OmniAb Q1 2024 Earnings Call Transcript

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May 9, 2024

There are 7 speakers on the call.

Operator

Good afternoon, and welcome to OmniApp Inc. First Quarter 20 24 Financial Results and Business Update Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

Operator

I would now like to turn the call over to Kurt Gustafson, OmniAb Inc. Chief Financial Officer. You may begin. Thank you.

Speaker 1

Thank you, operator, and good afternoon, everyone. This is Kurt Gustafson, OmniAb's Chief Financial Officer. Thank you all for joining our Q1 2024 financial results conference call. There are slides to accompany today's remarks and they're 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.

Speaker 1

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, May 9, 2024. 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, OmniAb's President and CEO.

Speaker 1

During today's call, Matt and I will provide highlights on the company's operations, partner and technology updates and our recent financial results. And at the conclusion of our prepared remarks, we'll open the call to questions. With that, I'll turn the call over to Matt. Thanks, Kurt.

Speaker 2

Good afternoon, everyone, and thanks for joining us today on our Q1 call. With consecutive quarters showing growth across some key business metrics, I'm proud of OmniAb's progress over the last 18 months, which put us on track for a successful quarter and positions our business and our pipeline very well for a strong year here in 2024. Our performance during the 1st 3 months of the year reflect both the continued diversification of our partnership base and the expansion of our global presence. OmniAb's team remains highly focused on our strategic plans. We're creating greater visibility for our validated technologies and we're committed to driving innovation to create long term value for our stakeholders.

Speaker 2

We're excited about the opportunities that lie ahead we're confident in our prospects for technology and business growth and progression in the coming years. I'll quickly review our business metrics starting here on Slide number 5. We ended Q1 twenty active partners. 3 new platform license agreements were signed during the quarter, including new agreements with a very well funded Boston based venture backed startup with Immunobiochem Corporation and with the University of Georgia. We're committed to continued expansion of our diverse partnership base.

Speaker 2

And as you can see here, we've nearly doubled our number of active partners net of attrition since 2018. Our technology platform continues to become more visible and continues to expand. And with our recent technology launches and plans for continued innovation, we believe we're well positioned to potentially accelerate this growth of partners. We also saw some growth in active programs this quarter net of attrition with the number of active programs increasing to 327 as we show here on Slide 6. We experienced a slightly higher level of program attrition in Q1 as compared to recent quarters, all of which was in the discovery stage with one exception that I'll discuss in a moment.

Speaker 2

The discovery stage attrition in Q1 was mostly attributed to a pipeline realignment by a single Asia based partner and given the net increase in programs in the quarter that was obviously positively counterbalanced by new program starts from other partners based here in the U. S. And in Europe. We saw some really nice active program progression in the quarter as 3 programs successfully transitioned from discovery to preclinical stage. And I'll mention again that we define preclinical stage programs as ones that are confirmed to be in pre IND studies by our partners with the intention of entering human trials.

Speaker 2

And at the end of Q1, we had a record 18 programs in preclinical, and that's the most that we've ever had at that stage. And as shown here on Slide 6, we also saw 1 program transition from the Phase 1 to the Phase 2 category per disclosures by our partner. Moving now to Slide number 7, as we mentioned frequently, attrition is a natural part of our business and of drug discovery and development generally. In 2023, we didn't have any attrition in our clinical stage programs. But in Q1, we saw the discontinuation of 1 program at Roche and that is reflected here on this slide.

Speaker 2

Roche discontinued a Phase 1 program as part of what they've termed a broader internal portfolio shaping initiative there that they've discussed publicly in some level of detail. In addition, they disclosed that the decision wasn't related to safety, to efficacy or quality of the program. And I note that the program is one that was subject to a legacy fully paid license. So this has no impact at all on future milestones or royalties that are due to OmniAb. Based on discussions with our partners, we continue to expect 4 to 6 new entries into clinical development for novel OmniAb derived antibody based programs this year.

