Good afternoon, and welcome to OmniAb, Inc. Third Quarter 2024 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. 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 to everyone. This is Kurt Gustafson, OmniAb's CFO. Thank you all for joining our third 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 www.omniab.com. Before we begin, I'd like to remind listeners that comments made during this call by management 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 our 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 the live broadcast today, November 12, 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. At the conclusion of the prepared remarks, we'll open the call to questions. And with that, let me turn the call over to Matt.

Thanks, Kurt. Good afternoon, everyone, and thanks for joining us today on our third quarter call. We've continued to deliver robust performance across our key metrics and are building momentum in the business. With strong execution and a leverageable business model, we're well situated to navigate a variety of industry cycles with a business that's now positioned for success. Our diversified base of partners and programs continues to grow and continued to grow during the third quarter, despite a backdrop of a somewhat challenging macro environment presenting headwinds to some areas of the pharma discovery tools and technology space this year. As our partners’ clinical stage programs advance, we're also gaining better insights into timing around key inflection points for preclinical and later-stage programs. These post-discovery programs represent just a subset of our growing portfolio and have over $550 million in potential milestones to OmniAb. We're committed to driving innovation to further differentiate our technologies and to bolster our pipeline, and we're excited both about the potential opportunities ahead and our important place within the global pharmaceutical industry. I'll now quickly review some of our business metrics starting here on slide number 5. As shown here on the chart on the left-hand side, we ended Q3 with 86 active partners. We signed three new platform license agreements during the quarter, that included new agreements with 92Bio, Memorial Sloan Kettering Cancer Center, and Queen Mary University of London. Strong partnerships like these are fundamental to our success and we remain committed to expanding our partnership base, while helping partners realize their research and discovery goals. Also, I'll mention here that we recently expanded our ion channel screening relationship with Syngenta, which began last year. We recently entered into a new license with Incyte Corporation. We're looking to finish the year strong in our business development and licensing efforts, and this year could potentially be our best year ever in that regard. Our growth in partner count reflects the industry's interest in our technology and our dedication to both innovation and collaboration. By fostering these relationships, we believe we're creating new opportunities for mutual success. An added benefit is that our deep relationships with our partners help inform the intelligent expansion of our platform. Our partnerships provide a valuable vantage point on current industry trends and future opportunities and also keep OmniAb on the leading edge of in-demand technologies. The number of active programs underway by our partners remains robust and year-to-date new program additions have been strong. As shown here on slide number 6, as of September 30, active programs increased to 352 net of attrition. As you'll see on this slide, we're now providing more detail on our active programs. We're displaying both attrition and additions on the right side of the slide in the call-out bar graph shown here on the screen in the orange and the green bars. As of the end of the third quarter, we had 12 terminations and 39 active program additions. We often say that terminations or attrition are a natural part of drug development. And as we've noted this year and as reported more broadly in the industry, certain pharma companies continue to realign and reprioritize their therapeutic programs and pipelines. Having said that, our net growth in the number of active programs continues to validate our technology platform. We've generated growth net of attrition over multiple years now in a variety of macroeconomic and industry cycles, which I think demonstrates our ability to continuously evolve and enhance our technologies and expand our reach. As I mentioned on the previous slide, our deep relationships with our partners position us really well as we focus our innovation efforts. Now on Slide 7. As of September 30, our partners had 33 active clinical programs and approved products. During the quarter, Genmab's GEN1057, an investigational proprietary bispecific antibody, and Merck KGaA's M5542, which is a fusion protein, both advanced into Phase I clinical trials. Genmab's GEN1053 came out of our clinical program count shown on this slide and shifted back to the preclinical stage. According to Genmab's public disclosures, they are discontinuing a Phase 1/2 clinical trial in solid tumors for GEN1053, while preclinical activities in other indications remain active and ongoing. As of the end of Q3, three new OmniAb-derived programs have entered human clinical trials in 2024. Based on discussions with our partners, we continue to expect that we'll see one to three additional entries into clinical development for novel OmniAb-derived antibodies by year-end. Our post-discovery assets, which include preclinical and later-stage programs, have the potential to drive near-term and mid-term value generation. Now on slide number 8, you see the increased count in these assets. Over the past two years, we've maintained impressive growth with a 40% increase in the number of these programs, reaching a total of 53 by the end of Q3. As I mentioned earlier, the programs depicted here have over $550 million in contracted potential milestones to OmniAb. The successful progression of our partners' programs showcases our collaborative efforts and our shared vision along with the value that our technologies can create. And here on slide number 9, I'll just briefly touch on some select partner updates. Immunovant has made significant progress on development of IMVT-1402. They announced IND clearance for rheumatoid arthritis, stating that IMVT-1402 has a potential best-in-class profile for difficult-to-treat RA. They also announced that five INDs have been cleared by the FDA in a range of therapeutic applications and they're on track to initiate potentially registrational trials of IMVT-1402 in four to five indications by the end of Q1 of next year. They also reported positive results from the Phase 2a trial of Batoclimab in Graves' disease. In addition, they announced alignment with the FDA and IND clearance and an expectation to initiate a pivotal trial of IMVT-1402 in Graves' disease by the end of this year. Genmab highlighted both Acasunlimab and GEN-1057 on their earnings call last week as well. They described their priority in continuing to build a world-class differentiated pipeline and highlighted the Phase 3 study of Acasunlimab in second-line non-small cell lung cancer and that it is on track to start this year. They also highlighted the recently initiated Phase 1/2 trial of GEN-1057 in malignant solid tumors. At the ESMO conference, BioCity presented interim Phase 1 clinical trial results on the safety and efficacy of their first-in-class antibody drug conjugate BC-3195, which targets CDH3. They reported that BC-3195 demonstrated impressive antitumor activity in patients with advanced non-small cell lung cancer and that the drug is in concurrent dose optimization and dose expansion studies in China. Teva recently disclosed Phase 1 data for TEV-53408, an anti-IL-15 discovered using our OmniRat technology. Teva indicated that TEV-53408 shows a potential best-in-class profile, noting high affinity for IL-15, prolonged suppression of free IL-15, and potential for low dosing frequency. It was well-tolerated in a first-in-human study, and a proof-of-concept study in celiac disease is in progress. Last week, Teva also disclosed the initiation of a clinical study in vitiligo, an autoimmune disease with significant unmet medical need. On my last slide here, slide number 10, I'd like to highlight a couple of upcoming scientific conferences by our team. We continue to increase the visibility of our differentiated technology platforms at relevant scientific conferences by showcasing innovations that we believe create value for our partners. Next month we'll be at the Antibody Engineering and Therapeutics Conference in San Diego, where our team will present workflows for discovering developable binders with broad epitope coverage and affinities that serve as building blocks for multi-specifics, which is an area of significant and growing interest in the industry. In another presentation, we'll discuss the design and implementation of OmniHub, a new platform we're launching for bioinformatics tools that also enhance antibody discovery workflows by integrating machine learning and AI tools with our deep bioinformatics capabilities. When we kicked off the year, we mentioned that we'd be rolling out some partner experience enhancements and OmniHub is one example of this. And with that, let me now turn the call back to Kurt for a discussion of our third quarter financials.

