Q2 2023 OmniAb Inc Earnings Call

Speaker 1: Good afternoon and welcome to OmniAb Inc. 2nd Quarter, 2023.

Good afternoon, and welcome to the Inc. Second quarter, 'twenty 'twenty 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.

I'd like to turn the call over to Kurt Gustafson.

Add Inc. Chief Financial Officer, you May begin thank you.

Thank you operator, and good afternoon, everyone. Thank you all for joining our second quarter 2023 financial results Conference call.

Speaker 2: Thank you, operator, and good afternoon, everyone. Thank you all for joining our second quarter 2023 Financial Results Conference call.

Speaker 2: There are slides to accompany today's remarks, and they are available in the investors section of our website at omniam.com.

There are slides to accompany today's remarks and they are available in the investors section of our website at <unk> Dot com.

Speaker 2: 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.

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.

Speaker 2: These forward-looking statements are qualified by the cautionary statements contained in today's press release and our SEC.

These forward looking statements are qualified by the cautionary statements contained in today's press release and our SEC filings.

Speaker 2: Importantly, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast today, August 10th, 2023. 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.

Importantly, this conference call contains time sensitive information that is accurate only as of the date of the live broadcast today August 10, 2023, except as required by law on the Abbott undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this call.

Speaker 2: Joining me on the call today is Matt Forr, OmniAb's President and CEO .

Joining me on the call today is Matt for on the Abbs President and CEO .

Speaker 2: During today's call, Matt and I will provide highlights on the company's operations, partner and technology updates, and our recent financial results. That's a conclusion of the prepared remarks we'll open the call to questions. With that,

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 with that let me turn the call over to Matt.

Speaker 2: Thanks, sir. Good afternoon, everyone. And thanks for joining our second quarter conference call. I'll start today with an overview of our business here on slide number four of the deck. At the core of Omniab's business model is our proprietary discovery technology platform that's designed to help partners discover innovative therapeutics quickly and efficiently.

Thanks, Curt and good afternoon, everyone and thanks for joining our second quarter conference call.

I'll start today with an overview of our business here on slide number four of the deck at.

At the core of <unk> business model is our proprietary discovery technology platform. That's designed to help partners discover innovative therapeutics quickly and efficiently.

Speaker 3: In a simple sense, it's a model based on licensing innovative technologies to partners.

In a simple sense its a model based on licensing innovative technologies to partners.

Speaker 2: On the out is differentiated in the marketplace by having the most diverse host systems for fully human, bi-specific, fully human, and bi-specific antibody discoveries with the industry's only four species platform. That includes transgenic mice, rats, chickens, and cow-based technology.

Omnipod is differentiated in the marketplace by having the most diverse host systems for fully human Bispecific.

We humans and bi specific antibody discovery with the industry's only four species platform that includes transgenic mice rats chickens and Cal based technologies.

Speaker 2: Our partners have an increasing number of antibodies and clinical trials that are from our technology. And the versatility of our platform continues to be demonstrated in the number of modalities and formats being employed by our partners both pre-clinically and clinically.

Our partners have an increasing number of antibodies in clinical trials that are from our technology and diverse agility of our platform continues to be demonstrated in the number of modalities and formats being employed by our partners, both pre clinically and clinically.

Speaker 2: We offer flexibility to meet our partners evolving scientific needs. As we believe generating large and diverse repertoires of high-quality antibodies increases the likelihood of success in optimizing desired therapeutic characteristics.

We offer flexibility to meet our partners' evolving scientific needs as we believe generating large and diverse repertoires of high quality antibodies increases our likelihood of success in optimizing desired therapeutic characteristics.

Speaker 2: Our technology and our core capabilities are driven by what we call the biological intelligence of our transgenic animals. And our further strengthen by our innovative high throughput screening and other technology.

Our technology and our core capabilities are driven by what we call. The biological intelligence of our transgenic animals and are further strengthened by our innovative high throughput screening and other technologies.

There are 74 partners with access to our technology or the army have antibodies with over 300 programs in various stages of research and development.

Speaker 2: There are 74 partners with access to our technology or the AMIAB antibodies with over 300 programs and various stages of research can develop.

Speaker 2: The antibody space is one of the fastest growing parts of the drug industry, with a market size expected to be larger than 250 billion within a couple of years.

The antibody space as one of the fastest growing parts of the drug industry with a market size is expected to be larger than 250 billion within a couple of years. We believe we're in a great position to capitalize on this opportunity with our unique and expanding technology offerings.

Speaker 2: We believe we're in a great position to capitalize on this opportunity with our unique and expanding technology off.

Speaker 2: We're constantly innovating our technology stack and this May we introduced our newly branded Omni Deep offering, which is a suite of Enciilico capabilities, including structural modeling, large, multi-species antibody databases, molecular dynamic simulations, artificial intelligence and machine and deep learning sequence models that are applicable across our technology platforms to further enhance our partners' discovery.

We're constantly innovating our technology stack and this past may we introduced our newly branded omni deep offering which is a suite of silicone capabilities, including structural modeling large multi species antibody databases molecular dynamic simulations artificial intelligence and machine and deep learning sequence models that are applicable across our technology.

<unk> platforms to further enhance our partners' discovery process.

Speaker 2: In addition, we plan to introduce our novel, Heavy Chain Omi Omni Chicken, that we will be branding as Omni Dab in the fourth quarter of this year. And I'll save more detailed content.

In addition, we plan to introduce our novel heavy chain only omni chicken that we will be branding as omni Dab in the fourth quarter of this year and I'll say more detailed concept.

Speaker 2: DAB, and our excitement around that technology until later this year when we want to.

That and our excitement around that technology until later this year when we launch it.

Yeah.

On this next slide I, just want to reiterate that as a company and as a team we're mission driven to enable the rapid discovery of innovative pharmaceutical products by pushing the frontiers of drug discovery technologies.

Speaker 2: On this next slide, I just want to reiterate that as a company and as a team, we're mission driven to enable the rapid discovery of innovative pharmaceutical products by pushing the frontiers of drug discovery technology.

Speaker 2: We're poised for continued growth as shown here on slide number six by the new license agreements we signed during the second quarter.

