Good afternoon, and welcome to OmniAb, Inc.'s First -- Fourth Quarter 2025 Financial Results and Business Update Conference Call. [Operator Instructions]. 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 to everyone. Thanks for joining our fourth quarter and full year 2025 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 omniab.com. Before we begin, I'd like to remind listeners that comments made during this call by OmniAb's management 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 the live broadcast today, March 4, 2026. 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 this afternoon is Matt Foehr, OmniAb's President and CEO. Matt is going to cover some business highlights, and I'll cover some financial information, and then we'll be opening the call up for questions. And with that, let me turn the call over to Matt.

Thanks, Kurt. Good afternoon, everyone, and thanks for joining our call. I'll start now on Slide #4. Our business built some nice momentum in 2025 that we sustained throughout the year. specifically related to broadening both our roster of partners and the number of active programs enabled by our technologies. By year-end, we're happy to report that we had 107 partners who are running 407 active programs. And as our partner pipeline advances, there are certain later-stage programs that are now coming into focus with the potential to drive meaningful milestone revenue and create value over time, headed towards the generation of significant future recurring royalty revenue streams. On the innovation front, we introduced OmniUltra at the Antibody Engineering Conference down in San Diego in mid-December. OmniUltra is the industry's first and only transgenic chicken platform to express ultra-long CDRH3 on a human antibody framework. We see OmniUltra as an important new growth driver that can help us gain additional partners, generate new program starts, create incremental near-term revenue opportunities and extend our reach into peptide focused discovery applications. Additionally, we're building a strong foundation for our xPloration platform, which brings our high-throughput single B-cell screening capabilities directly into our partners' labs. We think xPloration is very well positioned for significant growth with an expanding pipeline of high-quality prospects and increasing engagement as more partners are actively evaluating the platform for use in their labs. And we expect xPloration to be additive to the business and to contribute to our growth. And I note with the growth in our base of partners and our partner program portfolio, it's becoming easier to highlight that our differentiated platforms and business are highly scalable, allowing us to add new programs while maintaining operating efficiency, positioning OmniAb on a sustainable path to future growth.…

Thank you, Matt. On Slide 15, I'll start with a review of revenue. Total revenue for the fourth quarter of 2025 was $8.4 million compared with $10.8 million in the same period in 2024. The decrease was primarily driven by a decline in license revenue, which was partially offset by an increase in milestone revenue. Royalty revenue increased, but this was due to an adjustment in the prior year period to reconcile royalties to actual product sales. And we also saw a small contribution from xPloration in the fourth quarter. Slide 16 shows our cost and operating expenses for the fourth quarter of 2025. As Matt mentioned, even with our growing program portfolio, we have a scale platform that has allowed us to be very disciplined with our cost structure. As you can see from the chart, our operating expenses in the fourth quarter decreased to $24.1 million from $26.7 million. Most of this decrease was due to lower personnel costs, but we also saw lower outside service costs, primarily related to reduced spend for our legacy small molecule ion channel programs. Q4 2025 also included a noncash impairment charge of $3.9 million, primarily related to certain small molecule ion channel property and equipment. Q4 2024 had a similar-sized write-off associated with intangibles. Turning to Slide 17. I'll focus on the bottom part of the P&L here and make just a few comments. If you focus on the tax line, as we previously guided for taxes, we recorded a full valuation allowance against the income tax benefit associated with our net loss, which is why our effective tax rate is close to 0%. Our net loss for the fourth quarter was $14.2 million or $0.11 per share compared with a net loss of $13.1 million or $0.12 per share in…

[Operator Instructions]. Your first question comes from the line of Puneet Souda from Leerink.

First one on the partner programs. Given the sort of the backdrop of the markets, fundraising activity that happened in the second half last year and it still is ongoing, one on the clinical assets. Just wondering if you're seeing any effect from that? And how should we think about the new program's growth this year despite the strong 2025 that you had. So maybe I know it's always hard to sort of outline that, but just wondering, how are you thinking about the new program growth this year and any feedback from the business element side?