Thanks, Matt. The income statement on slide 12 summarizes our financial performance in the third quarter of 2024. Total revenue for the quarter was $4.2 million, which compares with $5.5 million in the prior year quarter. The decrease was primarily due to lower milestone revenue and lower ion channel service revenue. We had previously guided that our revenue would be weighted towards the second half of the year based on statements and information from our partners, and we still believe this to be true. However, it looks like most of those milestones will hit in the fourth quarter. Our R&D expense for the third quarter was $13.3 million compared to $13.9 million in the prior year quarter, with the decrease primarily due to lower stock-based compensation expense. Our G&A expense was $7.1 million for the quarter compared to $8.5 million a year ago, with the decrease primarily due to lower legal costs and lower stock-based compensation. Our operating expenses are in line with our expectations, and we continue to anticipate total operating expenses in 2024 to be slightly less than total operating expenses in 2023. The net loss for the third quarter of 2024 was $16.4 million or $0.16 per share versus a net loss of $15.7 million or $0.16 per share in the prior year period. Turning to slide 13, you'll see our balance sheet as of September 30, 2024. We ended the third quarter with $59.4 million in cash, which includes $8.5 million of capital raised through our at-the-market security offering. We raised an additional $2.9 million under the ATM program subsequent to the end of the quarter, which will be reflected in our fourth quarter financial statements. As the year progressed, we continued to observe pressure on the biopharmaceutical industry, which has led to restructurings and pipeline reprioritizations. This can drive additional volatility in our business. Given these dynamics, we believe it was prudent to add some cushion to our balance sheet through the issuance of stock from our ATM program. These new funds strengthen our cash position, enhance our financial and strategic flexibility, and better prepare us for potential risks driven by macroeconomic and varying industry conditions and cycles. At this point, we believe the company is well capitalized and we enter 2025 in a better financial position. With regards to cash guidance, we expect to end 2024 with a cash balance in the range of $50 million to $60 million, which includes the proceeds from the recent ATM issuance. We anticipate that certain development milestones will be achieved in the fourth quarter. However, due to the payment terms of our agreements that typically range from 30 to 60 days, the actual cash collection for some of these milestones may not occur until the first quarter of next year, which is what drives the broad range. With regards to cash guidance for 2025, given the current expected progression of our existing partnered pipeline, we expect that cash used in 2025 will be lower than in 2024, excluding the recent ATM program proceeds. And with that, I'd like to open up the call for questions.

