OmniAb, Inc. (NASDAQ:OABI) is a biotechnology company that licenses cutting-edge discovery research technology to the pharmaceutical and biotech industry to enable the discovery of next-generation therapeutics. The company's technology platform creates and screens diverse antibody repertoires and is designed to quickly identify optimal antibodies and other target-binding proteins for its partners' drug development efforts.

At the heart of the OmniAb platform is something the company calls Biological Intelligence™, which powers the immune systems of its proprietary, engineered transgenic animals to create optimized antibody candidates for human therapeutics. OmniAb primarily derives revenue from license fees for technology access, milestones from partnered programs, and service revenue from research programs.

Business Overview

OmniAb partners with pharmaceutical and biotechnology companies as well as leading academic institutions of varying size, clinical stage, geography, and therapeutic focus. Its partners gain access to wide repertoires of antibodies and state-of-the-art screening technologies designed to enable efficient discovery of next-generation novel therapeutics and deliver high-quality therapeutic antibody candidates for a wide range of diseases.

The company's license agreements with partners generally include upfront or annual payments for technology access and payments for performance of research services, downstream payments in the form of preclinical, intellectual property, clinical, regulatory, and commercial milestones, as well as royalties on net sales of its partners' products. License agreements with academic institutions are typically structured with revenue sharing.

OmniAb's revenue is materially driven by milestones in the shorter term, and by royalties in the longer term, from its partnered programs. However, there is significant uncertainty in timing and likelihood of reaching marketing authorization in drug discovery and development, and the company cannot be certain when, if at all, royalty payments will be a material portion of its revenue. Furthermore, OmniAb does not control the progression, clinical development, regulatory strategy or eventual commercialization of programs discovered using its platform, and as a result, it is dependent on its partners' efforts and decisions with respect to such programs.

Key Business Metrics

OmniAb regularly reviews several key business metrics to evaluate its business, measure its performance, identify trends affecting its business, formulate financial projections, and make strategic decisions. These metrics include the number of active partners, active programs, active clinical programs and approved products, and approved products.

As of March 31, 2023, the company had 80 active partners, 327 active programs, 31 active clinical programs and approved products, and 3 approved products. These metrics demonstrate the continued diversification of OmniAb's partnership base, the expansion of its global presence, and the progress of programs utilizing its technology platform.

Financials

For the full year 2023, OmniAb reported annual revenue of $34,164,000, annual net income of -$50,619,000, annual operating cash flow of $2,347,000, and annual free cash flow of $703,000.

In the first quarter of 2024, the company reported total revenue of $3,801,000, a decrease from $16,919,000 in the prior year quarter. The decline was primarily due to the recognition of a $10 million milestone related to the first commercial sale of teclistimab in the EU in the prior year period. Service revenue also declined as a result of the completion of work on certain ion channel programs.

Research and development expenses for the first quarter of 2024 were $14,551,000, compared to $13,759,000 in the prior year quarter, with the increase primarily due to higher personnel costs. General and administrative expenses were $8,337,000, similar to the prior year period.

The net loss for the first quarter of 2024 was $18,961,000, or $0.19 per share, compared to a net loss of $6,100,000, or $0.06 per share, in the prior year period.

Liquidity

As of March 31, 2024, OmniAb had $69,007,000 in cash, cash equivalents, and short-term investments. The company believes its existing cash, cash equivalents, and short-term investments, along with the cash it expects to generate from operations, will provide the flexibility needed to meet operating, investing, and financing needs and support operations through at least the next 12 months.

For the full year 2024, the company expects cash used to be relatively similar to the cash used in 2023, excluding the $35 million TECVAYLI milestone received last year. OmniAb's cash balance and the cash from operations are expected to provide sufficient capital to fund the operations for the foreseeable future.

Partner and Technology Updates

During the first quarter of 2024, OmniAb signed 3 new platform license agreements, including with a well-funded Boston-based venture-backed start-up, ImmunoBiochem Corporation, and the University of Georgia. The company's technology platform continues to gain visibility and expand, with the recent launch of its OmnidAb technology attracting new partners from both industry and academia.

OmniAb's partners reported several updates during the quarter, including Immunovant's progress on global Phase 3 clinical trials for batoclimab in myasthenia gravis and thyroid eye disease, Merck's initiation of a first-in-human Phase 1 study for the novel ADC M9140, and Genmab's plans to announce acasunlimab Phase 2 data in second-line non-small cell lung cancer in the first half of 2024.

The company also highlighted upcoming scientific presentations by its team, showcasing innovations and new workflow enhancements that benefit its business and create value for stakeholders. These include presentations at the PEGS, Protein and Antibody Engineering Summit, the Antibody Engineering and Therapeutics Conference, and the World ADC Asia Conference.

Risks and Challenges

OmniAb's long-term value will be driven by royalties from its partnered programs, as such payments are based on global sales and generally provide larger and recurring payments compared to technology access, research, and milestone payments. However, the timing and likelihood of reaching marketing authorization in drug discovery and development are highly uncertain, and the company cannot be certain when, if at all, royalty payments will be a material portion of its revenue.

Furthermore, OmniAb is dependent on its partners' efforts and decisions with respect to the progression, clinical development, regulatory strategy, and eventual commercialization of programs discovered using its platform, which it does not control.

Outlook

Despite these risks, the company remains confident in its prospects for technology and business growth and progression in the coming years, driven by the continued diversification of its partnership base, the expansion of its global presence, and the validation and innovation of its technology platform.

Conclusion

OmniAb's diversified antibody discovery platform, powered by its Biological Intelligence™ technology, is well-positioned to drive long-term value for its stakeholders. The company's growing partner base, expanding active programs, and progress in clinical-stage programs demonstrate the strength and versatility of its offerings. While the timing and likelihood of royalty payments remain uncertain, OmniAb's efficient business model and commitment to innovation position it for continued success in the dynamic antibody discovery landscape.