We're poised for continued growth as shown here on slide number six by the new license agreements, we signed during the second quarter in.

Speaker 2: Thank you to our team close for new platform license agreements. One with Merck Inc. and one with neurocreen biocytes as well as platform deals with Stanford University and Seattle Children's.

In Q2, our team closed four new platform license agreements, one with Merck, Inc, and one with Neurocrine biosciences, as well as platform deals with Stanford University, and Seattle Children's Hospital.

Speaker 2: regarding murk this is a new agreement uh... and is with the u.s. murk and company uh... not to be confused with the german murk k g a a with whom we also have an agreement

Regarding Merck this isn't new agreement and as with the U S. Merck and company not to be confused with the German Merck K G. A a with whom we also have an agreement with.

Speaker 2: We reached a total of 74 active partners at quarter-end up from a partner count of just slightly more than 60 as of a year ago.

We reached a total of 74 active partners at quarter end up from a partner count of just slightly more than 60 as of a year ago.

Speaker 2: Our discovery platform continues to garner interest in the industry among a diversified group of leading global pharmaceutical companies allowing us to leverage our highly scalable business.

Our discovery platform continues to garner interest in the industry among a diversified group of leading global pharmaceutical companies, allowing us to leverage our highly scalable business model.

Speaker 2: like Merck into our global leaders in the industry and who are committed to using the power of leading edge science to improve lives bolsters are growing list of partners

Adding partners like Merck, Inc, who are global leaders in the industry and who are committed to using the power of leading edge science to improve lives bolsters, our growing list of partners.

We believe this is a testament to our effective and efficient discovery technologies to our in house expertise for scientific collaboration services, our mindset for developing a deep understanding and also prioritizing the current and future needs of our partners as well as our commitment to continued innovation.

Speaker 2: We believe this is a testament to our effective and efficient discovery technologies, to our in-house expertise for scientific collaboration services, our minds for developing a deep understanding and also prioritizing the current and the future needs of our partners, as well as our commitment to continued innovation.

Speaker 2: Here on slide number eight, our portfolio of active programs increased to 305 with 29 programs in the clinic under regulatory review or approved for commercialization at the end of Q2.

Here on slide number eight our portfolio of active programs increased to 305 with Q with 29 programs in clinic in the clinic under regulatory review or approved for commercialization at the end of Q2.

During the second quarter, we added a net total of four new programs to our portfolio importantly, I want to note that when we report program count we do so net of attrition as attrition is expected in the pharmaceutical industry and this quarter attrition was seen only in the discovery stage of our partnered pipeline.

Speaker 2: During the second quarter, we added a net total of four new programs to our portfolio. Importantly, I want to note that when we report program count, we do so net of attrition. As attrition is expected in the pharmaceutical industry.

Speaker 2: And this quarter, attrition was seen only in the discoveries stage of our partnered pipe.

The Pie chart on the right hand side of this slide breaks down our 305 programs by stage of development.

Speaker 2: The by-tart on the right-hand side of the slide breaks down our 305 programs by stage of development.

Speaker 2: The discovery phase consists of 261 programs in addition to 15 programs now in the pre-quentival state.

The discovery Phase consists of 261 programs. In addition to 15 programs now in the preclinical stage in.

Speaker 2: In the clinic at the end of June , our partners had 22 programs in phase one, two programs in phase two, one in phase three, as well as one program currently under regulatory review.

In the clinic at the end of June our partners had 22 programs in phase one and two programs in phase two one in phase III as well as one program currently under regulatory review.

There are three approved drugs utilizing Ami abduh writhed antibodies and we're recognizing royalty revenue from commercial sales of <unk> and sue them Allomap in China, both of which are also being pursued in other geographies.

Speaker 2: There are three approved drugs utilizing Omniab derived antibodies, and we're recognizing royalty revenue from commercial sales of Zimbarra Lab and Sugamalamab in China, both of which are also being pursued in other geographies.

We saw some nice progression of programs in the quarter as well with three programs transitioning from the discovery stage to the preclinical stage with two programs moving from the preclinical stage into their first human clinical trials and with one phase III program moving to a regional filing for approval.

Speaker 2: We've got a nice progression of programs in the quarter as well. With three programs transitioning from the discovery stage to the pre-clinical stage, with two programs moving from the pre-clinical stage into their first human clinical trials, and with one phase three program moving to a regional filing for approval, shown here on this slide number eight pie chart on the right as BLA stage.

<unk> shown here on this slide number eight pie chart on the right as BLA stage.

Our large and growing portfolio features a diversified set of partners utilizing a variety of formats and modalities as I mentioned earlier.

Speaker 2: Our large and growing portfolio features a diversified set of partners utilizing a variety of formats and modalities, as I mentioned earlier.

Speaker 2: I'd also like to note here that the count of active programs has increased from 270 in the year ago period up to 305 programs at the close of the second quarter. Noting again that this is net of program attrition.

I'd also like to note here that the count of active programs has increased from 270 in the year ago period up to 305 programs at the close of the second quarter, noting again that this is net of program attrition.

Speaker 2: despite some of the industry's challenges, including evolving financing environment and funding constraints, especially for some of the smaller players in our industry, our portfolio continues to expand from a combination of new and existing partners.

Despite some of the industry's challenges, including evolving financing environment and funding constraints, especially for some of the smaller players in our industry. Our portfolio continues to expand from a combination of new and existing partners.

Speaker 2: We don't feel that it's entirely unexpected that macro factors can influence the velocity of growth of some of our business metrics. And although we see a slightly lower number of net new program additions compared to last year, AMIAB is in a very solid position for continued growth with an increasing number of both active programs and active parts.

We don't feel that it's entirely unexpected that macro factors can influence the velocity of growth of some of our business metrics and although we see a slightly lower number of net new program additions compared to last year.

<unk> is in a very solid position for continued growth with an increasing number of both active programs and active partners.

Moving now onto slide number nine as I mentioned in the second quarter two new programs entered the clinic with immune event, who initiated a phase one clinical trial of <unk> 14, O two which is a sub Q F. C. R. N inhibitor also Gloria pharmaceuticals initiatives initiated a phase one two study to <unk>.

