Good afternoon and welcome to OmniAb Inc's Fourth Quarter and Full Year 2024 Financial Results and Business Update Conference call. At this time, all participants are in a listen-only mode. Following the presentation, we'll follow the formal presentation. A question-and-answer session will take place. 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, you may begin. Thank you.

Thank you, operator, and good afternoon, everyone. This is Kurt Gustafson, OmniAb's Chief Financial Officer, and thank you for joining our fourth quarter and full year 2024 financial results conference call. There are slides to accompany today's prepared remarks, and they're 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 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, March 18, 2025. 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 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. Starting now with Slide number 4, I'm pleased to report strong performance and momentum in 2024, as we achieve double digit percentage growth in both the number of active partners and the number of active programs that leverage our technology. Our partners clinical stage programs are advancing and we're encouraged by the progress that they're making. We introduce new technologies and enhancements that are positively impacting our partnerships and driving efficiencies in our increasingly scalable business. These innovations are not only differentiating our business, but are also attracting new partners and creating opportunities for significant future growth potential. Potential key royalty assets are beginning to come into focus, along with other building blocks of value that we expect will drive our growth in the coming years. As we look ahead here in 2025, we're excited about the opportunities we're seeing and we're confident in our plans. This schematic here on slide number 5 provides a bit of an outline along with some details on how we view our business and how one can look at the interconnected elements of value here in OmniAb. Starting with the upper left corner, our novel platform technologies continue to differentiate us and create new partnerships, and also drive our existing partners to start new programs. We have deep relationships with a growing number of partner companies, and those relationships create a unique vantage point in the industry that informs our thinking about new technology innovations and launches, as well as any strategic technology acquisitions. We now have a long track record in this area. Value creations really starts with the additions to our pipeline, as mentioned in the center of the slide. And here, we've driven double-digit percentage growth over multiple years and…

Thank you, Matt. I'll start with slide 18 with our revenue in the fourth quarter of 2024. Total revenue increased substantially reaching $10.8 million compared with $4.8 million for the same period in 2023. This increase was primarily due to higher license and milestone revenue driven by new deals and the clinical advancement of our partner programs. Service revenue declined as we completed work on certain small molecule ion channel programs that were then transitioned over to the partner. Regarding royalties, typically we receive sales data from our partners on a lag, so we record royalty revenue based on estimated net sales of our partners' products. When we do receive the final sales data, any difference between our actual results and the prior estimates are adjusted in the period in which they become known. In the fourth quarter, we received an update on some information regarding the sales of Sugemalimab and Zimberelimab in China during 2024 and accounted for that downward adjustment in the fourth quarter to reflect this new information. Turning to Slide 19, let's take a look at our operating expense. Operating expense in the fourth quarter would have been lower than the prior year period if not for a $2.7 million impairment charge related to certain small molecule ion channel and tangible asset. The impairment charge was a result of a shift in our focus for ion channels from small molecules to antibodies. This shift resulted in the impairment of certain small molecule related and tangible assets. For R&D and G&A expense, both decreased versus prior year, primarily due to lower stock-based compensation expense and reduced outside expenses, as we continue to drive efficiencies in our business. We take a look at the quarterly P&L on slide 20 and focus here on the bottom part of the…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Joe Pantginis from H.C. Wainwright. Your line is now open.

Hey, guys. Good afternoon. Thanks for taking the questions. A couple, if you don't mind. So first, Matt, with regard to attrition rates, obviously this is a normal part of biotech drug development. Just curious, I might assume that a lot of it or the majority has to do with, you know, clinical development moves, number 1. But are there any attrition numbers that might be due to technical issues?

Yeah, thanks, Joe. No, I wouldn't describe attrition as related to technical issues at all. In this, the attrition we saw last year, you know, we talked through the year about big pharma pipeline realignment, which was pretty widely reported through the year. I think a lot of dynamic changes in the big pharma space have led many of the big pharmas to focus more on efforts where they can really be differentiated and maybe even in some instances to aim even bigger in CNS and areas like that. So that caused, I think, some of the big farmers to realign their clinical pipelines. But beyond that, I think the rest of the attrition that we saw, I would characterize as kind of normal types of attrition that you see in the various stages of drug development. Of note, Q4 was a really strong quarter for us in terms of additions, And I think that has positioned as well for this year. So that was generally good to see.

