared to $9,600,000 in the prior year quarter.

Speaker 1

The revenue increase was Pwn Payment for the first commercial sale of Tech Vale in the EU. I mentioned on our last conference call that we received a $35,000,000 payment from Janssen and that $25,000,000 was recognized as revenue in the 4th quarter for the 1st commercial sale in the U. S. I also stated that we would likely recognize the remaining $10,000,000 milestone payment later in the year. However, in April, we received information from Janssen that met the criteria for recognizing the EU portion of this milestone revenue In the Q1, we performed for some of our ION channel partners based on stage and status of these exclusively licensed programs.

Speaker 1

Turning to operating expense. Our R and D expense for the Q1 was 13,800,000 compared to $10,800,000 in the prior year quarter. The increase was primarily due to higher personnel costs and higher costs associated with our new facilities. G and A expense was $8,200,000 compared to $4,100,000 in the prior year quarter as we staffed up these functions and incurred other costs associated with The net loss for the Q1 was $6,100,000 or $0.06 per share versus a net loss of $6,300,000 or $0.08 per share in the prior year period. One additional comment about shares used for our earnings The number of shares of 99,200,000 for Q1 is based on our basic shares outstanding.

Speaker 1

It Should be a good number to be using for the EPS calculations going forward. We ended the Q1 with $113,600,000 in cash, cash equivalents and short term investments. The increase in the quarter was primarily driven by the receipt of the $35,000,000 milestone payment for TechValley. Other than the associated decrease in accounts receivable for the milestone that I just mentioned, there were no significant changes to our balance sheet. The only other change that I'll mention is that we paid approximately $2,000,000 in the Q1 on our CDR obligation, most of which was related to various omnitor programs that recently started.

Speaker 1

We continue to expect that our cash balance at the end of 2023 will be slightly higher than the balance at the end of 2022 and that this balance provides sufficient runway to fund our operations for the foreseeable future. On our Q4 earnings call, I indicated that our Q4 2022 R and D expense is a good base off of which we would be growing. Q1 2023 actual results are in line with that expectation and we continue to expect to see this trend going forward. On the G and A side of things, I previously indicated that our Q4 2022 G and A expenses included approximately $2,000,000 of one time expenses and indicated that if you pulled out that $2,000,000 we expected that our G and A expense would grow slightly off this adjusted Q4 figure. As you can see, our Q1 2023 results are consistent with that guidance And we also expect to see the similar trend going forward.

Speaker 1

And with that, I'd like to open up the call for questions. Operator?

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer Your first question comes from Robin Carnaczekas from Turis Securities. Please go ahead.

Speaker 3

Hi, this is Nishanth. I'm on for Robin. Thanks for taking our questions and congrats on all the process. So, one question on OmniDeep. I know, I mean, you should believe that biological intelligence is a better way to produce Antibodies, I was just wondering if you are willing to leverage OmniD platform to kind of create novel antibodies just in silico.

Speaker 3

Is that something like a plan for the future?

Speaker 2

Thanks Nishant. Yes, good question. And I'll first talk a little bit about the branding of Omni Deep and it's really a nod to The term deep in Omni Deep is really a nod towards deep repertoires, right, that the biological intelligence of our animals produce, To deep screening, in terms of our screening capabilities with exploration and other proprietary capabilities, To deep sequencing and ultimately to deep learning as well. And we'd already been leveraging Insilico And AI in our downstream work, especially on the screening side and in some of the work around ion channels and transporters really for some time. And I'd be Remiss, if I didn't note that we have some really fantastic Insilico experts on our team who are really impressive and important teammates We actually announced a deal a couple of summers ago with Landing AI And talked a bit about it then, and that work expanded considerably over the last 12 or 18 months or so.

