OmniAb, Inc. (OABI) Earnings Call Transcript & Summary

Thank you. Good afternoon and welcome to OmniAB Inc's second quarter 2026 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.'s Chief Financial Officer. You may begin. Thank you.

Thank you, Operator, and good afternoon, everyone. Thank you all for joining our second quarter 2026 financial results conference call. There are slides to accompany today's prepared remarks, and they're available in the investor section of our website at OmniAB.com. Before we begin, I'd like to remind listeners that comments made during this call by OmniABS 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. The 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, August 6, 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 on the call this afternoon is Matt Foer, OmniABS President and CEO, as well as Amechi Wachuku, our recently appointed Chief Operating Officer. During today's call, Matt is going to cover some business highlights, and I'll review our Q2 financial results and update our full year guidance, and then 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 our second quarter call. I'll start now on slide number four. We continue to see momentum in the business with the second quarter strong performance led by advancements in our portfolio of partner programs. Our business here at OmniApp has been designed to benefit from long term and durable revenue streams. We're excited to report that the programs derived from our differentiated discovery technologies continue to move into the clinic and to make progress through later stage clinical development. This clinical progression gives visibility into the value that can be realized as our pipeline matures and as an increasing number of partner programs reach milestones and approach potential royalty generation. Our novel technologies reinforce our position as a key enabling technology licensing partner. support both existing and new partnerships. Novel differentiated technologies and our capabilities keep us at the forefront of next generation discovery, enabling meaningful value creation for our stakeholders and the broader industry. We're pleased to note that both of our most recently launched antibody generation technologies, which are OmniUltra and OmniDab, are opening up new markets and important new opportunities for us. and we're seeing an increase in our chicken-derived technologies producing programs that are now in clinical trials. And for exploration, we saw the sale of two instruments during the quarter as we continue to build a very strong foundation for that element of our business. We think exploration gives us an important opportunity to broaden our reach, diversify our revenue streams, and deliver greater value for our stakeholders and for our customers. Ongoing discussions with our partners, some very recent market research, and our growing funnel of high-quality prospects evaluating the exploration system for use in their labs gives us increasing confidence in the potential market opportunity. We're also really excited to have welcomed here Meichi to our team, who's an established and highly experienced global executive, to help lead and grow the business. And lastly, we're encouraged by the continued progress across our partner programs that drove another very strong quarter for us. And so we're again raising our full year 2026 financial guidance by increasing both our revenue and our cash outlook, which we view as important indicators of the value that's embedded in our growing portfolio of partner programs that have contracted downstream economics. Kurt will speak to our updated guidance in greater detail during his remarks. I'd also like to take a moment to highlight the continued expansion of our platform as our innovation engine advances novel technologies that we believe further differentiate and strengthen our value proposition. We have a growing ecosystem of partners, and that gives us a pulse on the work that partners are doing and that they plan to do. And it also gives us a unique vantage point on the industry's needs more broadly. We leverage that vantage point as we continue to enhance our technologies, our workflows, and our capabilities. And I want to highlight exploration here on this slide, slide number five. Exploration extends our business and nicely complements our novel antibody generation technologies. Exploration is our proprietary high throughput single B cell screening platform that leverages machine learning and artificial intelligence. The platform includes a competitively priced instrument and proprietary single use consumables, as well as annual software subscriptions and maintenance contracts. So it therefore has potential to generate multiple revenue revenue streams to our business. We achieved an important milestone within Q2 with the sale of two instruments while strong commercial interest continues to expand our sales pipeline. Early feedback highlights explorations, rapid runtimes, ease of use, and overall robustness. With these user benefits, we strongly believe we have the right technology at the right time as we're entering an era when our partners and the broader industry increasingly recognize the value of lab automation and high value and high impact instrumentation for large scale proprietary data generation and AI and ML aided screening and selection. We continue to be very excited about what this technology can contribute to the business and look forward to sharing more with you at our upcoming Investor and Analyst Day on October 6th that I'll talk more about in a moment. I'll turn now to some of our metrics starting on slide number six. So at the end of the second quarter, we had 110 active partners. In Q2, new licenses included agreements with Enrosa Therapeutics and Argenix. Argenix is especially notable given that they're a global leader with a strong heritage of innovative R&D and are described as, quote, leading a new era of innovation in immunology. our technologies are well positioned for some of the things that we think they're looking to achieve in novel drug discovery The mix of our partners across discovery stage companies, large pharma, and academic institutions remains really well balanced, and a majority of our partners are headquartered here in the U.S. with the remainder primarily in Europe and in Asia. We're also proud that eight of the 10 largest pharmaceutical companies in the world continue to be active partners of Omniab, which we believe demonstrates the quality and the strength of our partner base and further validates the value of our technology platforms. Now I'll move on to slide number seven, and you'll see here our active programs metric. We ended the quarter with 425 active programs with an increase that reflects both the addition or new program starts and some normal attrition that occurs as partners refine their pipelines and their priorities. priorities. Importantly, about 98% of our active programs include contracted future economics to OmniApp. Across our portfolio, we have more than $3 billion in total contracted potential milestone payments on standard antibody licenses with an average contracted royalty rate of approximately 3.4%. On the clinical front, slide number eight here shows our partners' active clinical programs