Thank you. We will now begin the question-and-answer session. Your first question comes from Puneet Souda with Leerink Partners. Please go ahead.

Hi, everyone. You have Michael on for Puneet today. Congrats on the quarter. I was wondering just given the large step-up in the number of active programs this quarter, if you could provide some insight into how much is from a macro recovery in the biopharma space versus something that you as a company are doing, maybe gaining share or expanding in certain geographies?

Yeah. Michael, thanks for the question. This is Matt. I'll just call out one detail here that probably wasn't lost on you, but we've provided a little more detail on our active program count after discussion with our internal team and external stakeholders thought it would be useful. Traditionally, we've just reported numbers net of attrition, but now we're providing a little more detail on additions and attrition. The growth in program counts has been strong this year and continues to be strong. I think it's a testament to the new technologies that we've launched. Our OmniAb technology, which is really the first and only transgenic chicken that produces single-domain antibodies, is an area of growing interest in the industry for a variety of scientific reasons. We're getting a lot of interest in that, which is driving a lot of new starts. I'll say the validation of the platform is also a factor here. We balance that with the backdrop of the industry, some of the things we mentioned in the intro around big pharma companies realigning portfolios and pipelines, and things like that. But program growth has been strong and continues to be strong.

Okay. Great. And then I had a quick question about the OmniHub. I was curious if that's another add-on as part of a standard license or if that's going to be an additional revenue stream software-wise?

Yeah, thanks. It's another tool that we use in collaborating with our partners. We're going to do a full launch of that at the AATC conference in December down in San Diego. It's really meant as a way to facilitate and streamline and accelerate discovery interactions with our partners. As we've expanded our platform, we have the benefit of a core technology of our transgenic animals that produce really strong antibody responses, which creates opportunities for us to leverage machine learning, AI, and big data analysis in ways that others frankly can't. OmniHub is a way in which we can interact with our partners to facilitate their efforts downstream. It's part of our standard offering; we don't see it necessarily being a single business line item, but it's one of the ways that we continue to innovate and remain on the cutting edge to meet our partners' needs now and in the future.

Great. Thank you very much.

Your next question comes from Matt Hewitt with Craig-Hallum. Please go ahead.

Hello, this is Tal on the call for Matt Hewitt. We've heard some rumblings that while biotech is up this year compared to last, the amount raised has declined from earlier in the year until last quarter. As a result, some companies are being a little more cautious with their investments. Are you hearing or seeing anything like that?

Yes. I think we sort of mentioned some of these macro and industry forces that we're observing. We're seeing the same things that you're talking about, which have created some volatility in our business. We may have a little bit more cautious outlook as we look ahead. All that being said, if you take a look at the key metrics that we have focused on in terms of signing up new deals, partners continuing to see the value of our technology and starting new programs, and moving things through the clinic, we're seeing progress on all of our key metrics. So I don't discount the fact that there are some challenging industry dynamics, but our business continues to perform well. Matt, anything to add on that?