Speaker 2

That work was centered around our exploration screening platform. And kind of as you're generally referencing, there are obviously some public and A radical example of concordance of predicted structures with actual crystal structures, right? So, this is A scientific resource that's available to us and really to everyone else in the drug discovery space, but that I'll say that area of work really is not perfect. There are many, many classes of proteins where it's not so good at all for a variety of reasons. And similarly, designing antibodies based on predicted antibody structure from sequence has a lot of very well known limitations.

Speaker 2

And the uncertainties are really compounded in that quite a bit when using a predicted but not verified antigen structure, which creates almost like a House of Cards type scenario, as some have described it, when using only Insilico or AI only approaches. And still, Well, that sort of approach may bear bits of fruit. In specific instances, it will lead only to a subset of all solutions and it will never change the fact that And in silico solution or enhancement, we'll need to be tested for expression and binding and both in vitro and eventually in vivo And we'll also need to be evaluated for off target binding to a large number of irrelevant proteins. But the point I really want to highlight here is Carefully engineered transgenic animal systems have many of these tests inherently built in as natural checkpoints. So our systems can essentially try and test many different antibody sequence possibilities directed at the actual protein structure Rather than just a predicted model and then it can weed out antibodies that don't express well or that bind promiscuously And then it can further refine and edit, if you will, for high affinity.

Speaker 2

And that's why kind of a long lead up, but that's why we and our partners see so much power In pairing our biological intelligence of our highly engineered transgenic animals with the in silico tools that we brand and call OmniDeep. So those are the sorts of reasons why we're excited about it and I think our partners are. But really, It remains our core foundation, the biological intelligence, but obviously, we're leading into the Omni Deep element as we expand our technology as well.

Speaker 3

Great. Thanks. And in terms of economics of deal, so as you like do more deals for Difficult targets using your new advanced technologies. Is there variability in terms of economics? Like do you negotiate higher economics for these of deals versus the others, which are like more simpler targets?

Speaker 2

Yes. In general, we've Obviously, got a core commitment as part of our strategy to continue to innovate around the platform, to really continue to keep it cutting edge, Right. And that takes a variety of forms. That's not only workflow enhancement, it's also continued genetic engineering. As I said, we're going to be launching a heavy chain Chicken in the Q4.

Speaker 2

And it's really leveraging the positive feedback loop that we have from our partners and really understanding not only where they are today, But where they are headed? Generally, when it comes to deal structures, maybe I'll let Kurt comment a little bit on kind of the elements of Economics of our deal, but it's really an interchange of kind of the work that we're doing, The technology that partners are leveraging and then that you say kind of is reflected in the structure of the deal. But Kurt, maybe you want to Yes.

Speaker 1

I mean, for the most part, the economics of all of our partnership deals are established and set at the time that we sign those deals. So they're Sort of fixed in nature in terms of what milestones and royalties will be. That being said, to the extent that we're performing additional work, we or partners, We would earn additional service revenue for those types of things.

Speaker 3

Thanks. And just the last one, I mean, I know you provided guidance for a number of new clinical molecule that will enter clinic in this year. Just wondering, I mean, you are seeing a nice consistent trend of around like 10 new project starts every quarter. Do you plan to like provide guidance For new product starts for the year?

Speaker 1

And in terms of guidance for the only guidance We're providing is really just sort of this guidance on the number of clinical starts. And the reason for that is, it's sort of a number where we do have some visibility in terms of Discussions and insight from partners. As it relates to kind of program starts, it's a really difficult thing for us to project, Given the way partners start new programs, so I would doubt that we would ever provide guidance on that number. But to the extent where we do have visibility, like I said, on kind of clinical starts, that's where we tried to provide a little bit more guidance here.

Speaker 3

Great. Thank you. Thanks for taking my questions.

Speaker 4

Sure.

Operator

Thank you. Your next question comes from Stephen Giley from Stifel. Please go ahead.

Speaker 5

Yes, good morning. Thanks for taking the questions. Maybe just a follow-up on the OmniDeep. Is that technology that A partner with just a broader platform license would have access to or is that technology that a partner who comes to you looking for a Full end to end solution would benefit from given the way that it's kind of woven into the tech stack?