and approved products. At the end of Q2, there were 34 active clinical programs and approved products that leverage our technologies. That total reflects both new entrants into the clinic and attrition. We've had four new clinical entrants so far in 2026, and we continue to anticipate new clinical entrants. We've seen important clinical advancement within these active clinical programs year-to-date, and we're looking forward to further positive advancement activity later this year. And I note that we have approximately $340 million in remaining contracted potential milestone payments to OmniAB for these active clinical stage programs. And also, as mentioned on the slide here, there are now six programs in Phase I or Phase II clinical trials that are derived from our novel genetically engineered chicken antibody discovery technologies, specifically Omnidab and OmniChicken. I think it's worth noting that OmniAb is the only company in the world with a transgenic chicken platform that creates fully human antibody sequences. Traditionally, many therapeutic targets are highly conserved or similar in sequence among mammals, and that adds to the value proposition of our transgenic chickens. But the advantage of a chicken platform is based on the evolutionary distance of a chicken as a biological host for discovery versus other animals, specifically mammals. So this distance allows our chickens to create a robust response and a diverse set or a library, if you will, of antibodies against novel targets that a mammal or other approaches likely wouldn't. We have a number of different types of genetically engineered chickens that can create unique antibody repertoires and help discover drugs such as traditional heavy and light chain antibodies, common light chain formats, single domain antibodies, ultra long CDRH3 domains, and dual modality antibodies, and now even peptides. These capabilities open market opportunities and are driving partner interest. We're seeing increasing interest in our engineered chicken platforms, and now with further clinical validation, we think that can drive even more interest. Turning now to slide number nine, this graphic summarizes our clinical and commercial stage partner pipeline for active programs that carry downstream economics to OMNIAAP. The placement of any program here is based on its most advanced stage in any geography or in any indication. As you can likely tell, there's been some significant movement in the later stages of development with additional programs now in Phase 1, in Phase 2, and in Phase 3 with some bigger events having happened just in Q2. I'll call out two programs that jumped from Phase 1 directly into Phase 3 during Q2. romantamig, which is J&J's tri-specific antibody for multiple myeloma, and Merck KGA's presentobarc tocentican, which is a CCAM5 ADC for colorectal cancer. We'll also mention here the Boerger Ingelheim BI878 program, which is shown on the pipeline here in Phase 2. So BI is pursuing a MASH indication, which is an important market and is a major health challenge. The right-hand side of this graphic is continuing to get more crowded with what some of our partners view as important potential first-in-class or best-in-class medicines. Let me turn now to slide number 10 to point out a few things that developed recently that are playing a key role in driving elements of the business. Specifically, we're pleased to highlight continued advancements in the clinical programs of our partners. I'll hop around a little bit on this slide, and I note that the Merck KGA program that Merck announced that based on phase one data, it's now in the phase three trial with percentibarc-tocentican, which is that potential first-in-class investigational anti-CCAM5 antibody drug conjugate for the treatment of metastatic colorectal cancer. They reported some very strong data, and that's also summarized here on this slide. I'll also highlight the TEV408 anti-IL-15 asset, which was the subject of some substantial news earlier this year with a large investment in the program by Royalty Pharma. TEVA has now announced plans to begin its Phase 2b study in vitiligo in the fourth quarter following encouraging results from its earlier clinical work. Those clinical data showed improvements in skin pigmentation in patients with active or stable vitiligo at week 24 and valuable participants nearly 75% of the patients reported improvement in facial vitiligo with half reporting much or very much improved. And as shown here on the left of this slide, Immutivant announced clinically meaningful response rates at week 16 of IMVT-1402, and it's difficult to treat rheumatoid arthritis trial. Immunovance expected to provide further updates on this program in the second half of this year, and also in the second half, Immunovance expected to provide an update on IMVT-1402 in lupus. Therefore, now turning to slide number 11, we look forward to some exciting updates in the second half of this year with additional expected readouts from TEVA and updates from the IMVT-1402 program at Immunovant. There were also updates provided on the progress earlier this morning stating that the imbt 1402 program remains on track across all six of the announced indications that are being pursued Before turning the call back over to Curt for a discussion of our Q2 financial results and our updated 2026 guidance, let me provide you with a little bit more detail on our upcoming investor and analyst day. That'll be on October 6th, and we'll be webcasting it and hosting it here at our and headquarters in Emeryville. The team is preparing a productive session with an agenda that includes management presentations and will feature discussion of some of our partner programs and Q&A. And then for those that can attend in person, a demonstration of our exploration technology and lab tours. You'll also be able to meet additional members of our team in person, including Amechi, for those that haven't met him yet, who will share more around our plans for the exploration platform as well. We provided an online link for additional information and participation details for the investor and analyst event in our press release. And in addition to that event, we have some technical presentations in the coming months related to our OmniUltra technology, for which we're excited to see continued strong adoption and also see some important new application possibilities. And on the lower part of this slide, we've highlighted a couple of those upcoming talks on OmniUltra. And just as background, we launched Ultra late last year, and it's the first and only transgenic chicken that produces antibodies with ultra-long CDRH3s, which is a structural feature of antibodies typically found in cows. CDRH3s are designed to reach binding pockets not accessible with other antibodies or modalities, potentially unveiling new therapeutic opportunities, and they can play a role in things such as building blocks for multispecifics, as binders for CAR-T and for radiopharmatherapies, and as in vivo-generated pediatrics. So Dr. Christelle Ipland, one of our scientific leaders here, will be giving a couple of talks on OmniUltra over in Europe in late October and in early November. And with that, I will turn the call back over to Kurt to discuss our financials. Kurt?.