Not really. I'd say the only thing I'd add is we talked about how some of the larger pharma companies have gone through what they call 'portfolio shaping initiatives.' That's balanced with a lot of discussions with those in the industry. One key insight is that at times when they focus their work, they also look to the best platforms and most validated technologies to help them meet their discovery needs, and that can also attract them to us. So yes, a lot going on in the industry, but we feel good about our position.

Awesome. Thank you. And I do realize that it's early, but how should we be thinking about the range of new clinical entries by your partners next year?

Yes. Thanks for the great question. As we look into next year, we expect one to three additional clinical entries before the end of this year based on our discussions with partners. Currently, we have 20 assets in preclinical. We maintain a high bar for what we consider to be preclinical assets. Those programs are candidates to move into the clinic in 2025. As we get into next year, we'll share more details. The JPMorgan conference at the beginning of January is often a time when many of our partners start discussing new programs publicly, new trials, and their intentions for the year. This is a good time for us to start discussing specifics about some of the programs and the count that we expect. We feel good about the growth in the portfolio and the matriculation of the programs through the various phases.

Thank you for the color.

Next question comes from Stephen Willey with Stifel. Please go ahead.

Yes, good afternoon. Thanks for taking the question. So I guess you're talking about how growth in program counts remains strong. You mentioned that multi-specifics are an area of considerable growth for the industry. Do you know what proportion of new program starts you're seeing that are multi-specific in nature? Do you have that level of insight? And then do you have any insight into the types of targets that partners are pursuing via these new program starts? I'm wondering if you have the ability to assess where each annual cohort of new program starts falls on the risk spectrum?

Yes. Thanks, Steve. Great question. The answer there is it's a range. Our platform has become more widely used and validated, leading to an increase in the number of new modalities and approaches that partners are looking to employ downstream using our technology for discovering antibodies. Even in our visible clinical programs, a growing number of those are bispecifics. Multi-specifics are absolutely the next wave and we've seen an increase in multi-specifics this year in interest there. Our OmniAb technology is also driving that. We're also seeing more diversification in therapy areas and areas of interest. OmniAb opens up a lot of possibilities in neuroscience, as well as in oncology, where we already have a broad presence. I can say that overall, interest in multi-specifics is absolutely increasing, and we are pleased that partners come to us because they realize we've got technologies designed to meet their needs.

Okay. That's helpful. And then, I think you may have given this information at some point last year, but do you have any update as to what the blended royalty rate of the post-discovery program portfolio looks like at this point? Is there anything you can say about how the Immunovant 1402 asset compares to that blended royalty rate? I know that asset is getting investor attention right now. Thanks.

Yes. Steve, I don't have an update for you on that blended royalty rate. We provided that number back in September or November of last year. That rate was based on the number of active programs we had at the time, which was about 300. We have obviously grown the number of active programs, but it's difficult to move the needle on that number significantly. Although I don't have an updated number, I would expect it to be similar to the figure given in November. Regarding the Immunovant program, Henal was the original party we had a contract with. The way it works is Immunovant will pay Henal and we get a portion of whatever Henal gets. So it's slightly different than a straight license for us. But in terms of the royalty rate, our standard guideline is that the royalty rate we receive is in the low to mid-single digits, and the percentage from Henal is pretty consistent with that. So that's about as much as I can disclose on that rate.

That’s helpful. Much appreciate it, guys. Thank you.

Yes. Thanks, Steve.

Yes. Thanks, Steve.

Next question comes from Kripa Devarakonda with Truist Securities. Please go ahead.

Hi, this is Alex Xenakis on for Kripa. A question from us. We see some of your potential partners rethinking their portfolio, perhaps driven by economic pressures. Are you seeing more or fewer partners electing to develop molecules in-house and advance to the IND stage? What are your thoughts, and can we see the seed of change that might affect your current business model going forward?

