Good afternoon, and welcome to OmniAb, Inc. First Quarter 2024 Financial Results and Business Update Conference Call. As a reminder, this conference is being recorded. I would now like to turn the call over to Kurt Gustafson, OmniAb, Inc. Chief Financial Officer. You may begin. Thank you.

Thank you, operator, and good afternoon, everyone. This is Kurt Gustafson, OmniAb's Chief Financial Officer. And thank you all for joining our first quarter 2024 financial results conference call. There are slides to accompany today's remarks, and they 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, 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. 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. Good afternoon, everyone, and thanks for joining us today on our first quarter call. With consecutive quarters showing growth across some key business metrics, I'm proud of OmniAb's progress over the last 18 months, which puts 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 first 3 months of the year reflects 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. We're excited about the opportunities that lie ahead, and 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 #5. We ended Q1 2024 with 80 active partners. Three new platform license agreements were signed during the quarter, including new agreements with a very well-funded Boston-based venture-backed startup, ImmunoBiochem Corporation, and with the University of Georgia. We're committed to continued expansion of our diverse partnership base. 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. With our recent technology launches and plans for continued innovation, we believe we're well-positioned to potentially accelerate the growth of partners. We also saw some growth in active programs this quarter, net of attrition, with a 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 compared to recent quarters, all of which was in the discovery stage, with one exception that I'll discuss in a moment. The discovery stage attrition in Q1 was mostly attributed to a pipeline realignment by a single Asia-based partner. Given the net increase in programs in the quarter, that was 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 pre-clinical stage. I'll mention again that we define pre-clinical stage programs as ones that are confirmed to be in pre-IND studies by our partners with the intention of entering human trials. At the end of Q1, we had a record 18 programs in pre-clinical, which is the most that we've ever had at that stage. As shown here on Slide 6, we also saw one program transition from the Phase 1 to the Phase 2 category per disclosures by our partner. Moving now to Slide #7, as we frequently mention, attrition is a natural part of our business and of drug discovery and development generally. In 2023, we had no attrition in our clinical stage programs. However, in Q1, we saw the discontinuation of one program at Roche, which is reflected here on this slide. Roche discontinued a Phase 1 program as part of what they've termed a broader internal portfolio shaping initiative that they've discussed publicly in some level of detail. Additionally, they disclosed that the decision wasn't related to safety, 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 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. Here on Slide #8, I'll touch on select partner updates and some upcoming catalysts for this year. Immunovant reported that global Phase 3 clinical trials for batoclimab 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 2024 for myasthenia gravis and in the first half of 2025 for thyroid eye disease. They also expect initial Phase 1 data from the Phase 2b clinical trial of batoclimab in chronic inflammatory demyelinating polyneuropathy, or CIDP, in the second or third quarter of this year. HanAll Biopharma, in collaboration with Immunovant, is already running a Phase 3 study for batoclimab 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-1402, Immunovant announced plans to initiate 4 to 5 potentially registrational programs for IMVT-1402 over their next fiscal year and also plans on initiating trials in 10 indications for IMVT-1402 over their next few fiscal years. At the recent AACR Conference, Merck presented the pre-clinical data for M9140, which is a novel ADC with a topoisomerase 1 inhibitor payload targeting CEACAM5 expressing tumors. M9140 demonstrated high potency, strong antitumor 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 in patients with advanced solid tumors is now ongoing. Lastly, Genmab disclosed that they expect to announce acasunlimab 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. We, like many others who are focused on the oncology space, are really looking forward to that update and data. Genmab has also already disclosed plans to initiate a global Phase 3 study of acasunlimab 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 4. On Slide #9, you can see some of the presentations that are planned by our partners relating to new clinical data for OmniAb-derived programs. I saw that this slide does not include all of the presentations by our partners at ASCO, but we've listed the ones that we feel are the most worth highlighting for you. On my last slide here, Slide #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. 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. 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'd also want to mention a recent peer-reviewed publication by our scientists related to chicken-derived VHH antibodies in the Journal of Immunology, which just came out in digital form recently and creates further visibility for our OmniAb technology that we launched in Q4 of last year. OmniAb is attracting new partners and opening new market opportunities for us, and it's currently in use by multiple industry and academic partners. Before I hand the call back over to Kurt, I want to say that with the successful establishment of OmniAb as a stand-alone 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. And with that, let me turn the call back over to Kurt for a discussion of our first quarter financial results. Kurt?