Speaker 2: Moving now onto slide number nine, as I mentioned in the second quarter, two new programs entered the clinic. With Immunivant, who initiated a Phase I clinical trial of IMVT-4102, which is a sub-QFCRN inhibitor. Also, Gloria Pharmaceuticals initiated a Phase I II study.

Speaker 2: to investigate the safety, tolerability, and preliminary efficacy of GLS-01-2 as a monotherapy in combination with GLS-01-0 and subjects with advanced solid tumors that had progressed following standard treatments.

Westgate the safety Tolerability and preliminary efficacy of <unk> as a monotherapy in combination with <unk> in subjects with advanced solid tumors that had progressed following standard treatment.

Yeah.

We've now had three new programs enter the clinic in the first half of this year and we expect a potential one to two more to enter the clinic before year end I want to note that when 2023 began we indicated that we expected three to five new programs to enter the clinic. This year by the end of June we'd already reached three <unk>.

Speaker 2: We've now had three new programs enter the clinic in the first half of this year, and we expect a potential one to two more to enter the clinic before year end. I wanna note that when 2023 began, we indicated that we expected three to five new programs to enter the clinic this year. By the end of June , we'd already reached three, and we're now focused on an upward range of four to five new clinical programs for the year.

And we're now focused on an upward range of four to five new clinical programs for the year.

Our partners made numerous public announcements about their clinical and commercial progress during the second quarter and in recent weeks and I'll highlight a few of them on this slide slide number 10, starting with Datacom app during the second quarter, we earned milestone revenue related to advancement of Datacom AD into pivotal studies in two additional <unk>.

Speaker 2: Our partners made numerous public announcements about their clinical and commercial progress during the second quarter and in recent weeks. And I'll highlight a few of them on this slide, slide number 10, starting with Vatican MAT. During the second quarter, we earned milestone revenue related to advancement of Vatican MAT into pivotal studies in two additional indications of CIDP and TED.

Indications of the IDP and T D.

Speaker 2: These are additional indications from the Phase III work that was started in generalized myoceneia gravis earlier in the year. In addition, Harbor Biomed announced that China's NMPA accepted its biologic license application for the treatment of generalized myoceneia gravis. And for the same indication, HANL announced that they're progressing towards initiation of a Phase III trial in Japan later this year.

These are additional indications from the phase III work that was started in generalized myasthenia gravis earlier in the year. In addition harbor Biomed announced that China's N M. P. A excepted, it's biologics license application for the treatment of generalized myasthenia gravis and for the same indication handle announced that they are progressing towards initiation of our <unk>.

<unk> III trial in Japan later this year.

Speaker 2: As for the next generation anti-FCRN IMVT-4102, I mentioned that Immunivand initiated a Phase I trial to evaluate safety, tolerability, and pharmacodynamics, and they communicated that initial data are expected in the second half of this year.

As for the next generation anti F. C. R. N I M V. T 14, O too I mentioned that immune <unk> initiated a phase one trial to evaluate safety tolerability and pharmacodynamics and they've communicated that initial data are expected in the second half of this year.

Speaker 2: One of our newer partners, Sassation TherapyDix, announced that they've received authorization to initiate a Phase I clinical trial.

One of our newer partners cessation therapeutics announced that they've received authorization to initiate a phase one clinical trial.

Speaker 2: The next 1004 was first discovered via collaboration with Scripps Research Institute and subsequently licensed to cessation for development. Sensation is developing this compound for the prevention of fentanyl overdose, which is an indication that obviously has an important and urgent unmet medical needs.

<unk> 1004 was first discovered via collaboration with Scripps Research Institute and subsequently licensed to cessation for development.

Station is developing this compound for the prevention of Fentanyl overdose, which is an indication that obviously has an important and urgent unmet medical need.

At Tivo Therapeutics announced data for its by specific AML drug candidate <unk> hundred 36, and that it plans to initiate two phase II clinical trials in AML populations and lastly, we achieved a research progression milestone for small molecule inhibitors of a genetically validated.

Speaker 2: Pivotheraputics announced data for its bi-specific AML drug candidate APVO 436, and that it plans to initiate two phase two clinical trials in AML populations. And lastly, we achieved a research progression milestone for small molecule inhibitors of a genetically validated target relevant to neurological diseases in one of our ion channel collaborations with GSK.

Target relevant to neurological diseases in one of our ion channel collaborations with GSK.

Speaker 2: This triggered a $2 million progression payment for Omniab and Kurt will discuss the accounting for this.

This triggered a $2 million progression payment for Omnia and Curt will discuss the accounting for this.

Speaker 2: were particularly excited about this program with GSK. As it demonstrates, the capabilities of our highly differentiated IAM channel and transporters technology class.

We're particularly excited about this program with GSK as it demonstrates the capabilities of our highly differentiated ion channel and transporters technology platform.

I am channels are key components in a variety of biological processes that involve rapid changes themselves and they hold therapeutic potential in a broad range of indications, including neurological and metabolic diseases pain cancers infectious diseases and many others as a result ion channel drug discovery provides a compelling opportunity.

Speaker 2: Ion channels are key components in a variety of biological processes that involve rapid changes in cells. And they hold therapeutic potential in a broad range of indications, including neurological and metabolic diseases, pain, cancers, infectious diseases, and many others. As a result, Ion channel drug discovery provides a compelling opportunity, although it's been a challenging area for the industry to identify drugs to these high-value targets.

<unk>, although it's been a challenging area for the industry to identify drugs to these high value targets.

Our ion channel platform Omnia Leverages, our proprietary expertise in a combination of biological assays medicinal chemistry and in silica and computational chemistry applications to enable the discovery of ion channels targeting therapeutics in a variety of formats and modalities. We believe are.

Speaker 2: Our INChannel platform and Omnib leverages our proprietary expertise in a combination of biological assays, medicinal chemistry, and in silico and computational chemistry applications to enable the discovery of INChannels, targeting therapeutics in a variety of formats and modalities.

Speaker 2: We believe our differentiated core capabilities can assist partners in their advancement of drug discovery against this target.