Speaker 2

Here on Slide number 8, I'll touch on select partner updates and some upcoming catalysts for this year. Immunavant reported that global Phase 3 clinical trials for vadaflimab in myasthenia gravis and thyroid eye disease are progressing and that they remain on track for top line data readout in the second half of twenty twenty four for myasthenia gravis and in the first half of twenty twenty five for thyroid eye disease. They also expect initial period 1 data from the Phase 2b clinical trial of vadaclimab in chronic inflammatory demyelinating polyneuropathy or CIDP in the 2nd or Q3 of this year. Hanwhal Biopharma in collaboration with Immunovant is already running a Phase 3 study for vadaclimab in generalized myasthenia gravis in Japan and reported that a clinical trial notification was approved to initiate a Phase 3 study in thyroid eye disease in Japan. Moving to IMVT-fourteen oh two, Immunovant announced plans to initiate 4 to 5 potentially registrational programs for IMVT-fourteen oh two over their next fiscal year and also plans on initiating trials in 10 indications for IMVT-fourteen oh two over their next two fiscal years.

Speaker 2

At the recent AACR conference, Merck presented preclinical data for M9140, which is a novel ADC with a topoisomerase 1 inhibitor payload targeting CCAM5 expressing tumors. M9140 demonstrated high potency, strong anti tumor activity and bystander effect in vitro and in mouse models. A first in human Phase 1 study to evaluate the safety, tolerability, PK and preliminary clinical efficacy is in patients with advanced solid tumors is now ongoing. And lastly, Genmab disclosed that they expect to announce acasumlimab Phase 2 data in second line non small cell lung cancer in the first half of the year and data are now expected at ASCO. And we like many others who are focused on oncology space are really looking forward to that update and data.

Speaker 2

Genmab has also already disclosed plans to initiate a global Phase 3 study of axonlumab in second line non small cell lung cancer later this year. The ASCO clinical meeting starts at the end of the month and will run through June 4th. Here on Slide number 9, you can see some of the presentations that are planned by our partners relating to new clinical data for OmniAb derived programs. I know too that this slide does not include all of the And on my last slide here, Slide number 10, I'd like to highlight a few upcoming scientific presentations by our team. We're committed to creating greater visibility for our differentiated technology platform and highlighting innovations and new workflow enhancements that benefit our business and create value for stakeholders.

Speaker 2

With an expanded business development presence, we're actively involved in more scientific conferences now than ever before. Next week, we'll be at the PEGS Protein and Antibody Engineering Summit in Boston, where Bob Chen will present new data on methods to facilitate rapid and efficient discovery of bispecific antibodies, leveraging the biological intelligence of our engineered transgenic animals, the deep screening capabilities of our exploration platform and the machine learning and AI in our OmniDeep offering. And you also see here other conferences and presentations that we have coming up in the next 8 weeks or so at the Antibody Engineering and Therapeutics Conference in London and the World ADC Asia Conference in South Korea. I also want to mention a recent peer reviewed publication by our scientists related to chicken derived VHH antibodies in the Journal of Immunology, which came out in digital form very recently and creates further visibility for our Omni DAB technology that we launched in Q4 of last year. Omni DAB is attracting new partners and it's opening new market opportunities for us and it's currently in use by multiple industry and academic partners.

Speaker 2

Before I hand the call back over to Kurt, I want to say that with the successful establishment of OmniAb as a standalone entity and with a positive growth outlook, we remain on track to deliver on our goals and leverage the efficiencies of our prior investments in the business. As a company, we're committed to addressing the most critical challenges of antibody based drug discovery and plan to continue to enhance our technology offerings. And we're excited to do that within our efficient and highly scalable business model. Q1 financial results. Kurt?

Speaker 2

Thank you, Matt.

Speaker 1

I just have a couple of slides on our financials. So starting on Slide 12, we've got a summary of our financial performance in the Q1 of 2024. Total revenue for the Q1 was $3,800,000 compared to $16,900,000 in the prior year quarter. The decrease was primarily due to the recognition of the TechValley EU launch milestone of $10,000,000 that was recorded in the Q1 of 2023. Service revenue was lower primarily related to the completion of our discovery work on certain ion channel programs.

Speaker 1

1st quarter revenue was consistent with our expectations and you'll recall that on our Q4 earnings call, I stated that we were projecting milestone payments would be weighted towards the second half of the year based on information that we had received from partners in their public statements. This is still our expectation. Turning to operating expense, our R and D expense for the Q1 was $14,600,000 compared to $13,800,000 in the prior year quarter with the increase primarily due to higher personnel costs. On the G and A side, expenses were similar to last year coming in at 8,300,000 dollars Our operating expenses are also tracking in line with our expectations and we still expect operating in 2024 to be approximately the same as in 2023 as we are now fully staffed and resourced to leverage the future growth of the business. One additional comment about the tax rate.

