Earnings Call Transcript - OABI Q1 2023

Operator, Operator

Good morning, and welcome to the OmniAb Inc.'s First 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. I would now like to turn the call over to Kurt Gustafson, OmniAb Inc.'s Chief Financial Officer. Please go ahead.

Kurt Gustafson, CFO

Thank you, operator, and good morning, everyone. Thank you all for joining our first quarter 2023 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 would like to remind listeners that comments made during this call will include forward-looking statements within the meaning of 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 11, 2023. Except as required by law, OmniAb undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Joining me on the call today is Matt Foehr, President and CEO. During today's call, Matt and I will provide highlights on the company's operations, partner and technology updates, and our recent financial results. At the conclusion of the prepared remarks, we'll open the call to questions. With that, let me turn the call over to Matt Foehr. Matt?

Matt Foehr, CEO

Thanks, Kurt. Good morning, everyone, and thanks for joining our first quarter 2023 financial results conference call. OmniAb has been an independent publicly traded company for just about six 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 rapidly discover innovative therapeutics. We generate revenue from upfront payments for access to our technology stack, from collaboration or service revenue when a partner asks us to do work for and with them, from milestone payments related to advancement of clinical phases, regulatory or commercial achievements, and from royalties on net sales of our partners' products. 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. We also plan to launch our novel heavy-chain OmniChicken in the fourth quarter. 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. 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 billion 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 first quarter, 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 pharmaceutical companies, and we continue to attract high-quality partners that are seeking our discovery platform and our team's scientific collaboration services. Approximately 20% of our partners are among the world's top 20 pharmaceutical companies as measured by global revenue. I'll also highlight here that this industry is constantly expanding and consolidating with new companies being formed and companies being acquired, and that dynamic will sometimes impact the number of partners that we report. That's expected to be the case with Seagen and Pfizer given their previously announced and planned consolidation. I know here too that our agreements are generally 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 or approved for commercialization at the end of Q1. During the quarter, we added a net of 10 new programs to our portfolio. The pie chart on this slide breaks out our 301 programs by stage of development. The discovery phase is large and growing with a base totaling 260 programs in addition to 14 programs in the preclinical stage. In the clinic, our partners have 20 programs in Phase I, 2 in Phase 2, and 2 in Phase 3. There are three approved drugs utilizing OmniAb-derived antibodies, and we're recognizing royalty revenue from commercial sales of Zimberelimab and Sugemalimab in China, both of which are also being pursued in other markets. In the first quarter, we had a new program enter the clinic with Seagen, 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 three to five new OmniAb-derived antibodies to enter the clinic in 2023. 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 in optimizing desired therapeutic characteristics. 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, mouse-derived, and chicken-derived, and we continue to see the versatility of our platform showing in the number of modalities and formats being employed by our partners, both preclinically and clinically. Our partners made a number of public announcements about their clinical and commercial progress during the first quarter and in recent weeks. Notably, in January, we received $35 million in milestone payments from Janssen related to TECVAYLI, which Kurt will discuss. Regarding other progress, I'll start with batoclimab. Batoclimab is in clinical development by HANALL, by Harbour Biomed, and by Immunovant. Harbour Biomed announced positive top line results from its Phase 3 clinical trial in China for the treatment of generalized myasthenia gravis. HANALL 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, Immunovant announced that it expects to report initial results from its Phase 2 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. For the next-generation anti-FcRn IMVT-1402, which was discovered using our OmniRat technology, Immunovant announced plans to initiate a Phase I clinical trial for autoimmune diseases. I want to make one clarifying note regarding the economics for both batoclimab and the 1402 programs, which is that these molecules were originally discovered by HANALL using OmniRat, and any payments that we receive will come from HANALL through defined sharing economics that are built into our agreement with them. As I mentioned, Seagen recently initiated a Phase 1 clinical trial of SGN-BB228, a CD228 and 4-1BB bispecific molecule in advanced melanoma and other solid tumors. A comment on ASCO: based on the titles and presentations that have been disclosed, 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 here in June. As mentioned in our press release this morning, we'll be launching our OmniDeep platform at next week's PEGS meeting in Boston. 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 dynamic simulations, large proprietary multi-species antibody databases, AI and machine learning sequence models, and additional features. Leveraging the biological intelligence of our engineered animals and 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 proprietary capabilities have been part of our internal research efforts for many years, and we've recently expanded them, especially for programs with some of our larger partners. Our extensive capability is centered around ion channels and transporters also leverage OmniDeep, which we view as a differentiated tool for viable target-to-lead delivery. 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 multiple formats and modalities for our partners. 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 a highly scalable business model, and we're poised to facilitate the development of therapeutic candidates into the clinic by our partners, as well as continue to forge new deals with structures that create value for all stakeholders and also expand our portfolio with new partners. We look forward to keeping you updated as we execute this strategy. So with that, let me now turn the call back over to Kurt for a discussion of the first quarter financials. Kurt?