<unk> core capabilities can assist partners and their advancement of drug discovery against this target class, we're continuously expanding our capabilities in this area and we believe we have one of the most experienced teams of ion channel experts anywhere.

Speaker 2: or continuously expanding our capabilities in this area. And we believe we have one of the most experienced teams of IN Channel experts anywhere.

Speaker 2: We have an extensive bank of custom cell lines, reagents and assays that are designed to accelerate IN Channel Drug Discovery and development. And that's what attracts partners to this element of our technology and capability.

We have an extensive bank of custom cell lines reagents and assays that are designed to accelerate ion channel drug discovery and development and that's what attracts partners to this element of our technology and capabilities.

As these are higher value and more difficult targets to identify we structure our collaboration agreements accordingly.

Speaker 2: As these are higher value and more difficult targets to identify, we structure our collaboration agreements accordingly.

Speaker 2: These deals provide for exclusivity on various targets. And as a result, have higher milestone payments and higher royalty percentages than we typically get for standard platform access agreement.

These deals provide for exclusivity on various targets and as a result have higher milestone payments and higher royalty percentages and we typically get for standard platform access agreements.

Speaker 2: We have agreements with GFK for two neurology targets that are in discovery phase. And another partner is Roche for three undisclosed targets that are also in the discovery.

We have agreements with GSK for two neurology targets that are in discovery phase and another partner as Roche for three undisclosed targets that are also in the discovery phase.

Speaker 2: In total, we're eligible to receive a billion dollars in milestones on these five programs alone. Along with royalties, should a program be commercial?

In total we're eligible to receive a $1 billion in milestones on these five programs alone along with royalties should program be commercialized.

Okay.

And this last slide for me, which is slide number 13 in our deck highlights our key areas of focus going forward and it describes why we believe we are well positioned for future growth and can make an enduring impact on our industry and ultimately on global human health.

Speaker 2: And this last slide for me, which is slide number 13 in our deck, highlights our key areas of focus going forward. And it describes why we believe we're well positioned for future growth and can make an enduring impact on our industry and ultimately on global human health.

Speaker 2: our businesses are highly scalable. And we're focused on increasing partners and expanding programs by continuing to invest in technologies and innovations to power the discovery and development of effective therapeutic candidates.

Our business is highly scalable and we're focused on increasing partners and expanding programs by continuing to invest in technologies and innovations to power the discovery and development of effective therapeutic candidates.

A focus on stakeholders and building value for stakeholders is that the foundation of what we do and.

Speaker 2: focus on stakeholders and building value for stakeholders is at the foundation of what we do. And that focuses guided in collaboration with our Board of Directors and its present and every employee here as well.

And that focus has guided in collaboration with our board of directors and it's present in every employee here as well.

While I mentioned, our board of directors I do also want to acknowledge on today's call that earlier this week.

Speaker 2: While I mention our Board of Directors, I do also want to acknowledge on today's call that earlier this week with heavy hearts, we announced the passing of a beloved board member here at Omniab, Cineo Patel.

With heavy Hearts, we announced the passing of our beloved board member here at on the App Sunil Patel.

Speaker 2: The NEO was an accomplished biotech executive who was a longtime colleague and a co-architect of what we're building here at AMIA. And it allowed that the team here is honoring Cineo's contribution and legacy as we continue to do our important work, expand our technology, and grow our business.

So Neil was accomplished biotech executive who was a longtime colleague and a co architects of what we're building here at Onvia and allowed that the team here is honoring <unk> contribution and legacy as we continue to do our important work expand our technology and grow our business.

And now before I hand, the call back over to Curt I'll finish by saying that we look forward to keeping the investment community updated as we execute on our strategy and with that I'll pass it back over to Curt now for a discussion of our second quarter financial results occur.

Speaker 2: And now, before I hand the call back over to Kurt, I'll finish by saying that we look forward to keeping the investment community updated as we execute on our strategy. And with that, I'll pass it back over to Kurt now for a discussion of our second quarter of financial results. Kurt. Thank you, Matt.

Thank you Matt.

As a reminder, the financial results reported for the prior year periods are prepared on a carve out basis, which were derived from <unk> historical accounting records as if <unk> were an independent company.

Speaker 4: As a reminder that financial results reported for the prior year periods are prepared on a carve-out basis, which were derived from ligand's historical accounting records as if Omniab were an independent company.

As a result certain comparisons to prior periods aren't reflective of true underlying business changes. This is primarily true for operating expenses given the differences in corporate structure and the methodologies for reporting.

Speaker 4: As a result, certain comparisons to prior periods aren't reflective of true underlying business changes. This is primarily true for operating expenses given the differences in corporate structure and the methodologies for...

Youll recall that Omnia derives revenue from several sources, including upfront payments for our partners to access our technology stack.

Speaker 4: You'll recall that Amniabderized revenue from several sources, including upfront payments for partners to access our technology stack, payments related to service contracts, when we do discovery work for our partners, milestone payments typically related to progress in the clinic, and royalties on net sales of our partners.

Payments related to service contracts when we do discovery work for our partners milestone payments typically related to progress in the clinic and royalties on net sales of our partners' programs.

Moving specifically to our second quarter results.

Speaker 4: The moving specifically to our second quarter results, total revenue for the second quarter of 2023 was $6.9 million compared to $7.2 million in the prior year quarter.

Total revenue for the second quarter of 2023 was $6 9 million compared to $7 2 million in the prior year quarter.

Speaker 4: We saw an increase in license in milestone revenue based on milestones that were hit this quarter, mostly related to progress with the Taco Mab, specifically the start of additional pivotal studies for two new indications.

We saw an increase in license and milestone revenue based on milestones that were hit this quarter, mostly related to progress with the Taco map specifically the start of additional pivotal studies for two new indications.

The increase in milestone revenue was offset by a decrease in service revenue and this decrease is related to a few different things.

Speaker 4: The increase in milestone revenue is offset by a decrease in service revenue. And this decrease is related to...

Speaker 4: First, we've completed our portion of the work on certain programs, and these programs have been handed off to the R&D teams at our part.