Speaker 1

Going forward, our deferred tax liabilities are no longer expected to fully cover our deferred tax assets in the future. So we had to establish a valuation allowance and this caused our effective tax rate to drop. In general, we now expect our effective tax rate to be in the low to mid teens going forward, but this could fluctuate from quarter to quarter based on the timing of certain discrete items. The net loss for the Q1 was $19,000,000 or 0 point 1 $9 per share versus a net loss of $6,100,000 or $0.06 per share in the prior year period. Turning to Slide 13, we ended the Q1 of 2024 with $69,000,000 in cash.

Speaker 1

As we said on our Q4 earnings call, we expected that Q1 would be our largest burn quarter this year due to the timing of milestones and certain compensation cycle items, and this played out as we had expected. For the full year, we reaffirm our guidance for cash used to be relatively similar to the cash used in 2023 when you exclude the $35,000,000 Tech Volley milestone that was received last year. And we still expect that our cash balance and the cash from operations should provide sufficient capital to fund the operations for the foreseeable future. And with that, I'd like to open the call for questions. Operator?

Operator

Thank you. First question comes from Stephen Willey at Stifel. Please go ahead.

Speaker 3

Hi, good evening guys. This is Tully on for Steve. Thank you for taking my question and congrats on the progress. Before I proceed, can you guys hear me okay?

Speaker 1

Yes, we can hear you.

Speaker 3

Okay, great. So, yes, congrats on our progress. And now given that there are multiple different programs across various stages, right? So can you please make an additional comment on what proportion of programs actually include downstream participation on the royalty? That's my question number 1.

Speaker 3

And the question number 2, also Matt mentioned about the potential 4 to 6 new programs entering the clinic this year. Is there any like what proportion of those programs are specific to which platform If potential, can you provide an additional color on that, please? Thank you.

Speaker 2

Yes. Thanks. I'll maybe make a couple of comments and then Kurt can fill in anything that I missed. In terms of programs that have downstream economics, of our 327 active programs said partners are actively investing in and progressing through discovery and development, really only a very small portion, about 2% don't have downstream economics and participation to OmniAb. Those that about 2% of those 327 are legacy licenses that we are old licenses that we inherited where partners essentially had a fully paid license to a predecessor company that we acquired.

Speaker 2

So that's I think probably gives you the color you need there. In terms of the 4 to 6 new programs that are entering clinical trials this year, We're actually excited about those. Some are getting very close to the clinic. We expect a couple of those to be omni chicken derived, one with a large multinational player and the others will likely be a mix of our source technologies, our other source technologies. So hopefully that helps you.

Speaker 3

Yes. Thank you very much.

Speaker 4

Thank you.

Operator

Thank you. The next question comes from Srivika Devarakhanda from Tuoh Securities. Please go ahead.

Speaker 5

Hey, guys. This is Nishant. Thanks for taking the questions. I'm on for Kripa. So I know you don't provide deal terms for like specific partnerships, but just to get a sense of how different the deal terms are.

Speaker 5

For example, you signed a deal with the University of Georgia and another one with a startup or a biotech company. So how in terms of economics, how these deals are different? If you can provide any color, that would be great. And then I have a follow-up.

Speaker 1

Yes. So I think in terms of the way most deals start off, they all kind of start off with the same term sheet and get negotiated from there. So all the terms end up being slightly different. But they're in the same ballpark and we've provided some guidance in the past about those, what those look like. I will say though that frequently deals with academic institutions are structured slightly different because for the most part, these institutions are not going to take something all the way through clinical development and launch them.

Speaker 1

And so these deals, the way the economics are primarily structured is that we would receive kind of a percentage of whatever they would eventually get when they either sell the asset or license it out. And frequently that percentage may vary depending on how far they took the asset, right? If they license it out in preclinical versus Phase 1 versus Phase 2, that percentage could sometimes vary. So I'd say for our for commercial companies, there is some variation, but it's not hugely different. And with the academic institutions, just the basic structure of the deal is a little bit different.