Speaker 2

Yes. Thanks, Steve. This is Matt. Yes, it really is woven throughout our tech stack, right? And there are elements of this that we're now branding as OmniDeep that we've been leveraging for years.

Speaker 2

And so it's been an important part of it. We've expanded it over the last 12 to 18 months. And we are employing these techniques for partners, especially some of our larger Partners, so to answer your question, it's part of the benefit, if you will, that partners get when they partner with us, Right. They know they're coming to us. They get cutting edge technology.

Speaker 2

They get continued innovation And a commitment to continued investment around the platform. And I think that's what drives our partners' use of the platform. That's one of the reasons I think they're excited about the things that we do and why our science team is excited about as well. So hopefully that gives you a little perspective there.

Speaker 5

Okay. And then you talked about launching the heavy chain chicken species in, I think the Q4 of this year, I guess, how do you think about what the demand for that will look like? And I guess I asked the question, I know that you guys launched omni tour, I think back in 2020 and I think kind of per one of the slides you have on the deck, I think 2% of demand looks to be centered around that technology. Would you expect the heavy chain chicken To improve upon, I guess, kind of that 2% omni tour demand metric?

Speaker 2

Yes. Thanks, Steve. I'll say for Omniture, we actually are seeing an increase in starts there and that percentage is going up. Obviously, when you have over 300 programs, it can be the percentages are going to shift around The edges, but Omniture is an area of growing and increased interest and we have had new starts there. On the heavy chain antibody That's an area of growing interest in the industry, domain antibodies, heavy chain antibodies, nanobody, fecal bodies, that sort of thing.

Speaker 2

So we do see a demand there. In fact, we do have partners who are already inquiring and lining up for Use and access to the heavy chain chicken when it becomes available in December. We'll probably talk more about Where we see it fitting in to the overall landscape at the time we launch it, but hopefully that gives you a little bit of color.

Speaker 5

Okay. And then maybe just lastly, you can kind of speak to the average royalty rate On the royalty bearing assets across the portfolio right now, where you think that metric Can kind of realistically expand to over the next 3 to 5 years? And then maybe what are the key levers that allow for that expansion to occur?

Speaker 1

Thanks. Yes, Steve. So, I guess the way that I would frame that question is there are 2 products that are approved right now where we receiving royalty in that is a flat 3% royalty. In terms of royalty rates that For the entire portfolio, we haven't given a specific number, but it's generally in the low to mid single digits. And I would Based on kind of as we get out into the future that that 3% number would go up based on Sort of deals that we've signed.

Speaker 1

That being said, it's going to be a function of sort of what individual deals are that kind of move forward. But in general, I would expect that number to Operator, can we go to the next question?

Operator

Your next question comes from Joe Pantginis from H. C. Wainwright. Please go ahead.

Speaker 6

Hey, guys. Good morning. Thanks.

Speaker 1

So I guess I'm going to

Speaker 6

approach OmniDeep from a marketing standpoint. So whether you get inbounds or whether you're out there marketing your overall Platform, how would you say OmniDeep differentiates from other in silico approaches?

Speaker 2

Yes. Thanks, Joe. Really, it starts at our core, I'll say, which is our foundation of biological intelligence in the deep repertoires, The proprietary multi species antibody databases that we possess that have been built up by doing Many, many, many programs over many, many years. And then pairing that with cutting edge technology, as I said, this is an area that's been woven Throughout our tech stack in pieces for years, but we've leaned into it more over the last 12 to months really leveraged some of the expertise that we've had internally that had been built up over time in some of the organizations that We're acquired that form the foundation of OmniAb. But really what differentiates it is pairing some of these tools and capabilities with Our transgenic animal systems and the biological intelligence and capabilities.