First we have completed our portion of the work on certain programs and these programs have been handed off to the R&D teams and our partners.

Speaker 4: As a result, we are no longer earning service revenue for these programs, but would still have the opportunity to earn milestones in Royal T's should these programs advance.

As a result, we are no longer earnings service revenue for these programs, but would still have the opportunity to earn milestones and royalties should these programs advance.

Speaker 4: Second, the research period for one of our GSK Ion Channel programs was extended by approximately one and a half years.

Second the research period for one of our GSK ion channel programs was extended by approximately one and a half years.

Speaker 4: The accounting impact of this extension is that the initial $7 million upfront payment that was being amortized over the initial research period had its amortization schedule adjusted to reflect the new length of the research period.

The accounting impact of this extension is that the initial $7 million upfront payment that was being amortized over the initial research period at its amortization schedule adjusted to reflect the new linked the research period.

Speaker 4: This resulted in a one-time negative adjustment of $1.7 million this court.

This resulted in a onetime negative adjustment of $1 $7 million this quarter.

The full 7 million will all eventually be recognized it's just that the recognition of the revenue will be spread over the new longer research period.

Speaker 4: The full 7 million will all eventually be recognized. It's just that the recognition of the revenue will be spread over the new longer research period.

Speaker 4: And third, as it relates to the GSK program that achieved the $2 million research progression milestone, this milestone is recognized as service revenue and will be amortized over the research period of this program.

And third as it relates to the GSK program that achieved a $2 million research progression milestone. This milestone is recognized as service revenue and will be amortized over the research period of this program.

Speaker 4: As this program is a bit more than halfway through its research period, we recognize a bit more than half of this milestone in the current quarter, and the rest will be amortized over the remaining research period.

As this program is a bit more than halfway through its research period, we recognized a bit more than half of this milestone in the current quarter and the rest will be amortized over the remaining research period.

Okay.

Speaker 4: The net result of the change in the amortization period and the new milestone recognition created a negative impact of about $500,000 in the quarter relative to what the trend would have been. The new milestone recognition created a negative impact of about $500,000 in the quarter relative to what the trend would have been.

The net result of the change in the amortization period, and the new milestone recognition created a negative impact of about $500000 in the quarter relative to what the trend would have been.

Turning to operating expense.

Speaker 4: Our R&D expense for the second quarter was 14.1 million compared to 11.5 million in the prior year quarter.

Our R&D expense for the second quarter was $14 1 million compared to $11 5 million in the prior year quarter.

Speaker 4: Similar to Q1, the increase was primarily due to higher personnel costs and higher costs associated with our new facility.

Similar to Q1, the increase was primarily due to higher personnel costs and higher costs associated with our new facilities.

G&A expense was $8 7 million compared to 5 million in the prior year quarter with the increase related to increased head count and other costs associated with being a newly established public company.

Speaker 4: GNA expense was 8.7 million compared to 5 million in the prior year quarter with the increase related to increased head count and other costs associated with being a newly established public company.

Speaker 4: And that loss for the second quarter was 14.7 million or 15 cents per share versus the net loss of 10.3 million or 12 cents per share in the prior year period.

The net loss for the second quarter was $14 7 million or <unk> 15 per share versus a net loss of $10 3 million or <unk> 12 per share in the prior year period.

Speaker 4: Turning to the balance sheet, we ended the second quarter with a total of 103.1 million in cash, cash equivalent, short-term and best.

Turning to the balance sheet, we ended the second quarter with a total of $103 1 million in cash cash equivalents short term investments.

Our business model is not capital intensive and highly scalable.

Speaker 4: Our business model is not capital intensive and it's highly scaled.

Speaker 4: And while we are committed to growing the business and keeping our technology cutting edge, we're also committed to deploying our capital efficiency.

And while we are committed to growing the business and keeping our technology cutting edge. We're also committed to deploying our capital efficiently.

Speaker 4: We continue to expect that our cash balance at the end of 2023 will be slightly higher than the balance at the end of 2022 and that this cash balance provides sufficient runway to fund our operations for the foreseeable future.

Continue to expect that our cash balance at the end of 2023 will be slightly higher than the balance at the end of 2022 and that this cash balance provides a sufficient runway to fund our operations for the foreseeable future.

Speaker 4: Turning to our corley results, I'd like to make a few comments on some of the underlying trends that we see.

Turning to our quarterly results I'd like to make a few comments on some of the underlying trends that we see.

Speaker 4: Excluding the milestone revenue recognized specifically for the Clifthamab, we generally expect whole revenue to grow. However, the majority of our revenue in the near-to-medium term will come from milestone payments, and the exact timing of these milestones can be difficult to predict. As a result, our revenue growth will likely be a bit lumpy on a quarterly basis.

Excluding the milestone revenue recognized specifically for daclizumab, we generally expect total revenue to grow however, the majority of our revenue in the near to medium term will come from milestone payments and the exact timing of these milestones can be difficult to predict as a result, our revenue growth will likely be a bit lumpy on a.

Quarterly basis.

Speaker 4: As we think about our operating expense going forward, I had indicated last quarter that our Q-1 2023 actual results would be a good baseline from which we would grow.

As we think about our operating expense going forward I'd indicated last quarter that our Q1 2023 actual results would be a good baseline from which we would grow.

Speaker 4: The second quarter results were consistent with that expectation, and we anticipate this trend will continue going forward, as our operating expenses are now more predict-

The second quarter results were consistent with that expectation and we anticipate this trend will continue going forward as our operating expenses are now more predictable.

Speaker 4: We're forecasting that both R&D and GNA will grow slightly in subsequent quarters with the pace of GNA spend being more moderate than that of our R&D.

We're forecasting that both R&D and G&A will grow slightly in subsequent quarters with the pace of G&A spend being more moderate than that of our R&D spend.

Speaker 4: And with that, I'd like to open up the call for questions. Operator.

And with that I'd like to open up the call for questions operator.

Thank you ladies and gentlemen, this should you have a question. Please press the star followed by the one on your Touchtone phone.

Speaker 1: Thank you, ladies and gentlemen. Should you have a question, please press the star, followed by the one.