No, that's very helpful. And I assume that I just wanted to ask. And then in your prepared comments and in your slide deck, you gave a little bit of a tease of new tech rollouts this year. So curious, you know, any further information you can share, and does it come from any of your existing platforms or the sort of brand new rollouts of tech?

Yeah, great, great question, Joe. Thanks. I mean, we think our commitment to innovation is really a significant competitive advantage. One -- we've seen that now over the years and we hear it from partners as we're talking to them. And we have been investing actively in innovation for the last few years and those investments that we have made are informed by really deep relationships with our partners. That helps us form our thoughts on both and also form our technical and our business conviction around new technologies and workflow enhancements that we consider innovation that can really drive value. In recent years, we launched OmnidAb, which is an engineered chicken with a human framework for discovering novel single domain antibodies. That has attracted a significant number of new partners. It's driving some nice growth in our active programs. And it's also substantially diversifying therapy areas that are being pursued by our partners into CNS and radiopharma and other areas. But when we think about innovation, I also include things like OmniDeep, which we launched in recent years also, which is the suite of in silico tools, AI and machine learning elements that are woven throughout our tech platform, but are also driving new programs, creating new opportunities. And then after that, we launched OmniHub at the end of last year, which is a platform for bioinformatics tools that enhance our workflows for our partners and the feedback on OmniHub has been candidly fantastic. So as a long lead to answer your question, this year we're really excited about the new technologies that we're planning to launch. I think they can impact our ecosystem of partners and the industry more broadly. And I'll just say generally that the things we launched this year all very much within our strategy and the themes that we've talked about previously in terms of they'll enable discovery of high-quality candidates more quickly and efficiently. They're highly scalable, expand our existing partnerships, and I think will attract new partners as well and will continue to differentiate us. So the only other, I guess, detail I'll give, I mean, we've generally launched new things around key scientific conferences and that's worked well for us. And that generally includes the PEGS Protein Engineering Conference in May in Boston and the [AEC] (ph) conference that is very late in the year down in San Diego. So just kind of some general details there. I hope that helps.

No, it certainly does. And one more quick question, I guess, and it might be a little self-deprecating, the simplistic answer is a yes, no, or irrelevant. Do you think that in these current volatile markets that Kurt alluded to and we all know about, do you think there's any sort of push for additional pipeline and development where you might see added cash deployment from partners?

You know, Joe, I mean, as we look at our business and the metrics that we track, it's a business that's been resilient and has done well in a variety of cycles. And I think there's a lot of reasons for that, potentially. You know, the technologies and the needs that they serve, the different cycles like sub-cycles that exist within the industry around therapy areas or approaches to research, whether that's internalization or externalization, et cetera. And the good news about our platforms is that they're scalable. They can be used in a flexible fashion in a variety of ways. So I feel like we're kind of well positioned in just about any landscape. I don't know, Kurt, anything you'd add?

I agree.

Fantastic. Thanks for indulging all my questions, guys.

Yeah, thanks, Joe.

Your next question comes from the line of [Puni Tsuida from Learing Partners] (ph). Your line is now open.

Hi, guys. Thanks for the questions here. So first 1, if you – Kurt if you could clarify on the $20 million, $25 million guide, just assuming what's – are you expecting cash and non-cash within that tour? Is that all cash? And maybe if you can elaborate, you provided a number of programs here. Any upside you're baking in from those programs? And I know it's always hard to say how much is collaboration revenue versus license revenue, but maybe you can provide context because this is the first time you're providing this guide.