Thanks, Matt. As Matt mentioned, this was a strong quarter driven by the advancements in our partner portfolio. On slide 14, let me start with revenue for the quarter, which totaled $13.4 million compared with $3.9 million in the second quarter of 2025. was primarily driven by higher milestone revenue, reflecting the progress of our partners' programs in the clinic. We also saw an increase in exploration sales this quarter with the sale of two instruments, and service revenue increased slightly due to some new ion channel agreements signed late last year and earlier this year. On slide 15, we have our year-to-date revenue as of June 30, 2026. revenue grew to $27.8 million compared to $8.1 million from the corresponding 2025 period. Similar to the quarterly figures, the primary driver of revenue growth was the increase in milestone revenue. As a reminder, milestone revenue can vary significantly from quarter to quarter. Last year, milestone revenue was more heavily weighted toward the back half of the year, and this year it is more front-end loaded. Turning to slide 16, you'll see our operating expense for the quarter. We continue to execute against our plan to run the business efficiently while investing appropriately in our technology platforms. While the numbers look flat year over year, I want to note that last year's figure included a one-time net gain of about $2 million from the sale of an ion channel asset. This had the net impact of lowering operating expense last year, but from a true operating standpoint, you can see from the chart that we saw nice decreases in both R&D and expense based on the realization of operational efficiencies. On slide 17, we illustrate our year-to-date operating expenses. Starting with the other expense line, I already spoke about the gain that we had last year that had the impact of lowering operating expense. And earlier this year, we had a non-cash write-off in the first quarter. These two items skew the overall operating expense comparison, but once again, from a true operating perspective, if you focus on the R&D and G&A costs, you can see the efficiencies we've been able to drive in the business. Slide 18 shows our P&L for the quarter and year to date. I've already walked you through the revenue and OpEx numbers on the previous slides, so I'll focus on the bottom line numbers. The net loss for the second quarter of 2026 improved to $5.9 million or $0.05 per share, and this compares with the net loss of $15.9 million or $0.15 per share in the year-ago period. We saw a similar reduction in our net loss for the year-to-date period with a net loss of $13.6 million or $0.11 per share versus a net loss of $34.1 million or $0.32 per share in the prior period. One of the metrics that we've introduced this year is a non-GAAP measure called cash costs and operating expense. On slide 19, we have a reconciliation of our gap operating expense to our cash operating expense. The cash operating expense figure removes the major non-cash items of depreciation, stock-based compensation, and the amortization of intangibles. As you can see from the table, about 35 to 40 percent of our operating expense is non-cash, which is why we believe this cash metric provides a better measure of our true operating expense. In general, we've been driving our cash costs down for the last couple of years. Remember that these comparisons include that one-time gain in the prior year period, which I mentioned earlier. Excluding that gain, the cash costs and operating expenses would have shown an even bigger decrease year over year. Turning to the balance sheet on slide 20, we ended the quarter with a cash position of $52 million. Our cash balance grew in the second quarter based on the receipt of milestone payments. The accounts receivable balance reflects certain milestones that were achieved in the second quarter but not yet paid. We continue to believe that based on our anticipated cash flows, the company is well capitalized to execute against our strategy. Our updated 2026 financial guidance is on slide 21, which reflects the strong second quarter performance and our view for the remainder of the year. In addition to raising guidance for revenue and our year-end cash balance, we've also narrowed the ranges for all of these metrics. We've increased the range for 2026 total revenue to $32 to $36 million. This increase is primarily the result of increased milestone achievements that we saw in the second quarter. We are slightly tightening the range in our OPEX guidance and now expect 2026 GAAP operating expense to be in the range of $84 to $88 million and our cash operating expense to be in the range of $51 to $55 million. Regarding cash, with the higher expected revenue, we now anticipate ending 2026 with cash and cash equivalents in the range of $37 to $41 million. Our effective tax rate for the full year is expected to remain at approximately 0% because of the valuation allowance we record. Moving to slide 22, we've shown this slide the last couple of quarters, and I thought I would repeat it again this quarter to provide historical context and highlight the guidance changes we're making this quarter. As you can see, in particular when it comes to cash use, we expect revenue to grow significantly in 2026 versus 2025, while cash operating expense is expected to remain in a tight band, driving overall cash use lower. While we are still in a period where revenue is largely driven by milestones, which can be highly variable in any given quarter, our portfolio of partner programs has continued to grow and advance. This should generally drive milestone revenue higher. And this year, we are beginning to see the benefits of our business model take hold. Our milestone base continues to expand, and we expect royalties to become a growing part of our revenue streams as partner programs advance towards potential approvals. Combined with our scalable infrastructure, we expect these factors to drive the long-term profitability of the company.