I would like to withdraw your question. Please press the star followed by the two if you're using a speaker phone. Please lift the handset before pressing any keys one moment. Please for your first question.

Your first question comes from Puneet <unk> from Leerink partners. Please go ahead.

Speaker 5: Yeah, hi guys. Thanks for taking the questions. So Matt maybe first one.

Yeah, Hi, guys. Thanks for taking the questions. So.

Maybe.

First one.

Speaker 6: You know, obviously you talked about some of the headwinds in the market and as you pointed out, there's potential that you could see that.

Obviously, you talked about some of the headwinds in the market.

And as you pointed out.

There is a potential that you could see that but maybe talk to us a little bit about the flip side.

Speaker 4: But maybe talk to us a little bit about the flip side of what's happening at the partners and what they are telling you in terms of the projects that they can potentially bring to you because you're providing them value and cost reduction. Maybe talk to us about what happened, how do they think about that as they think about the discovery stages and getting into Facebook?

What's happening.

<unk>.

What they're telling you in terms of the.

Projects that they can potentially bring to you because you are providing them value in cost reduction maybe talk to us about.

How do they think about that.

As they as they think about discovery stages and getting into phase one.

Yeah Puneet. Thanks. This is Matt I appreciate the question.

Speaker 7: Yeah, we need thanks Mrs. Maddett. I appreciate the question.

Yes, as we I mean, one of the things I'll highlight that obviously this quarter.

Speaker 8: Yeah, as we, I mean, one of the things I'll highlight that obviously this quarter, we entered into four new platform license agreements with new partners, right? And NERICRIN, NERICRIN, NERICRIN, obviously is a well-known player, global force in the industry that is really committed to leading edge science and leveraging cutting edge technologies to develop new medicines. NERICRIN, of course, is a 30-year...

We entered into four new platform license agreements with new partners right.

Merck and Neurocrine, Merck, obviously is a well known player.

Global force in the industry that is really committed to leading edge science and leveraging cutting edge technologies to to develop new medicines Neurocrine of course is a 30 year plus history in innovation and success of pursuing.

Speaker 2: plus history and innovations and success of pursuing really what have become life-changing medicines in the neurology and neurological disease space.

Really what have become life changing medicines in the neurology and neurological disease space.

Speaker 2: but also new partnerships with Stanford and Seattle Children's, both of which are leading academic centers, both of which are focused on translating their novel biology into new medicines.

But also new partnerships with Stanford and Seattle children's both of which are leading academic centers both of which are focused on translating their novel biology into into new medicines. So sometimes it's not only the existing partners that tell us a lot about how we're bringing value to them, but it's the <unk>.

Speaker 2: So sometimes it's not only the existing partners that tell us a lot about how we're bringing value to them, but it's the new partners as well. So to your question of how we do that, we obviously get into a lot of deep discussions with our partners of areas that are interested in and why they see

New partners as well right. So to your question of how we do that.

Obviously, you get into a lot of deep discussions with our partners of areas that we're interested in and why they see our technologies unlocking opportunities for them.

Speaker 2: technologies unlocking opportunities for them. That obviously translates into potential for increased success rates and faster pace in terms of finding quality antibodies to then take into the clinic. And that's why they're attracted to do licensing deals with us. I think there's also a recognition now, a more broad recognition of our continued commitment to

And that obviously translates into.

Potential for increased success rates and faster pace in terms of finding quality antibodies to then take into the clinic and Thats why they are attracted to do licensing deals with US I think there is also a.

A recognition now a more broad recognition of our.

<unk> continued commitment to innovation.

Speaker 2: And that is also, I think, an important part as well. And obviously, our innovation is informed by our deep relationships with partners. So there's like the call and intelligence feedback loop where you get a sense of where the industry's headed and that informs the sorts of innovations and investments we want to make in our technology. So...

And that is also I think an important part as well and obviously our innovation is informed by our deep relationships with partners. So there is like what we like to call. It intelligent feedback loop, where you get a sense of where the industry is headed and that informs the sorts of innovations and investments we want to make in our technology. So.

So it's really at the end of the day about about speed and opportunity in.

Speaker 2: And so it's really at the end of the day about speed and opportunity and efficiency and quality of the product, in this case, that the antibodies that are coming out of our plants.

In efficiency and quality of the product in this case the antibodies that are coming out of our platform.

Got it.

Speaker 5: got it. And then with that question, I was, I was, I was really, what I was trying to get to is that if the biotech funding situations were to get worse, is there an opportunity for you to sort of gain more share in the market?

And with that question I was I was wanted to Australia.

What I was trying to get to is that if the biotech funding situations were to get worse is there an opportunity for you to sort of gain more share in the marketplace and then let me just follow up with a question on China.

Speaker 4: And then let me just follow up with a question on China. You know, I mentioned, I know you mentioned Gloria and I like three in the phase one trial now. Wondering if you could update us on what you're seeing in China, we are all seeing weakness in the discovery stages in China. That's well known at this point. So, wondering what you're seeing there, any color you can provide geographically.

I mentioned I know you mentioned Gloria and tight.

<unk> III and the phase one trial now.

I'm wondering if you could update us on what Youre seeing in China. We are all seeing weakness in the discovery stage is in China.

Well known at this point, so im wondering what youre seeing there any color you can provide.

Graphically thank you.

Speaker 9: Yeah, yeah, I'll take that punita. I'll take the China part first, and then Kurt maybe can add some color as well. Obviously, we announced this quarter that Gloria entered the clinic in China, so it was nice to see, it's always nice to see clinical progression out of our pipeline. And we obviously have a couple of drugs that are approved in China that Kurt can probably comment on as well.

Yeah, Yeah, I'll take that Puneet I'll take the China part.

First and then Kurt maybe you can add some color as well.

Obviously, we announced this quarter that Gloria entered the clinic in China. So it was nice to see it's always nice to see clinical progression.

Eight out of our pipeline.

And we obviously have a couple of drugs that are approved in China that Curt can probably comment on as well.