Kurt Gustafson, CFO

Thanks, Matt. As a reminder, the financial results reported from the prior year period are prepared on a carve-out basis, 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 for reporting. Now let's walk through a few of the highlights for the quarter. Total revenue for the first quarter of 2023 was $16.9 million compared to $9.6 million in the prior year quarter. The revenue increase was primarily due to the recognition of the remaining $10 million milestone payment for the first commercial sale of TECVAYLI in the EU. I mentioned on our last conference call that we received a $35 million payment from Janssen and that $25 million was recognized as revenue in the fourth quarter for the first commercial sale in the U.S. I also stated that we would likely recognize the remaining $10 million 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 first quarter. Like last quarter, our service revenue was down slightly as a result of less work being performed for some of our ion channel partners based on the stage and status of these exclusively licensed programs. Turning to operating expense: our R&D expense for the first quarter was $13.8 million compared to $10.8 million in the prior year quarter. The increase was primarily due to higher personnel costs and higher costs associated with our new facilities. G&A expense was $8.2 million compared to $4.1 million in the prior year quarter as we staffed up these functions and incurred other costs associated with being a public company. The net loss for the first quarter was $6.1 million or $0.06 per share versus a net loss of $6.3 million or $0.08 per share in the prior year period. One additional comment about shares used for our earnings per share calculation. The number of shares of 99.2 million for Q1 is based on our basic shares outstanding and should be a good number to be using for the EPS calculations going forward. We ended the first quarter with $113.6 million in cash, cash equivalents, and short-term investments. The increase in the quarter was primarily driven by the receipt of the $35 million milestone payment for TECVAYLI. 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 million in the first quarter on our CDR obligation, most of which was related to various OmniTaur programs that recently started. 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 fourth quarter earnings call, I indicated that our Q4 2022 R&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&A side of things, I've previously indicated that our fourth quarter 2022 G&A expenses included approximately $2 million of one-time expenses and indicated that if you pull out that $2 million, we expected that our G&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 a similar trend going forward. And with that, I'd like to open up the call for questions. Operator?

Operator, Operator

Thank you. Ladies and gentlemen, we will now start the question-and-answer session. Your first question comes from Robyn Karnauskas from Truist Securities. Please go ahead.

Nishant Gandhi, Analyst

Hi. This is Nishant. I'm on for Robyn. Thanks for taking our questions, and congrats on all the progress. So one question on OmniDeep. I know you believe that biological intelligence is a better way to produce antibodies. But just wondering if you're willing to leverage the OmniDeep platform to kind of create novel antibodies just in silico; is that something like a plan for the future?