And with that, I'd like to open up the call for questions. Operator. We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question for optimum sound quality, and if muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Matt Hewitt with Craig Hallam. Your line is open. Please go ahead.

Good afternoon, gentlemen. Congratulations on the strong quarter. Maybe to start off, congratulations on the exploration sales. Given that you do have a few in the ecosystem at the moment, what are you seeing from a utilization standpoint? Is that starting to tick up? And as far as the sales pipeline is concerned, how is that shaping up? And will that maybe be lumpy over the near term? But are you starting to see maybe a cadence where you could start to...

to see more consistent sales there. Yes, Matt, thanks. I'll offer some perspectives and then I'll invite Amechi to comment as well. Just generally I'll say we remain very excited about the exploration opportunity. In fact, the more we learn... the greater our conviction grows that this could really be a meaningful compliment to our antibody business. And, you know, right now we're not breaking out kind of the details of the different subcomponents of revenue, but we do see exploration contributing to our revenue growth this year and going forward. great to get two units sold- in the quarter- that we now have four- out there in the field. But- still probably a little early to talk about a consumables and that sort of thing but I will- I mean based on a major experience I'll invite him to- to add commentary as well obviously he's deep in and interacting with our customers as well. Thank you. Thank you. Big question.

Based on what I've seen in the life sciences tools world and the capital equipment world, differentiated licenses instruments like the Exploration Platform. they have a real potential to create diverse and durable revenue streams, including instrument placements, ongoing consumables and reagent usage, software and service, And we're still evaluating the full commercial opportunity for exploration and how best to capture that. And we'll aim to maybe share more of our thinking around that. around the platform, the market opportunity, the strategic role at our upcoming Analyst and Investor Day.