Speaker 10: A lot of that in terms of the later stage visible programs out of China really come out of some very early partnerships with Omni Rat that were struck years ago. And those programs progressed quickly through the clinic and then or approaching the clinic, which is really a representation of what you see in our pipeline with some of our assets. But maybe Kurt, you wanna talk a little bit as well. I mean, we don't have any specific knowledge.

A lot of that.

In terms of the later stage visible programs out of China really come out of some very early partnerships with omni rat that were struck years ago and those programs progress quickly through the clinic.

And then or approaching the clinic, which is really a representation.

Of of what you see in our in our pipeline with some of our assets, but maybe Curt you want to talk a little bit as well, yes, puneet, we don't have any specific knowledge.

Relative to the sales forecast if you will of our partners.

Speaker 4: You know, relative to the sales forecast, if you will, of our partners, I know that one of our partners, you know, disclosed earlier this year that there've been supply chain issues in the first half of the year in part due to challenges with COVID. But they also indicated that they expect that those slight chain issues will be alleviated in the second half of the year. And so they were forecasting, you know, sales to pick back up. But we obviously are in a royalty on that. I think the first part of your...

No that one of our partners disclosed earlier this year that there has been supply chain issues in the first half of the year in part due to challenges with Covid.

But they also indicated that they expect that those supply chain issues will be alleviated alleviated in the second half of the year and so they were forecasting sales to pick back up and we obviously are in a royalty on that I think the first part of your question.

Speaker 4: You know, our partnerships are designed really to align sort of the economics that our partners pay with success. Right? So I do think in a difficult, you know, if we're in a difficult funding environment.

Our partnerships are designed really to align sort of the economics that our partners pay with with success. So I do think in a difficult.

We are in a difficult funding environment.

Speaker 4: Our model is conducive to have people continue to use it because they're really not paying for or large sums of money until they actually have success. They're discovering a drug and actually moving in the clinic. So I do think that there's opportunities there and we're still continuing to see growth across our key metrics. Got it. Super helpful. Oh, I'll back.

Our model is conducive.

To have people continue to use it because they are really not paying.

Theyre not theyre not paying for.

Our large sums of money until they actually have success.

Discovery to drug and actually moving into the clinic. So I do think that there's opportunities there and we.

We're still continuing to see growth across our key metrics.

Got it so we're hoping I'll hop back into the queue.

Thanks, Tony.

Your next question comes from Robyn <unk> from <unk> Securities. Please go ahead.

Hi team. Thanks, so much for taking my questions Mr off with a couple.

Speaker 11: Hi team, thanks so much for taking my questions. I'm gonna start off with a couple that I don't know you'll be able to answer. So.

Bill to answer so.

Speaker 2: So can you talk a little bit about how the platform deals with Stanford and those are different than those of the pharmaceutical companies, like how are they structured if you can give any color? And are your ion channel programs have that, do they have better economics given the scarcity of being able to develop small molecules to those biologics for those programs? I would think that they have better economics because you're adding a lot more value.

So can you talk a little bit about how the platform deals with Stanford and those are different than those of the pharmaceutical companies like how are they structured if you can give any color.

Is there are you.

Ion Channel program.

Do they have better economics, given the scarcity of like being able to develop small molecule.

She does or biologics to those programs I would think that they have better economics, because youre, adding a lot more value.

Yeah, Robyn Thanks ill answer your second question first on the ion channel programs and really the short answer is is is yes.

Speaker 2: Yeah Robin thanks I'll answer your second question first thought on the I&Channel programs and really the short answer is yes. The way those programs are structured

Hey, those those programs are structured.

Speaker 2: We are granting exclusivity to the target, to the specific target with those partners. They're accessing.

We are.

Granting exclusivity to the target to the specific target with that with those partners. They are accessing.

Speaker 2: Not only technology and capability, but novel cell lines, novel reagents, novel screening technology.

Not only technology and capability, but novel cell lines novel reagents novel screening technologies et.

Speaker 7: etc. So that then drives really a different and a higher economic structure.

Et cetera, So that then drives really a different and a higher economic structure.

Speaker 2: You know, the five programs that are highlighted in the deck today for I&Channel and Transporter collaboration, those are with GFK and with Roach. Those five programs alone have a billion dollars in milestones and royalties that are higher than our standard platform license agreement.

On the five programs that are highlighted in the deck today.

For for Ion channel and transporter.

<unk> both of those are with GSK and with Roche those those five programs alone have a $1 billion in milestones.

And royalties that are higher than our standard platform license agreements.

Speaker 2: So those are assets that we're excited about. Obviously we highlighted the GFK program today, but the short answer is yes. Now, to your first question about...

So those are those are <unk>.

Assets that we're excited about obviously we highlighted.

The GSK.

Program today, but the short answer is yes to your first question about the.

Speaker 2: the different sorts of deals. We have in recent quarters,

The different sorts of deals we have.

In recent.

<unk> leaned.

Speaker 2: leaned into not only life and agreements with leaders in the industry, commercial, you know, those that are investing a lot in R&D and commercialization like Merck and Nurekren, but also with academic centers, leading academic centers and

Leaned into not only.

License agreements with with leaders in the industry commercial those that are investing a lot in R&D and commercialization like Merck and Neurocrine, but also with.

Academic centers, leading academic centers and.

Speaker 2: Just as a general matter of policy and based on confidentiality, we don't disclose specific deal structures, but we have.

Just as a general matter of policy and based on confidentiality. We don't we don't disclose specific deal structures, but we have.

Speaker 2: And in our corporate deck, we've outlined typical deal terms.

And then in our corporate deck, we've outlined typical deal terms.

Speaker 2: for all of our deals and they fall within boundaries that that we previously disclosed there are multiple parts of the deals are upfront payments there are milestones there are royalties and there's an interplay between those but in terms of

For all of our deals when they fall within boundaries that we previously disclosed there are multiple parts of the deals are upfront payments. There are milestones there are royalties and there's an interplay between those but in terms of access to the platform.

Speaker 3: to the platform, they really are not major differences between the deals signed with, say, a traditional commercial pharma and the academic centers. But on the business side, obviously, would be highly unusual for an academic center to commercialize a drug on its own. Obviously, these folks have leading edge biology. They generally want to translate that into therapeutics that then get spun out into companies.