Speaker 2

Again, the term deep is A nod to deep repertoires, the deep screening capabilities that we have stood in. And as we launch this next week at PEGS, As I said, Bob Chan, who heads our systems engineering, will be presenting at the PEGS meeting in Boston, also with some case studies. This sort of work has really been able to be highlighted, things like MKP 46 and other areas where I think Partners will realize and some partners are already benefiting from these capabilities, kind of the power that this Creates within our business model.

Speaker 6

No, that's helpful. Thank you. And then I guess, 2 little questions, housekeeping and expenses for both of you, I guess. Are there any changes to the terms or everything sort of status quo with the SeaStone announcement? And number 2, with regard to OmniDeep or for example, any Key infrastructure investments that need to come from that at this point?

Speaker 2

Yes, I can comment on Seastone. Yes, Joe, you're referring to Keystone announced earlier in the week they regained development commercialization rights to sugamelumab outside of Greater China. And yes, no change at all to the economics to us. Obviously, assets You change hands from time to time. We've seen that at times and there's no change there.

Speaker 2

Maybe I'll let Kurt comment on expenses.

Speaker 1

Yes. No additional expenses related to OmniDeep or any of these other programs relative to We're still sticking with the guidance that we have. So no major change to

Speaker 6

that. Fantastic. Thanks for the color, guys. Yes. Thanks, Joe.

Operator

Thank you. Your next question comes from Puneet Souda from SVB Securities. Please go ahead.

Speaker 7

Yes. Hi, Matt, Kurt. Thanks for taking the question. So first one on maybe a broader one, Just given what we're hearing in the marketplace and in terms of small biotechs, emerging biotechs, funding constraints, What are you seeing within the business development pipeline? Maybe you can can you give us a high level view there?

Speaker 7

And then also within the 260 discovery programs that you have, are you hearing anything in

Speaker 2

Yes. Thanks Puneet. So first, I'll just comment on your last question. All the numbers we report are net of attrition, Right. So whenever we report our numbers, they're net of attrition.

Speaker 2

And of course, you do see attrition At any time, that's a natural part of the pharmaceutical business, of course. But your question on the macro environment, obviously, we are Students of the industry as well and have been for some time and we do have, I'll say, a really interesting vantage point On the industry, given our 70 different partners, over 300 programs. But in answering your question, I think I'll first point historically And note that we've been able to grow our number of partners and number of active programs on an annual basis Through a variety of macro funding cycles in the industry, in those times when raising capital for smaller partners was relatively easy or in times like now, where it's viewed as more complex. And I'll speak for our business more specifically And say that the diversity of our partner base with a mix of global big pharmas, with biotechs, with startups who have interesting biology, But that diversity brings a lot of power to the business and I think positions us well to create long term value for our stakeholders As cycles come and go, our deeper relationships with partners also informs our innovation.

Speaker 2

That obviously creates what we call the positive feedback loop and really, I'll say, informs our conviction around continued innovations for our platform. And also, I'll say, I Say this to our team a lot internally as well that when you see cycles in the broader landscape generally, that these are the times when true innovation And true differentiation, but innovation wins, if you will. And partners come to us to help them discover new drugs, To get Scientific Solutions, that's why they come to us, is for that innovation. So, could some of the things that are seen in the macro landscape, If sustained, influence some of our metrics at some point, sure, I think it would be odd to say that it absolutely But that said, we do think that our innovation will win out, and we really like how we are positioned because of that. Our business development team remains extremely busy.

Speaker 2

The vast majority of our deal dialogue and Deals have come from inbound interest or scientists migration. That continues to be true. And we are leaning into, I'll say more conferences. We used About a half a dozen or so conferences a year, we're increasing that by about 3x over the next 12 months. So that's hopefully a little bit of color there for you.

Speaker 7

Yes. No, that's great. On the business model, the way you're offering is, Can you talk to us a little bit on sort of how cost effective it is versus the traditional model where the Work is being done under sort of one roof in some of your competitors. Can you talk about what sort of leverage you have If the market was to get tougher, how can that offering resonate potentially more with your customers? Thank you.

