OmniAb, Inc. (NASDAQ:OABI) Q1 2024 Earnings Call Transcript May 10, 2024

OmniAb, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon and welcome to OmniAb Inc. First 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.

Kurt Gustafson: 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 9th, 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.

Matt Foehr: 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 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 first three 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 number 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 start-up with 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.

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 a number of active programs increasing to 327 as we show here on Slide number 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. 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 three programs successfully transitioned from discovery to pre-clinical stage. And 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. And at the end of Q1, we had a record 18 programs in pre-clinical and that's the most that we've ever had at that stage. And 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 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 one program at Roche and that 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 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 four to six new entries into clinical development for novel OmniAb-derived antibody-based programs this year. Here on slide number 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 period one 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 four to five 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 two fiscal years. At the recent AACR Conference, Merck presented the pre-clinical data on for M9140 which is a novel ADC with a topoisomerase one 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 is in patients with advanced solid tumors is now ongoing. And 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. And 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 the 4. 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 presentations by our partners at ASCO, but we've listed the ones that we feel are the most worth highlighting for you. 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. 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 biopecific 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'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 came out in digital form very recently and creates further visibility for our OmnidAb technology that we launched in Q4 of last year. OmnidAb is attracting new partners and its 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 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.

And with that let me turn the call back over to Kurt for a discussion of our first quarter financial results. Kurt?

Kurt Gustafson: 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. 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 have received from partners in their public statements.

This is still our expectation. Turning to operating expense. 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. And 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. 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 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 you exclude the $35 million TECVAYLI 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?

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