Matt Foehr, CEO

Thanks, Nishant. Yeah, good question. And I'll first talk a little bit about the branding of OmniDeep, and it's really a nod to the term deep. OmniDeep is really a nod towards deep repertoires, right, that the biological intelligence of our animals produces; the deep screening, and in terms of our screening capabilities with exploration and other proprietary capabilities to deep sequencing and ultimately to deep learning as well. We've already been leveraging in silico tools 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 in silico experts on our team who are really impressive and important teammates and have been for a long time. We actually announced a deal a couple of summers ago with a partner and talked a bit about it then, and that work expanded considerably over the last 12 or 18 months or so that work was centered around our exploration screening platform. And kind of as you're generally referencing, there are obviously some public and sporadic examples of concordance of predicted structures with actual crystal structures. So this is a scientific resource that's available to us and really to everyone else in the drug discovery space. But that said, that area of work is really not perfect. There are many classes of proteins where it's not so good at all for a variety of reasons. Similarly, designing antibodies based on predicted antibody structure from sequence has a lot of very well-known limitations, and the uncertainties are really compounded quite a bit when using a predicted but not verified antigen structure, which creates almost a house of cards-type scenario when using only in silico or AI-only approaches. Still, while that sort of approach may bear bits of fruit in specific instances, it will only lead to a subset of all solutions, and it will never change the fact that an in silico solution or enhancement will need to be tested for expression and binding in both in vitro and eventually in vivo and will 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. 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. That's why we and our partners see so much power in pairing the biological intelligence of our highly engineered transgenic animals with the in silico tool that we brand and call OmniDeep. 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, and obviously, we're leading into the OmniDeep element as we expand our technology as well.

Nishant Gandhi, Analyst

Great. Thanks. And in terms of the economics of deals, as you do more deals for difficult targets using your new advanced technologies, is there variability in terms of economics? Do you negotiate higher economics for these types of deals versus the others, which are like simpler targets?

Matt Foehr, CEO

Yeah. 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 OmniChicken in the fourth quarter. 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 deals. But it's really an interchange of the work that we're doing, the technology that partners are leveraging, and then that kind of is reflected in the structure of the deal. But Kurt, maybe you want to comment there?

Kurt Gustafson, CFO

Yeah. 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.

Nishant Gandhi, Analyst

And just the last one. I know you provided guidance for a number of new clinical molecules that will enter the clinic 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 provide guidance for new project starts for the year?

Kurt Gustafson, CFO

In terms of guidance, the only guidance we are providing is related to the number of clinical starts. We have some visibility on this through discussions and insights from our partners. However, projecting program starts is challenging because of the varying ways partners initiate new programs. Therefore, I doubt we would offer guidance on that number. Where we do have visibility, such as with clinical starts, we aim to provide a bit more guidance.

Nishant Gandhi, Analyst

Great, thank you. Thanks for taking our question.

Matt Foehr, CEO

Sure.

Operator, Operator

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

Stephen Willey, Analyst

Yeah, good morning. Thanks for taking the questions. Maybe just a follow-up on 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?

Matt Foehr, CEO

Yeah. Thanks, Steve. This is Matt. Yeah, 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. So it's been an important part of it. We've expanded it over the last 12 to 18 months. We are employing these techniques for partners, especially some of our larger partners. So to answer your question, it's part of the benefit that partners get when they partner with us, right? They know they're coming to us, they get cutting-edge technology, they get continued innovation, and a commitment to continued investment around the platform. 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 it as well. So hopefully, that gives you a little perspective there.

Stephen Willey, Analyst

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

Matt Foehr, CEO

Yeah. Thanks, Steve. I'll say for OmniTaur, we actually are seeing an increase in starts there, and that percentage is going up. Obviously, when you have over 300 programs, the percentages are going to shift around the edges, but OmniTaur is an area of growing and increased interest, and we have had new starts there. On the heavy chain antibody side, that's an area of growing interest in the industry: domain antibodies, heavy chain antibodies, nanobodies, and that sort of thing. So we do see 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 into the overall landscape at the time we launch it. But hopefully, that gives you a little bit of color.