Yes. Yes. Thanks, Puneet. This is Matt. So yes, 2025, we observed really nice momentum in program additions and also a really strong year in terms of partner adds as well. We noticed a shift beginning last year as I think the industry started to get some more winded in sales. We saw partners, both existing and new partners initiating new programs. Many of those are attracted to us because of our newer technologies. Some of the technologies we had launched that being OmnidAb, the year the prior or the prospect of OmniUltra coming, which we launched in mid-December. So we feel like we're very well positioned for this year with coming on the tail-end of new technology launches and are obviously really pleased to see partners actively progressing, looking at accelerating development and that sort of thing. So we feel very good about that element as we look forward.

Got it. And then on xPloration, Nice to see some revenue there. I don't know if you can quantify it, but maybe, for the full -- I would love to know if you have a number in mind for the full year? What sort of growth you can see on that platform? It's a nice addition of revenue on top of the core animal models and programs that program growth that you're seeing. And then also wondering if you can provide anything on the pull-through side of the xPloration.

Yes, Puneet, I'll give a little color there. Obviously, we launched xPloration midyear last year with our partner access program, highlighted at the PEGS conference and sold an instrument right after that, obviously, deployed instruments now are performing extremely well for partners, xPloration obviously has the potential to contribute revenue in a variety of ways, not only from instrument sales, but also from the single-use consumables, which are at a nice -- very nice high margin as well as subscriptions and maintenance contracts. The flow of interest is very strong. It's with our, what I'll call our highest tier of partners, these are ones who are obviously doing a lot of discovery work and I think are attracted to xPloration because of its -- it's a throughput and ease of use, the ability to do multiple runs in a day and the ability to generate huge amounts of data, which I think is very well timed for some of the interests of the industry. So yes, we do expect it will be contributing this year. We're excited about that. We've not broken down the various parts of revenue guidance, but we do see significant growth for xPloration and contribution this year.

Your next question comes from the line of Mike King from Rodman & Renshaw.

First is nice to see you guys are cattle light and keeping the expenses under control. But as a valuation metric, it would seem to me to be more important for you guys to be adding programs and advancing things in the pipeline. So I'm just wondering how sacrosanct the cash flow neutrality or positivity is relative to additional investments that you might want to make to generate additional partnerships?

Yes. Yes, Mike, good question. I mean we are obviously building this business to be differentiated from the perspective of technologies that we know the industry needs, right? But to do that in a really efficient way that benefits our shareholders and our stakeholders. We sit in a really, I'll say, envious and unique position in the industry, right, with 107 partners. Over 407 programs that partners are progressing through various stages of development gives us a really valuable perspective on the industry, right? We can see -- we understand the targets that are of most interest to the biggest and most valuable pharma companies in the world, right? And that informs kind of how we invest in our technologies, it informs kind of the work that we do and how we work with the partners. And I think you're seeing the benefit of that in many of our metrics, right? So for us to add incremental partnerships, we can do that quite efficiently in the model that we have. We talk a lot about the innovations that we choose to invest in, and we do it really with that knowledge of not only where the industry is right now from the perspective of discovery and innovation. But knowing where it's heading as well, right? And that's what informed our investments over past years and things like our Omni dab single domain technology. And then more recently, with the December launch of OmniUltra, which is -- it sounds [indiscernible] but it's a chicken that makes cow-like antibodies with fully human sequences. That was something that was -- we knew there'd be demand there based on our dialogue with partners. So for us, I think we can do that very efficiently. We think that benefits all of our stakeholders, and that's where we're going to continue to focus.

Okay. And then just real quick follow-up. Jumping to share count in the third and fourth quarter. What can we attribute that to?

Yes. Thanks, Mike. We did raise some capital, and so that raising capital increased the share count during that period of time.

Your next question is from the line of Matt Hewitt from Craig-Hallum Capital Group.