Yeah, so Puneeth, so the $20 million to $25 million is a GAAP number. So we're trying to compare gap to gap. What I was trying to point out was if you think about why the 2025 number is going down relative to 2024. A big chunk of that of 2024 was this service revenue, right? $6 million was the amortization of service revenue, which is non-cash. And that's the piece that was going away. I kind of pointed to the balance sheet. Take a look at deferred revenue on the balance sheet, that the balance at the end of the year is only $2.5 million. So, you know, we recognized $6 million in deferred revenue last year. There's only $2.5 half million left to recognize in the balance sheet. So that's one of the big things that's going down and that's non-cash anyway. So I was trying to just provide some color on that, but specifically the [$20 million to $25 million] (ph) is a GAAP number in terms of what we would expect to report. You asked about kind of the differentiation, you know, at this point, I don't think we're breaking out that, you know, in that revenue, the difference between milestones versus service revenue versus royalties, but you could allude or you could, based on my remarks, you know that kind of the deferred service revenue is a piece that's certainly going down next year based on the comments that I've made.

Got it, So that's helpful. And then I know academic is a smaller piece of your partner contribution, but just wondering if you're seeing any of the impact there, obviously volatility in the markets, but more importantly, you know, just a lot of NIH worries and whatnot. So just wondering if you're seeing any decline there.

Yeah, yeah, Puneet, this is Matt. Thanks for the question. I mean, obviously there's been, in regard to NIH funding, obviously a lot of wide reporting on how changes there can or might impact academic research now and in the future. At this point we've not that impacting how our ecosystem of academic partners are collaborating with us but we are you know continuing to watch at state we are inactive dialogue with perspective academic partners now and those discussions have progressed despite the headlines and but dynamic nature of the landscape and you know I get all that will report you know our numbers new partnerships for this year when we report Q1 in May, but we actually just signed a new leading academic institution to a new deal in the last week or so with a group that's very interested in leveraging our OmnidAb technology for a variety of pretty impactful areas. So that was a good thing to see. But we'll continue to watch the space.

Got it. And then one more for me. You talked about, you know, fourth quarter being especially productive for additions. Has that continued into the first quarter here now into March? Thank you.

Yeah, I think, you know, for some of that we need in terms of the work that we're actively starting, I'd say generally, yes, it's, you know, we do get reports on other elements of our tech that come later. And so hard to say exactly. I don't know, Kurt, anything you?

Yeah, I think, Puneet, in terms of, just like it is with milestone revenue, right? It can be lumpy over the quarters. And specifically for this data, it's a function of when we get reports in from partners on what they're working on. Some of these don't, you know, companies, they only report quarterly. We have a few instances where they only report annually. So be careful about reading too much into any single quarter in terms of what's happening there. Obviously the general trend for the year is very positive and we're looking for that to continue but I'm not sure I would sort of try to take a ruler and draw lines based on what happened in Q4.

Helpful, okay, all right, Thank you.

Your next question comes from the line of [Matthew Raab] (ph) from Craig Hallam Capital Group. Your line is now open.

Good afternoon. Thanks for taking the questions. Maybe first up, and I just want to make sure I was reading the slides correctly. So I think you're expecting 5 to 7 new clinical entrants this year. I would assume that most, if not all of those, would trigger milestones. And then 1 of the slides says you've got 4 that are now in Phase 3. As we look out, and I'm not asking for guidance, but as we look out at 2026, 2027, it would appear that you, I mean, as those kind of get through the clinic, there's an opportunity to see a nice step up in not only the milestones upon approval if that happens but also in royalties, am I thinking about that correctly?

Yeah, Matt I can comment I'm sure Kurt will have a comment just on the overall metrics that you're talking about obviously we've shown a new view of our pipeline chart, right, to really focus only on the programs that have downstream economics. And to answer your question generally, generally when a program starts a clinical trial, that will trigger a milestone in some manner. And I say it like that because every contract, I mean there can be differences in a variety of contracts. She looks across all of our programs. Over 98% of them have downstream economics to us, right? So that's, I think, an important thing to keep in mind. There are programs now we've kind of pulled out of our pipeline visual representation, but for historical comparative reasons are in our overall metrics. Some of those are in later stages of development. Again, deals that were done a long time ago that we inherited. But yeah, hopefully that answers your question on milestones.

It does. And then maybe shifting gears a little bit, it sounds like you've had some really positive feedback on OmniHub. I know last quarter you said that you had completed a kind of a beta run or a beta test with a partner and then you're going to present data in December. Are you now enrolling or signing up customers or partners to that product and if so how should we think about the ramp of that over the over the year, thank you.