Stephen Willey, Analyst

Okay. And then maybe just lastly, can you kind of speak to the average royalty rate on the royalty-bearing assets across the portfolio right now? Where do you think that metric can realistically expand to over the next three to five years? And then maybe what are the key levers that allow for that expansion to occur? Thanks.

Kurt Gustafson, CFO

Yeah, Steve. So I guess the way that I would sort of frame that question is there are two products that are approved right now where we're receiving a flat 3% royalty. In terms of royalty rates for the entire portfolio, we haven't given a specific number, but it's generally in the low to mid-single digits. I would expect, based on kind of as we get out into the future, that the 3% number would go up based on sort of deals that we've signed. That being said, it's going to be a function of the individual deals that move forward. In general, I expect that royalty rate to increase.

Operator, Operator

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

Joe Pantginis, Analyst

Hey, guys. Good morning, thanks. So I guess I'm going to 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?

Matt Foehr, CEO

Yeah. 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 programs over many years, and then pairing that with cutting-edge technology. As I said, this area has been woven throughout our tech stack in pieces for years. But we've leaned into it more over the last 12 to 18 months, really leveraging some of the expertise that we've had internally that has been built up over time in some of the organizations that were acquired that formed 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. Again, the term Deep is a nod to deep repertoires, the deep screening capabilities that we have, deep sequencing, as well as deep learning elements that we've invested in. As we launch this next week at PEGS, as I said, Bob Chen, who heads our systems engineering, will be presenting at the PEGS meeting in Boston, also with some case studies around targets where this work has really been highlighted, things like NKp46 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.

Joe Pantginis, Analyst

No, that's helpful. Thank you. And then I guess two little questions, housekeeping expenses for both of you, are there any changes to the terms or everything sort of status quo with the CStone announcement? And number two, regarding OmniDeep, are there any key infrastructure investments that need to come from that at this point?

Matt Foehr, CEO

Yeah. I can comment on CStone. Yeah, Joe, you're referring to CStone announcing earlier in the week that they regained development commercialization rights to sugemalimab outside of Greater China. And yes, there is no change at all to the economics to us. Obviously, assets do change hands from time to time. We've seen that at times, and there's no change there. Maybe I'll let Kurt comment on expenses.

Kurt Gustafson, CFO

There are no additional expenses related to OmniDeep or any of the other programs, and we are maintaining our current guidance. So, there are no significant changes to that.

Joe Pantginis, Analyst

Fantastic. Thanks for the color, guys.

Matt Foehr, CEO

Yeah, thanks, Joe.

Operator, Operator

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

Puneet Souda, Analyst

Yeah. 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 biotech funding constraints. What are you seeing within the business development pipeline? Maybe can you give us a high-level view there? And then also, within the 260 discovery programs that you have, are you hearing anything in terms of cancellations or potential for that sort of in the next two quarters?

Matt Foehr, CEO

Yeah. 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. 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: we are students of the industry and have been for some time, and we do have a really interesting vantage point on the industry given our 70 different partners and 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. From our business perspective, I think the diversity of our partner base, which includes a mix of global big pharmas, biotechs, and startups with interesting biology brings a lot of power to the business. I think it positions us well to create long-term value for our stakeholders as cycles come and go. Our deeper relationships with partners also inform our innovation and create what we call the positive feedback loop that informs our conviction around continued innovations for our platform. When you see cycles in the broader landscape, generally, those are the times when true innovation wins. Partners come to us to help them discover new drugs and get scientific solutions, that's why they come to us is for that innovation. Could some of the things that are seen in the macro landscape, if sustained, influence some of our metrics at some point? Sure. It would be odd to say that it absolutely could not. However, we think that our innovation will win out, and we like how we are positioned because of that. Our business development team remains extremely busy, and the vast majority of our deals, dialogue, and deals have come from inbound interest or scientist migration. That continues to be true. We are leaning into more conferences; we used to do 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.