Maybe to dig in a little bit more on the xPloration opportunity. It sounds like you're seeing strong demand. What was the number of systems that were placed or deployed exiting this past year? And given the pipeline, where could that go in '26?

Yes, yes. Thanks, Matt. Yes. So a quick answer to the first part of the question is 2, instruments deployed as of the end of 2025. And as we look to this year, as I said, we expect growth out of xPloration, we're excited about the flow of interest from our highest tier partners. These are obviously larger capital purchases for many companies. So there can be longer sales cycles, which we fully expected when we launched the technology. So they go through budget and capital approvals, et cetera. But the reception is quite positive. It's keeping our team very busy, which is great and the interest in demos and the performance in those demos has really been fantastic. So hopefully, that gives you the color you need.

Yes. No, that's great. And then you talked about -- Kurt, I think you were talking about this a little bit during your prepared remarks as far as your trajectory towards a cash flow breakeven, given the pipeline and Matt, you spoke to this as well, given the pipeline of opportunity, things progressing through the channel, or through the clinic, I should say, this year and into next year, when do you think that you could hit breakeven? Is that something that you see potentially exiting '27, maybe a little bit longer? Just trying to get a sense for time frame is when you could get to that level?

Yes. Thanks, Matt. Great question. Our future revenue is largely based on clinical and regulatory advancements by our partners for our partner programs. And while we're not giving a precise date for when we achieve breakeven, the growing and maturing portfolio of our partner programs gives us confidence that we are on the right path and that our trajectory can take us there. So we see it coming, but we can't give you an exact date right now, but we do see it coming.

Your next question comes from the line of Joe Pantginis from H.C. Wainwright.

So on the flip side for xPloration, obviously, we see the opportunities there. So just curious, how would you describe -- I mean, it sounded like you placed 2 machines in '25. But looking forward, your manufacturing needs and investment on your end and impact on op expenses as the program gets larger.

Yes, Joe, good question. This is an instrument that we use here for our own research. So we have a team of folks that understand the instrument is using it all of the time. And so there's not a large incremental investment in terms of staff that we need to make to go do this. This is a program that we've made available to our partners. For the most part, instruments would be built kind of to suit, if you will, or build for these folks when they order one. And so there's not even a large sort of investment in inventory, if you will, to go do that. So we're keeping this really lean right now as we want to make sure that this is something that is accretive to the business as we possibly can make it going forward.

Your next question comes from the line of Brendan Smith from TD Cowen.

This is Chad on for Brendan. I'd like to kick it off with Ultra. How has the initial response from partners been? And have you seen the beginning of that ramp in demand that you kind of called out last quarter?

Chad, thanks. The Ultra launch is going fantastically well. I've been really pleased with the reception. Obviously, it's still very early days. We just launched it in mid-December. But we did really a massive amount of validation work around Ultra before we launched it. The presentations that were given at the AET Conference in December highlighted a broad array of therapeutic targets that we had assessed at the time of launch. We also had 3 partner programs already progressing at that time. That number has increased and we expect it will continue to increase. So we're seeing really strong engagement. The technology is performing extremely well. And so we feel real good about how it will impact the business going forward.

That's awesome. Are you seeing any like specific traction amongst other modalities that you would call out of interest?

Yes. I mean I think there's been a general trend in the industry, and I'll say, smaller is better, looking for smaller binding units, if you will, that can be strung together in multispecifics. There's obviously been a big growing opportunity in the radio pharma space. That's something that the industry has observed. And then, of course, we've opened up totally new opportunities and a completely new call file in the peptide space, right? So peptides are an area of growing and increasing interest. There's significant growth in that space and really opened up our call file, if you will, to well over 130 companies that are new potential targets for us. So for all those reasons, I think we're excited about it. Again, early days, but we're building some nice momentum and we're excited about it.