Yes. Thanks, Alex. To quickly address your second question, no, we feel great about our business model, the leverageability in our business, and our ability to demonstrate that going forward. Our partners come to us specifically for discovery technologies. We do not intend to take programs into IND, they come to us for access to our technologies for broad repertoires of novel antibodies, and to quickly select promising antibodies that can be taken forward. We have a unique vantage point on the industry, as we maintain intimate relationships with our partners. We understand the targets they pursue and the ways they want to engage with targets, which informs how we innovate around our early-stage discovery platform. Therefore, I don't see a shift in our business model. We are well positioned to endure various industry cycles.

Got it. Makes a lot of sense. Thanks for the color, and congrats on the progress.

Thank you.

Thank you.

Your next question comes from Brendan Smith with TD Cowen. Please go ahead.

Hi, this is Jackie on for Brandon. To start off, have you done any beta testing for the OmniHub offering prelaunch? If so, have you received any feedback from your customers?

Yes. Jackie, we obviously interact digitally with our partners all the time. So, the short answer is yes. As we've expanded our bioinformatics capabilities over the years, rolling out our OmniDeep platform, which is a suite of in silico tools, this became a natural extension of our work. Therefore, yes, we interact with partners in this way digitally, and we'll be rolling out more broadly at the ATC conference in December.

Awesome. That's great. And just to follow up on that, are you thinking of partnering with any cloud providers, or are you going to run things on-prem or on your own?

At this point, it's much more homegrown. There’s a great deal of IT infrastructure behind the scenes, but it's primarily homegrown right now.

Awesome. If I could just squeeze one more in. Regarding the three new licenses, could you provide any color on the therapeutic interest or program size expected from these companies and then the mix regarding the platforms they're going to use?

Yes. We announced three new deals in the quarter, one with 92Bio, which focuses on best-in-class multi-specific antibodies targeted solely towards cancer. The other two deals were with Memorial Sloan Kettering Cancer Center, which has a deep dedication to cancer with significant funding for translational research capabilities, and Queen Mary University of London, a top research institute in the U.K. focusing on cancer prevention, diagnostics, and theranostics. These areas are where some of our newer technologies can be effectively applied. Across the board, there is a range of our technologies that these partners will be interested in, similar to many of our other partners.

Great. Thank you so much. Appreciate it.

Thank you.

Your next question comes from Conor McNamara with RBC Capital Markets. Please go ahead.

Hi, great. Thanks for taking my questions, guys. I have one for each of you. So, Matt, from a product development standpoint, what are you seeing on the development of single-domain antibodies? What is the adoption of OmniChicken with customers?

Yes. We launched our OmniAb technology about a year ago. It has been a significant factor in attracting new partners. This opens up new possibilities across multiple therapeutic areas. I mentioned growth in the CNS space, which is notable, and interest has accelerated across areas like radiotherapy, as well as infectious diseases. The breakdown of new routes of administration with single-domain antibodies, such as injectable or oral, and the ability to penetrate the blood-brain barrier, creates additional attractiveness. All of these elements are increasing partner engagement. I'm very excited about this diversification in our pipeline of programs.

Okay, great. And then Kurt, regarding the ATM and the amount of money you've raised, you raised a little over $11 million. Should we think that this amount might have coincided with a pushout in expected license and milestone revenue, or is there any way to separate how much of that is just safety padding versus potential delays in revenue from those sources?

Yes. I mean, Conor, I don't think this had to do with filling a specific shortfall that we thought was going to happen in the current quarter or anything like that, or even next quarter. We saw big pharma and smaller companies given changes in the industry and funding cycles. We were a bit more cautious looking ahead. It makes sense to add a cushion to our balance sheet. Therefore, this entire amount is aligned with a longer-term view rather than a reaction to shortfalls.

Got it. Thanks for that clarification, and congrats, guys on the progress of the business.

Yes. Thanks, Conor.

Thank you.

There are no further questions. Please continue.

Great. Thanks. I'd like to thank everyone for joining today's call and for the questions. We look forward to keeping you updated on our progress, and we will update you next quarter. Kurt and I will be attending a couple of investor conferences next week. Kurt will be in New York for the Stifel Healthcare Conference while I'll be in London for the Jefferies Conference. In the meantime, we appreciate your interest in OmniAb and thanks again for joining us today.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.