Puneet Souda, Analyst

Yeah. 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 one roof in some of your competitors? Can you talk about the leverage you have if the market got tougher and how that offering could resonate potentially more with your customers? Thank you.

Kurt Gustafson, CFO

Yeah, 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 OmniRat as an example. In that case, in many instances, we do very little work for the partner. We ship them the rats. They have the capabilities to do the inoculations and screening themselves. We typically just get quarterly reports on the work that they've done. So in terms of OmniRat, that business is theoretically infinitely scalable without us adding additional costs. When it comes to OmniChicken, we actually have to do some of that work ourselves up front because we're the only ones that house the chickens. But we pride ourselves on having a flexible business model where partners can come and pay us to go do all of the work. We can do screening and optimization for them and we’ll earn extra service revenue for that. To the extent that the partner has those capabilities and wants to do that work themselves, that's also fine; they take over the work and do that. 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.

Puneet Souda, Analyst

Got it. Okay. Great. Thanks, guys.

Matt Foehr, CEO

Thanks, Puneet.

Operator, Operator

Thank you. Your next question comes from Steven Mah from TD. Please go ahead.

Steven Mah, Analyst

Great. Thanks for the questions. And congrats on the quarter. And maybe just a follow-up on Puneet's question on when you're doing like a transgenic animal license; like it seems like to me, maybe you can confirm on the Scripps licensing deal, that's an OmniRat license where Scripps is maintaining the colony and doing the work for themselves. Is that right?

Matt Foehr, CEO

Yeah. 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've started to focus on advancing partnerships with leading academic institutions over the last year or so. Scripps is an example of that. We've got a great network of academics, not only through the history we’ve built up of genetic engineering first, but also through our board and others. Scripps is an example of an organization that has a history of innovation and interesting biology. They want access to our animals. From there, one of the benefits of these sorts of deals, and we have done these with other academic institutions as well, is that these are ones that also have a history of licensing and/or seeding and spinning out innovative companies. In this instance with the Scripps Institute, the assets that came out of our technology are now in development at Cessation Therapeutics, which is working on novel immunobiologics to prevent a fentanyl overdose and treat fentanyl addiction using a completely new approach that involves sequestering fentanyl before it can enter the brain to offer more durable protection against overdose. So it’s an interesting new area of science, but this is an instance where it's a partnership with a leading academic center who had some interesting novel biology that now then led to assets being moved forward at a company.

Steven Mah, Analyst

Okay. Yeah, I appreciate the color. And if possible, can you give us a sense for the economic structures of like a transgenic animal licensing deal where I mentioned where they maintain the colony themselves and do the work themselves versus like a full platform deal like the one you signed with Neurocrine in the second quarter?

Kurt Gustafson, CFO

In terms of how the deals are structured, the partnership economics are consistent across the board. We do not set a higher royalty rate just because we might need to do more work for a partner. Instead, the upfront and milestone payments along with royalties are agreed upon in advance and are not influenced by the amount of work we do for a partner on a specific program. For example, one partner may handle all aspects of an OmniRat program independently, while another may collaborate with us on an OmniChicken program where we take on a substantial amount of the work. Despite this, the milestones and royalties remain the same; however, with the OmniChicken program, we would generate additional service revenue based on the work we do. The fundamental structure of the deal is similar for all partner programs, with any extra work we undertake leading to increased collaboration revenue.

Steven Mah, Analyst

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

Matt Foehr, CEO

I think the answer to that is that elements of it potentially could, but you could say that about a lot of elements of our technology stack. 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. We have built up a technology offering of a variety of proprietary tools, of which this contains a number as well. Our view would be that this would be for partners who signed licenses with us as we leverage it for them to facilitate their programs moving forward more quickly and efficiently.

Steven Mah, Analyst

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

Matt Foehr, CEO

Yep. Thanks, Steve.

Operator, Operator

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

Matt Foehr, CEO

Great. Thank you, operator. I'd like to thank everyone for participating in 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. Riley conference in the L.A. 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.