Thank you, Matt. 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 first quarter of 2024. Total revenue for the first quarter was $3.8 million compared to $16.9 million in the prior year quarter. The decrease was primarily due to the recognition of the TECVAYLI EU launch milestone of $10 million that was recorded in the first quarter of 2023. Service revenue was lower, primarily related to the completion of our discovery work on certain ion channel programs. First quarter revenue was consistent with our expectations. 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 received from partners in their public statements. This is still our expectation. Turning to operating expenses, our R&D expense for the first quarter was $14.6 million compared to $13.8 million in the prior year quarter, with the increase primarily due to higher personnel costs. On the G&A side, expenses were similar to last year, coming in at $8.3 million. Our operating expenses are also tracking in line with our expectations. We still expect operating expenses 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: going forward, our deferred tax liabilities are no longer expected to fully cover our deferred tax assets in the future. We had to establish a valuation allowance, which caused our effective tax rate to drop. Generally, 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 first quarter was $19 million or $0.19 per share versus a net loss of $6.1 million or $0.06 per share in the prior year period. Turning to Slide 13, we ended the first quarter of 2024 with $69 million in cash. 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 excluding the $35 million TECVAYLI milestone that was received last year. We still expect that our cash balance and the cash from operations should provide sufficient capital to fund the operations for the foreseeable future. With that, I'd like to open the call for questions. Operator?

First question comes from Stephen Willey at Stifel.

This is Tule on for Steve. Congratulations on the progress. Before I proceed, can you hear me okay?

Yes, we can hear you.

Congratulations on the progress. With multiple programs at different stages, could you comment on the proportion of these programs that include downstream participation in the royalty? That’s my first question. My second question is about Matt’s mention of 4 to 6 new programs entering the clinic this year. What proportion of those programs are tied to specific platforms? If possible, could you provide any additional information on that?

Yes. Thanks. I'll 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 that partners are actively investing in and progressing through discovery and development, only a very small portion, about 2%, don't have downstream economics and participation to OmniAb. That 2% of those 327 are legacy licenses that we inherited where partners had a fully paid license to a predecessor company that we acquired. So I think that probably gives you the color you need there. Regarding the 4 to 6 new programs that are entering clinical trials this year, we're excited about those. Some are getting very close to the clinic, and we expect a couple of those to be OmniChicken-derived. One with a large multinational player, and the others will likely be a mix of our other source technologies. Hopefully, that helps you.

The next question comes from Truist Securities.

This is Nishant, I'm on for Kripa. I know you don't provide deal terms for specific partnerships. But just to get a sense of how different the deal terms are: for example, you signed a deal with the University of Georgia and another one with a start-up or biotech company. In terms of economics, how are these deals different? Can you provide any color? That would be great. And then, I have a follow-up.

Yes. Most deals begin with a similar term sheet and are negotiated from that point, resulting in terms that are slightly different but generally within a similar range. We have previously shared guidance on how those terms typically look. However, deals with academic institutions often have a different structure, as these institutions usually do not carry an asset through clinical development and commercialization. The economics in these agreements typically involve us receiving a percentage of any income generated when they sell or license the asset. That percentage can vary based on the development stage at which they license the asset, such as pre-clinical versus Phase 1 or Phase 2. For our commercial deals, there can be some variation, but it is generally not significantly different. In contrast, the structure of the deals with academic institutions is somewhat distinct. Matt, do you have any additional insights on this?

No, I think you covered it well, Kurt.

And then in terms of interest from external partners, can you provide any color on which platforms are seeing increased interest in the past quarter, specifically the newly launched OmniAb?

Yes, Nishant, a great question. Because of our 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 and expanded our business development team globally, which is contributing to increased interest in the platform. Our OmniAb launch has been going very well in terms of leveraging and deploying a new technology. Since we announced the launch of it at the AT conference late last year, as I said in prepared remarks, we have multiple industry partners as well as academic partners leveraging the platform now. We're really excited about it for a lot of reasons. One, it opens up new opportunities and markets for us. For our partners, they're attracted to the nature of domain antibodies and what that means in terms of alternate routes of administration, better penetration, and fast tunable clearance passing through the blood-brain barrier, among other benefits. This is attracting a lot of attention from both new and existing partners, and it is opening up potential in new markets like imaging, diagnostics, and theranostics. Yes, we're excited about it, and I think it's a great time for new technologies and these discussions also continue to inform how we innovate for the future as well.