Totally. I'm going to be that guy. I'm -- one more question in. But for your fiscal year '26 rev guide, it's kind of hinting out a return to 2024 levels. Would it be safe to say you're seeing early signs of recovery in the market? And what kind of visibility do you have into your partner spend expectations that couldn't form that outlook?

Yes. I think most of -- a big chunk of our revenue is milestone-based. And so as we talked about it on a quarterly basis, the revenue number is lumpy. It actually is for years as well. So it sort of is just really a function of what kind of clinical or regulatory events are going to be happening. And as we sort of project forward into 2026 based on what partners have said, we project out what those milestones might be. And so I'm not sure it's really sort of kind of whether the industry or the overall market is what's driving that as much as us taking a look at the very specific events that are happening with the programs that we've got. Any events that are sort of coming up for 2026. That's really more the driver of it.

Your next question comes from the line of Srikripa Devarakonda from Tourist.

This is Anna on for Kripa. One question on xPloration. Could you kind of qualitatively describe how the interest in xPloration is shaping up in terms of interest from any new partners or kind of strengthening that existing partner relationship?

Yes. Great question. The answer is both. I mentioned that of our existing partners, the ones that obviously have the quick engagers in evaluating xPloration with strong interest have been that highest tier of partners, right? These are the ones that are doing a lot of antibody discovery work, have a thirst for more data, are attracted to the high throughput and ease of use of the instrument, it is also attracting others as well who are not current partners of our repertoire generation discovery technology. So that's one of the things I referenced when I generally say I think there are benefits and advantages that xPloration creates for the business is not only deepening those relationships with existing partners and building structures that allow us to create value earlier in a product's life cycle or a program's life cycle or the relationship, but also attracting others as well who we can also bring in as a more broader partner in the process. So I think that is another benefit of xPloration.

Great. And on OmniUltra, are there any milestones we should expect from OmniUltra in 2026?

Yes. I obviously will expect to continue to be adding partners and programs with OmniUltra. That's going to be our initial focus as we launch the technology. As those programs obviously go through development and graduate to later stages of development, we expect that will happen in due time, but the initial is going to be driving new partnerships and new programs and leveraging the technology in that way.

Your last question comes from the line of Stephen D. Willey from Stifel.

Just actually had a question about a footnote on Slide 24, where I think for programs with tier of royalties, you're making some kind of sales assumption and using a blended royalty calculation. Have you said or can you speak to what proportion of the programs that are active have either a tiered or fixed royalty structure?

That's a good question, Steve. I don't think we've given that number out before. It's more than a handful, but I'm not -- I wouldn't say it's a majority. I don't know, Matt...

Yes, more than handful that have tiered -- majority of our deals are flat royalties. There are some instances in which they are tiered, but the majority are a straight royalty.

Got it. And then just also curious where you think that average, I guess, it's 3.4% royalty rate could trend to over time and whether you're trying to command a higher royalty rate on some of the newer technology offerings like OmnidAb and OmniUltra?

Yes. I think for Discovery Technologies, Steve, there's always a dynamic there of how far you can push, right, on royalties. Obviously, the level of innovation allows us to drive better economics more generally, but those economics can be an interplay between upfront payments, service payments, milestones that are paid along the way in royalty. So it really depends in many instances on the negotiating dynamic, the soft points or the points of interest of the partner. But I will say that more innovative technologies do drive more value for our shareholders. And that's one of the reasons why we've launched new technologies like OmniUltra, like OmnidAb, but that kind of gives you a little color on the dynamic.

There are no further questions at this time. I would now like to turn the call back to Matt Foehr for closing comments. Sir, please go ahead.

Great. Thanks. I'd like to thank everyone for joining today's call and for your questions and engagement. We look forward discussing our first quarter financial results in a few months. In the meantime, we'll be participating at the Leerink Global Healthcare Conference which is next week in Miami. So we hope to see some of you there. We also expect to be on the road likely in the spring with NDRs and the like. So thanks again, and have a great day.

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