Speaker 1

Yes, it's a great question Puneet because our business is highly scalable in terms of the way we've structured it. The deals that we have when partners come to us depending on the type of species they use and we'll use Omni Rad as an example. In that case, in many cases, we do very little work for the partner. We ship them the rest. They have the capabilities to Do the inoculations, do the screening themselves, and we really just kind of get quarterly reports on the work that they've done.

Speaker 1

So In terms of Omni Rat, that business is almost theoretically infinitely scalable without us adding additional costs. When it comes to OmniChicken, we actually have to go do some of that work ourselves on the front end because we're the only ones that house the chickens. But we sort of pride ourselves in having this flexibility or flexible business model, right, where partners can come and Pay us to go do all of the work, right? So we can do screening and optimization for them and we'll earn extra service revenue for that. But to the extent that the partner has those capabilities and wants to do that work themselves, that's fine too.

Speaker 1

And they take over the work and do that. So, Our business model tends to be much more scalable than others just in terms of the way that we operate with our partners and the fact that in Many, many cases, our partners are doing the majority of the work themselves.

Operator

Thank you. Your next question comes from Stephen Ma from TD. Please go ahead.

Speaker 8

Great. Thanks for the questions and congrats on the quarter. Yes, thanks. And maybe just a follow-up on Puneet's question When you're doing a like a trench hunting animal license, like it seems like to me maybe you can confirm on the Scripps licensing Deal, that's an Omni Rat license where Scripps is maintaining the colony and doing the work for themselves. Is that right?

Speaker 2

Yes. Without going into deeper specifics around, I'll say the workflows for certain partners, Right. On a specific basis, maybe I'll just describe it generally. We

Operator

one of the

Speaker 2

things we have I started to focus on over the last year or so is continuing to advance partnerships with leading academic institutions. And Scripps is an example of that. We've got a great network of academics, not only through Kind of the history that we've built up of genetic engineering first, but also through our Board and others And Scripps is an example of an organization that has a history of innovation and interesting biology. So they want Access or taking access to our animals and then from there, One of the benefits of these sorts of deals and we have we've done these with other academic institutions as well These are ones that also have a history of licensing and or seeding and spinning out innovative companies. And in this instance, with the Scripps Institute, the assets that came out of our technology there are now in development at cessation therapeutics, cessation is developing novel immunobiologics to prevent fentanyl overdose and to treat fentanyl addiction Using a really what is a completely new approach is really by sequestering fentanyl before it's able to enter the brain To offer more durable protection for overdose.

Speaker 2

So kind of an interesting new area of science, But this is an instance where it's a partnership through a leading academic center who had some interesting Novel biology that now then led to assets being moved forward at a company.

Speaker 4

Yes. Okay. Yes, I appreciate the color. And if possible, can you

Speaker 8

give us a sense for the economic structures of Look at Transgenic Animal Licensing deal where I mentioned where they maintain the quality themselves and do the work themselves versus like a full platform deal like the one you signed with Neurocrine in the 2nd quarter?

Speaker 1

Yes. In terms of the way the deals are structured, the partnership economics are all built the same, right? So, we don't To the upfront, we don't sort of say, hey, if we're going to do a lot of work for you, then that's going to come at a higher royalty rate or higher royalty rate. The idea is that the economics in terms of the upfront and milestone payments and royalties, they're really established upfront. And they're independent of whether or not we tend to do or whether we're going to do a lot of work for the partner on a program or not.

Speaker 1

Because in some cases, you'll have a partner where they might be set up to do an omni rat program where they do all of that work themselves. And then the next program they decide to go do is with OmniChicken, whereas we're maybe doing a big chunk of that work. The economics in terms of milestones and royalties will be the same, although in the case of the OmniChicken program, that's where we would earn additional service revenue As we do work. So the basic structure of the deal is sort of the same. It's for all programs that a partner would go do.