That's great. And then maybe a follow-up question. Obviously, the funding environment for pharma and biotech has gotten much better. And I'm curious whether or not you're seeing that already, or is there typically a lag? If so, when do you anticipate some of those dollars might start to flow to you? Thanks.

Thank you. Yes, Matt, thanks. I will comment. I think we have. seen very nice growth in partners and programs. net of attrition over the last couple of years. I do see the effects of that from the perspective of the types of swings that our bigger partners are taking, right? I think I think we have the benefit of technologies that represent, I'll say, a really substantial and durable competitive advantage. We kind of leverage our ecosystem of partners and the deep relationships we have with them. to get a good understanding of not only what they're doing, but where they're going and that sort of thing. And because our technologies are highly differentiated, we do see, you know, kind of where they want to focus from a, an indication perspective. I'll say just speaking generally, I think the big players are taking bigger swings. They're going after bigger indications. with with a substantial uh unmet need and we are seeing an uptick in I'll say smaller partners as well. I mean, we highlighted a couple of new relationships relationships that are new licenses that were entered into this quarter. And Rosa Therapeutics, which I'll highlight, is a preclinical stage venture-funded biotech company that's developing selective pathogenic cytotoxic T-cell depleters using bispecific antibodies, right? really highly experienced team, really, really, really interesting science and a very good match with our technology. So I think that's an example of, uh, you know, uh, an emerging preclinical stage player who's, who's now, uh, well-funded and, and, and charging ahead. And then on the bigger side, obviously, we signed up Argenix this quarter, obviously, a global leader research-wise and commercially. really are leading a new era in immunology and so excited to see them become a partner and ramping up activity as well. So hopefully that gives you color on what we're seeing.

Yes, no, that's very helpful. Thank you. Your next question comes from the line of Brendan Smith with TD Cowan. Your line is open. Please go ahead.

Great. Thanks for taking the questions, guys, and congrats on the progress here. Maybe just kind of a quick follow up first on exploration. I just want to double check and make sure that we're thinking about the impact to margins there. Nice to see the revenues coming through. Just wondering how we should think about and what your expectations are on kind of relative impact and margins just as that product ramps up over the coming quarters. And then, excuse me, separately, I wanted to ask, in your existing and potential partner conversations too, has OmniUltra kind of been a big focus? Maybe what's just kind of been the feedback there? And how are you kind of thinking about its relative contribution maybe to new partner deals versus some of the other offerings kind of over the next, you know, maybe 12, 18 months?.

Yes, so maybe, thanks for the questions, Brenna. Maybe I'll take the first one on margins, and then, Matt, you can comment. You know, with regards to margins, I think what we have told you is that we have, what I would characterize as very good margins on the instrument and even better margins on the consumables. And so in terms of the margins, you could see some variability quarter to quarter just given the mix of what comes through. You also have, you know, there's also some service revenue that's kind of a component of that as well. So it's sort of, I can't, I'm not going to say that this quarter is, you know, or the trends that you're seeing are like a trend that you should focus on going forward because it's going to vary a little bit just based on the mix that we see. in each individual quarter. But it's a nice margin and we expect that to continue.

Yes, Brendan, and on your questions around on the ultra, we've been really pleased that Omni Ultra is absolutely opening new markets for us and new opportunities. I'll say it's a driver of substantial inbound interest as well as Omni Gab. And both of those, I think, are well suited to have kind of important impacts on the industry, on the ultra being dual modality, both for antibodies and peptides. So that obviously drives a lot of inbound and we'll be obviously continuing to highlight some of our latest data and applications. OmniDAP also with important potential uses, things like brain shuttling and multi-specifics, both of them have applicability into some of these what I'll call you know really high value areas like ion channels and GPCRs and things like that. So a lot of interest in high value targets for these. So we've been really, really pleased with the dialogue and the signing up of new programs and new partners. And we've been really, really pleased with the dialogue and the signing up of new programs expect we'll be able to talk more about those as partners start talking about data in the future.

Your next question comes from the line of Michael King with Rodman and Renshaw. Your line is open. Please go ahead.

Thanks for taking the question, guys. Congrats on the progress and the increased guidance. Two questions, financial questions. One is... even though with the raised revenue guidance, you guys are still facing the 20 plus million dollar gap between your spend and the expected revenues. So I just wonder how we should think about how you're going to close that gap. Are you going to continue to try to self-fund? Are you going to have to draw funds from outside? Or do you think you're going to try to raise the value of individual contracts?.