Yeah thanks Matt. so yes partners are using OmniHub today we on our last call I think in November we mentioned the fact that we'd already done some data work with early adopters, if you will. But we launched OmniHub in December at the AET conference down in San Diego. And the receptivity and the feedback has been great on that. It allows us to, within a digital format, share data and tools and things like that with our partners and kind of a natural evolution and extension of our technologies as we, you know, have 1, start sharing more data with more partners, have introduced things like OmniDeep, which is our suite of in silico tools that are woven throughout our platform. OmniHub was a natural technological expansion for us that we launched in December and it's been going real well.

That's great, thank you.

Your next question comes from the line of Kripa Devarakonda from Truist Securities. Your line is now open.

Hey guys, thank you so much for taking my questions and congrats on all the progress. So on the 2 licenses with I think Incyte and Photinia that you reported in Q4, could you give us any additional color either on the therapeutic areas, the indications, or the platforms that they might use? And from a therapeutic area perspective, You previously have noted that OmnidAb opens up a lot more possibilities, especially you mentioned neuroscience as well as oncology. Can you talk about if the trend is continuing or if it has expanded or there have been any kind of changes in that? Thank you.

Yeah, Kripa, thanks. On therapy area evolution, OmnidAb , you know, as we launched it in November of 2023, and it certainly has contributed to an uptick of partners who are interested in and are pursuing CNS targets, what I'll describe as high-value CNS targets. We definitely also have partners using OmnidAb with a focus on oncology and in multi-specifics and areas like that, but it has certainly increased the diversity of our discovery pipeline with additions of CNS. We also see real interest in radiopharma as well. As far as both Incyte and Photinia, I can't really comment on the areas that they're interested in with our platforms, other than to say they have broad platform access, which gives them access to multiple species, to our proprietary screening technologies, and other downstream technologies and workflows. So that's what I got for you on that.

Okay, great. Thank you.

[Operator Instructions] Your next question comes from the line of Stephen Wheelie from Stifel. Your line is now open.

Hi guys, this is [Tolion] (ph) for Steve and thank you for taking the question. So just to start with, I have a question on your preclinical discovery program. So among these five incremental or in total 20 preclinical programs, is there any particular platform that over-represents the others? In other words, like I'm trying to gauge, you know, like any particular platform that's attracting more attention from partners. So that's my first question and I'll ask a second one later.

Great, thanks, Leigh. As far as the 20 programs in the preclinical phase, I'll just say generally we're really pleased with the diversity of therapy areas in there, broad therapeutic interests, really impactful indications where there are significant unmet medical need. There also is a mix in there of our source technologies, whether that's our [OmniRodent] (ph) technologies, our Bi-specific technologies, OmniFLIC and OmniCLIC, as well as our chicken-based technologies as well. So yeah, it's a nice mix in diversity. Generally, as those programs enter the clinic, that's when there's more information out there about the specific targets that partners are pursuing, how they're approaching their clinical development, et cetera, and we expect we'll be able to talk more about that through the year as programs graduate from the preclinical phase to the clinical phase.

Okay. Great. Thank you very much. That's helpful. My second question is actually related to one of the advanced assets. So Sugemalimab, you know, partnering with CStone. So can you please remind me of the downstream economics related to that asset? Because CStone sounds like they've been making significant progress on the commercial side. So the reason I'm asking this question is I'm wondering if potential royalty payment is actually embedded in 2025 revenue guidance at all.

Well I can tell you that the royalties for both Sugemalimab and Zimberelimab, are 3% globally. So that's the answer to that question. In terms of the guidance, I guess the guidance includes revenue from milestones and service revenue and royalties, Although I think we don't really have a lot of insight into sort of what sales are going to be in those territories. So I'm not sure there's a lot of upside baked into our guidance for that kind of thing.

Great, Thank you so much.

There are no further questions at this time. I will now turn the call back over to Matt Foehr, please continue.

Great, thank you all for joining our call today. We appreciate the engagement and the questions. We'll look forward to keeping you updated on our progress and to speaking to you next quarter. So in the meantime, again, we appreciate your interest in OmniAb and have a great day.

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