Speaker 1

So I don't know, Matt, if you have anything to add on that one.

Speaker 2

No, I think you covered it well, Kurt. Thanks.

Speaker 1

All

Speaker 5

right. Great. And then in terms of interest from external partners, like can you provide any color on which platforms are seeing interest increased interest in the past quarter and specifically the newly launched Omni to add? Thank you.

Speaker 2

Yes. Nishant, a great question. And we because of our, I'll say, clarity of mission and commitment to continued innovation, paired with the level of validation of our platforms, our inbound interest is the highest it's ever been in terms of partners approaching us. We've also increased our share of voice, expanded our business development team globally. So that's also I think contributing to increased interest in the platform.

Speaker 2

Our Omni DAB launch has been going very well in terms of leveraging and deploying a new technology since we announced the launch of it at the AET conference late last year. As I said in prepared remarks, we have multiple industry partners as well as academic partners leveraging the platform now. And we're actually really excited about it for a lot of reasons. 1, it opens up new opportunities and new markets for us. For our partners, they're attracted to the nature of domain antibodies and what that means in terms of opening up alternate routes of administration, better penetration, fast tunable clearance, passing through the blood brain barrier, those sorts of things.

Speaker 2

So that's attracting a lot of attention from new as well as existing partners. And it also is opening up potential in new markets like imaging and diagnostics and theranostics and the like. So, yes, we're excited about it and I think it's a great time for new technologies and also these discussions also continue to inform how we innovate for the future as well.

Speaker 5

Great. Thanks for taking my questions and congrats on the progress.

Speaker 4

Thanks, Nishana.

Operator

Thank you. The next question comes from Matt Hewitt from Craig Hallum. Please go ahead.

Speaker 4

Hi, guys. This is Jack on for Matt. The last quarter or year, it seems like others in the industry were struggling to win new business just given the challenging environment, but you guys were not. Could you just provide us with some color from what you're hearing from the line of Chris? Thanks.

Speaker 2

Yes. Thanks, Jack. It sounds like you might have got cut off there a little bit at the end, but I'll say, look, the last yes, the last couple of years, I think it's obviously been well documented, 20222023 were periods where financing was difficult for a lot of biotech companies where I'll say partners both large and small were exercising more cautious pipeline spending, trimming programs and that sort of thing across the industry. That said, if you look at our metrics all net of attrition, we were able to show really nice growth in terms of new programs and new partners. And I think that really speaks to the technology that we offer partners, our clarity of purpose and our model in terms of collaborating with them.

Speaker 2

And in those kinds of times like the last couple of years, I think partners really do look to validated technologies and stable and established partners as well as those with commitment to innovation and meeting their needs to partner. So I think that's a large part of it. I also give a lot of credit to our team who really have a very partner first mentality in terms of how we of last year and early this year with more funding coming into biotech, I think it has the potential to create tailwinds for the industry generally, but we feel really great about the business that we're running and the technology that we offer to partners.

Speaker 4

That's helpful. I'll jump back in the queue.

Speaker 2

Thanks. Thanks.

Operator

Thank you. The next question comes from Michael Sonntag from Leerink Partners. Please go ahead.

Speaker 4

Hi, good afternoon everyone. I got Michael on for Puneet. My first question, I guess, helps you a little bit with, I guess, you mentioned with your discovery pipeline, there's one partner in Asia that were doing cancellations offset by U. S. And Europe.

Speaker 4

So I was kind of curious if you have any perspective on, I guess, the health of the various biotech sectors geographically and, I guess, what your exposure is to some of these geographies?

Speaker 2

Yes, Michael, thanks. We did see in Q1, as I mentioned in prepared remarks, that we what we saw and really see as kind of a one time spike in attrition really related to a single partner in Asia who was realigning their pipeline and trimming discovery assets. I will say that the new program starts are off to a great pace. We report our numbers net of attrition. We see this more as like a one partner item.

Speaker 2

I wouldn't see anything that is more related to broader geography or anything like that. We obviously now have expanded our business development team and continue to negotiate new contracts and add new partners as we did in Q1. I don't know, Curt, anything you'd want to add to that?