The next question comes from Matt Hewitt from Craig-Hallum.

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

Yes. Thanks, Jack. It sounds like you might have got cut off at the end. But I'll say, look, the last couple of years have obviously been well documented. 2022 and 2023 were periods where financing was difficult for a lot of biotech companies, and partners both large and small were exercising more cautious pipeline spending, trimming programs, and that sort of thing across the industry. That said, our metrics, all net of attrition, showed really nice growth in terms of new programs and new partners. I think that speaks to our technology that we offer partners, our clarity of purpose, and our model in collaborating with them. In times like the last couple of years, partners look for validated technologies and stable, established partners, as well as those with a commitment to innovation and meeting their needs to partner. I think that's a large part of it. I also credit our team, who has a very partner-first mentality in terms of how we collaborate with our partners, driving that as well. Now, with more funding coming into biotech at the end of last year and early this year, we see potential tailwinds for the industry generally. But we feel great about the business that we're running and the technology that we offer to partners.

The next question comes from Michael Sontec from Leerink Partners.

This is Michael on for Puneet. My first question has to do a little bit with your discovery pipeline and one partner in Asia that was doing cancellations offset by U.S. and Europe. I was curious if you have any perspective on the health of the various biotech sectors geographically and what your exposure is to some of these geographies?

Michael, thanks. We did see in Q1, as I mentioned in prepared remarks, that we had a one-time spike in attrition related to a single partner in Asia who was realigning their pipeline and trimming discovery assets. The new program starts are off to a great pace. We report our numbers net of attrition. We see this more as a one-partner item; I wouldn't attribute it to broader geography or anything like that. We 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, Kurt, if you have anything to add.

I don't think there's anything from a geography standpoint 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.

I had another question related to the biosecure bill that's been proposed in Congress. I believe Wuxi is one of the partners that offer OmniRat as a service. I was curious if you have any early thoughts on what biosecure passage might do for the business?

Yes, Michael. Wuxi, specifically Wuxi Biologics, was an early user of OmniRat and really only OmniRat via a legacy deal with a predecessor company we acquired. They have a limited number of even active programs ongoing historically. The legislation being debated in Congress is not expected to have any significant or direct impact on our business. That said, it has received a lot of coverage given Wuxi's position in the greater biotech ecosystem, but we don't see it impacting any programs we see as value drivers or having any significant impact on our business at all.

Next question comes from Jacqueline Cusa from Cowen.

This is Jacqueline Cusa on for Stephen Mah. On the new licenses, can you give us some more color on the therapeutic interest or program size expected from these companies? What is the mix regarding platform use? Do you see this shifting as OmniAb continues to gain more traction?

Yes, Jacqueline. Thanks for the question. In terms of the new partners that were added in Q1, ImmunoBiochem is a really interesting company. They are alumni of the Johnson & Johnson J-Labs incubator headquartered in Toronto, focused on oncology and immuno-oncology, specifically in the micro-tumor environment. Our technologies are well matched to their areas of interest, and we're cheering them on. The University of Georgia, through their innovation gateway incubator, is a new partner as well. That partnership is structured with a revenue share model, as Kurt was describing. They have a really interesting history not only in innovations around infectious diseases but also in oncology. This is a partner we're excited to have onboard and to collaborate with. The last partner is very well-funded and Boston-based, but I can't divulge much more. They're a proven team who know our technology and our team well, but that’s all I can share at this point. I expect they'll talk more publicly in the future.

Are there any new updates or releases on OmniDeep we may have missed or can look forward to in the coming quarters? Have you seen any increased interest in the platform? How has customer feedback been from users?

Yes, great question, Jacqueline. In the near term, I direct you to the presentation next week at PEGS. Bob Chen will present data around marrying the biological intelligence of our transgenic animals and our high-throughput single B cell screening capabilities with our OmniDeep platform. OmniDeep is a suite of in silico, AI, and machine learning tools woven throughout our technology stack. Our partners are valuing the ability to marry it with high-quality input data from our transgenic animals and the hits generated with exploration, pairing that with variational encoder or VAE deep learning models we've developed to suggest new hits and leveraging in silico developability filters. We've been leveraging OmniDeep as part of our offering for several big pharma partners, as well as collaborations with academics and others. Since launching OmniDeep as a brand last May, the reception has been very strong. We've been in this space for quite some time, leaning into leveraging AI and machine learning alongside our other technologies for many years.

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

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.

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