Speaker 1

The difference would be to the extent that we're doing additional work is the additional collaboration revenue that we would earn.

Speaker 8

Okay. That's really helpful color. And last one for me on OmniDeep. Is this something that can be monetized as like a software as a service To others or to, for example, partners that are just doing the transgenic animal license route?

Speaker 2

I think the answer to that is, elements of it potentially could, but you could say that about a lot of elements Our technology stack, right? We've got proprietary pieces of our technology that one could Use the portable word around from a number of perspectives. But generally, that's not been how we do it, right? We Have built up a technology offering of a variety of proprietary tools of which this contains A number as well. But our view would be no, this would be for partners who sign licenses with us, And we leverage it for them to facilitate their programs moving forward more quickly and efficiently.

Speaker 8

Okay, got it. Perfect. Thanks for the questions.

Speaker 1

Yes. Thanks, Steve.

Operator

Thank you. Your next question comes from Matt Hewitt from Keith Hallum Capital Group. Please go ahead.

Speaker 4

Good morning. Thank you for taking the questions and I apologize if I ask one that was already As I'm kind of bouncing around between calls. But first up, thank you for providing the update on the number of active programs, Some nice growth there despite some of the questions about funding and whatnot. I'm curious, what is the number of partners that you currently have? Do you have that number that you can break out?

Speaker 2

Yes, Matt. We're reporting at the end of Q1 70 partners Who are leveraging OmniAb Technologies and Assets.

Speaker 4

That's great. Thank you. And then congratulations on the pending launch of Omni Deep. But I'm curious, given your strong cash balance and the current environment that is putting some pressure on some smaller companies, Would you contemplate or is M and A something that you would consider to kind of add to your toolset or Is your preference to continue to build those out internally? Thank you.

Speaker 2

Yes, Matt. Matt, thanks. And obviously, we built what became the foundation of OmniAb We're doing 6 acquisitions in less than 6 years, right, of technologies that fit very well with one another, that Complimentary to one another, proud of the fact that we've kept many of the founders of those companies on board as key members of our science team. And so M and A really is something that is in our DNA, right? Those 6 acquisitions, all of which have brought us Elements of our technology stack that have been important.

Speaker 2

We're always cautious never to promise deals, right? But we've been quite successful, I think, in tacking on technologies And teams out of the private sector, right, so these are private companies who have technologies that are validated or in the early stages of validation. So, like I said, we're always cautious never to promise deals, but I certainly wouldn't rule it out. That is something we do think about and are thinking And are always assessing. That said, we are also excited about our internal investments in technology like Omni Deep, like the heavy chain only chicken that we'll Launched in Q4, that investment in our technology is built into our plan, right?

Speaker 2

It's something we'll continue to do and we can Keep leveraging that positive feedback loop that we have from deeper relationships with partners that really inform our conviction around innovation. So, a long way to say, yes, we certainly are always looking at interesting things to bolt on, whether those come out of Companies, whether they come out of universities or other academic areas where we think we could add on new Our next question comes from the line of Jefferies. Your line is open. Thank you. Thank you.

Speaker 2

Thank you.

Speaker 4

Absolutely. Great. Thank you very

Speaker 1

much. Thank you.

Operator

Thank you. There are no further questions at this time. You may proceed.

Speaker 2

Great. Thank you, operator. I'd like to thank Everyone for participating on this morning's call and for your questions and engagement. We look forward to keeping you updated on our Progress and speaking with you next quarter. I just want to mention also that we'll be out on the road meeting with investors In addition to attending the EF Hutton Conference today here in New York, we'll also be attending the B.

Speaker 2

Riley Conference in the LA area, the Benchmark virtual conference as well as the Craig Hallum Capital Conference that's coming up in Minneapolis. So thanks again all and have a great day.

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