Speaker 1

No. I mean, I don't think that there's anything from a geography standpoint that necessarily that we're seeing. I think, like you said, Matt, at the end of the day, innovative technology is what we hope wins and so far it looks like it's winning.

Speaker 4

Okay, great. And then I had another question, I guess, related to the BioSecure bill that's been proposed in Congress. I believe WuXi is one of the partners that offers Omni Rad as a service. I was curious if you have any early thoughts on what biosphere passage might do for the business?

Speaker 2

Yes, Michael. So, yes, WuXi, and I'll be specific, it was WuXi Biologics. They were a very early user of OmniRAT and really only OmniRAT via a legacy deal with a predecessor company that we acquired, right? So and they have, I think, a very limited number of even active programs ongoing historically. But the legislation that's being debated in Congress is not expected to really have any significant or direct impact on our business.

Speaker 2

That said, obviously, it's gotten a lot of coverage, just given the spot that WuXi holds in the greater biotech ecosystem. But we don't see it having any impact on any programs that we see as value drivers or really don't see it having any significant impact on our business at all.

Speaker 4

Great. Thank you very much.

Speaker 1

Thanks, Michael.

Operator

Thank you. Next question comes from Jacqueline Keesa from Cowen. Please go ahead.

Speaker 6

Hi, this is Jacqueline Keesa on for Steven Ma. Thanks so much for taking the questions. Can you give us some more color on the therapeutic interest or program size expected from these companies? And then what is the mix regarding platform use? And do you see this shifting as Omni DAB continues to gain more traction?

Speaker 2

Yes, Jacqueline, thanks for the question. Yes, in terms of the new partners that were added in Q1, immuno is a really interesting company. They're alumna of the Johnson and Johnson J Labs incubator headquartered up in Toronto and they're focused on oncology and immuno oncology specifically in the micro tumor environment. So our technologies I think are really well matched to their areas of interest and we'll obviously be cheering them on and are cheering them on. The University of Georgia through their Innovation Gateway Incubator are a new partner as well and that is a partnership that is structured with a revenue share model as Curt was describing.

Speaker 2

And they've got a really interesting history, not only in innovations around infectious diseases, but also in oncology as well. So that is a partner we're excited now to have on board and to be collaborating with. And then the last partner, there's not much I can say about them. They're a very well funded Boston based stealth venture backed startup. I guess I can say from our perspective, they're a proven team who know our technology and our team well, but that's probably all I can say at this point.

Speaker 2

I expect they'll be talking more publicly in the future.

Speaker 6

Great. Thank you. I appreciate it. And then are there any new updates or releases on Omni Deep we may have missed or can look forward to in the coming quarters? And have you seen any increased interest in the platform?

Speaker 6

And how has customer feedback been from users?

Speaker 2

Yes. No, great question, Jacqueline. In the near term, I direct you to the presentation next week at PEGS. Bob Chen will be presenting data around really marrying the biological intelligence of our transgenic animals and our high throughput single B cell screening capabilities and technology with exploration with our OmniDeep platform. And really our OmniDeep platform is a suite of in silico AI and machine learning tools that are woven throughout our technology stack.

Speaker 2

And really the things that our partners are valuing in it is the ability to marry it with high quality input data from our transgenic animals and the hits that can be generated with exploration, pairing that with variational encoder or VAE deep learning models that we've developed to then suggest new hits and then also leveraging in silico developability filters and things like that. So we are leveraging OmniDeep as part of our offering for our partners, a number of big pharma partners who are leveraging it as well as collaborations with academics and others. So, since launching OmniDeep as a brand last May, so really just almost exactly a year ago, the reception to that has been really strong as well. We've obviously been in this space for quite a long time, leaning into leveraging AI and machine learning along with our other technologies for many years.

Speaker 6

Great. Thank you. I appreciate the questions.

Speaker 1

Thank you.

Operator

Thank you. At this time, we have no further questions. I will turn the call back over to the presenters.

Speaker 2

Great. Thank you all for joining our call today. We look forward to keeping you updated as the year progresses. And as the business progresses, we'll be out on the road quite a bit here over the next few months at a number of conferences and look forward to keeping you updated. Thanks again for joining and have a great day.

Operator

Ladies and gentlemen, this concludes your conference for today. We thank you for participating and we ask that you please disconnect your lines.

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