There really are not major differences between the deal signed with say a.

Traditional commercial pharma and the academic centers.

But on the business side, obviously, it would be highly unusual for an academic center to commercialize a drug on its own. Obviously these folks have leading leading edge biology. They generally want to translate that into therapeutics that then gets spun out into companies. So really the only difference is we will have special provisions with that specifically deal with <unk>.

Speaker 7: So really the only differences will have special provisions with that specifically deal with how those economics will work when the academic institution chooses to out license the program or form a company around it. But at a basic sense, they're very similar. They're just some specific provisions that are more applicable to.

Those economics will work when the academic institution chooses to out license the program or form a company around it but at a basic sense, they're very similar there just some.

Vidic provisions that are more applicable to the academic setting.

That's really helpful. I guess, a follow up it's like $1 billion.

Speaker 11: That's really helpful and I guess I've followed up like a billion dollars to the lot. So.

So have you been able to negotiate that you've been working with these companies a little bit more disclosure about what you need to see to get this milestone and then my last question sorry for so many.

Speaker 12: been able to negotiate and keep working with these companies a little bit more disclosure about what you do.

Speaker 11: to get those milestones. And then my last question, sorry for so many. You don't.

You don't talk a lot about on the deep and I know you believe that nature based immune response, they are bad but I was just wondering if youre willing to leverage on the <unk> platform SKU AI Mlps silicone antibody design, it's a hot topic right now.

Speaker 11: And I know you believe that nature based in your response to their best, but I'm just wondering if you're willing to leverage on these platforms to AI MLB. Silico antibody design is a hot topic right now, so I thought it asked.

That question.

Speaker 7: Yeah, on the first part, just financially the way these deals are structured, they're really structured the same way as if there are other deals, right? So there are typically clinical stage milestones as they progress through the clinic and royalties. The differences, the magnitude of the payments are larger.

Yes.

On the first part just financially the way. These deals are structured they are really structured the same way as our other our other deals right. So there are.

Typically clinical stage milestones as they progress through the clinic and royalties.

The difference is the magnitude of the payments are larger.

Speaker 4: mostly because of a function of the exclusivity on which we have written these deals. On the antibody side, all of the things that people are going after, those are non-exclusive targets,

Mostly because of the function of the exclusivity on which we have written these deals on the antibody side.

All of the things that people are going after those are nonexclusive targets, whereas with the ion channels. These targets are being licensed out on an exclusive basis and as a result, that's what triggers the larger economics, but theres nothing theres nothing unusual necessarily about the types of things they fall within that same sort of deal structure of upfront.

Speaker 4: with the ION channels, these targets are being licensed out on an exclusive basis. And as a result, that's what triggers the larger icon.

Speaker 4: But there's nothing unusual necessarily about the types of things they fall within that same sort of of a front payment and milestones and weldity.

Payments and milestones and royalties.

Yeah, and I'll be happy to comment on the AI question Robin obviously, given the visibility and use of AI associated with technology technologies are industries that are highly.

Speaker 2: Yeah, and I'll be happy to comment on the AI question, Rob. And obviously given the visibility and use of AI associated with technology, technologies are industries that are, I'll say, it's highly visible in a popular sense or are counted in a popular sense. This is obviously a question we do get.

Highly visible in a popular sensor are accounted in our popular census is obviously a question we do get.

And Amit.

Speaker 13: And, uh, um, deep, I'll just say is our suite of in-fillico tools for

Amit deep I'll, just say is our suite of in silicon tools for.

Therapeutic antibody discovery and optimization that are really woven throughout our various technologies and capabilities. In these tools include structural modeling and large very large multi species antibody databases, AI and machine learning sequence models and more and it really it allow.

Speaker 7: to get a body discovery and optimization that are really woven throughout our various technologies and capabilities. And these tools include...

Speaker 7: Promodeling and large, very large, multi-species antibody databases, AI and machine learning sequence models and more. And it really, it allows for optimization of identification of candidates that come out of our technology. Now there's, to the core of your question, obviously there's a lot of discussion around AI and its use, kind of sole AI approaches.

<unk> for optimization of identification of candidates that come out of our technology now there is.

The core of your question, obviously, there's a lot of discussion around.

AI and its use.

So AI approaches.

Speaker 2: and I think the the the element of that that might not be as well understood is that there are really some important considerations and limitations of that and that's why we think there's so much power in not only the biological intelligence of our animals but also the leveraging our AI capabilities now we've been using in silico and AI tools in our downstream work for a long time actually.

And I think the elements of that that might not be as well understood is that they're really some important considerations and limitations of that and Thats. Why we think there is so much power.

And not only the biological intelligence of our animals, but also leveraging our AI capabilities that we've been using in silica and AI tools in our downstream work for a long time actually.

Speaker 7: especially on the screening side and some of our work around behind channels and transporters.

On the screening side.

And some of our work around the iron channels and transporters.

Speaker 7: So we have deep expertise here in our organization that we really kind of rolled out in the concept of on the deep in Q2, but these have been woven throughout our organization and technology from the spirit of cutting edge and good science for quite a long time. And in fact, more than a couple of years ago, we actually did a deal with landing AI.

So we have deep expertise here in our organization.

That we really kind of rolled out in the in the concept of omni deep in Q2, but these have been woven throughout our organization and technology from the spirit of cutting edge and good science for quite a long time and in fact more than a couple of years ago, We actually did a deal with with landing AI for a vision portion of AI that we incorporated into our exploration plan.

Speaker 7: for a vision portion of AI that we incorporated into our exploration platform successfully that has-

<unk> successfully that has has really been.

Speaker 7: has really been a wild success story around how we leverage our screening.

Kind of a wild success story around how we leverage our screening but.

Speaker 2: uh... technical level there's a lot of limitations to just ai approaches so really the power of on the deep comes from marrying it to

I will say on a technical level. There is a lot of limitations to just AI approaches so really the power of omni deep comes from marrying it too.

Speaker 2: what I'll call the biological intelligence of our transgenic animals because

What I'll call the biological intelligence of our of our transgenic animals, because a carefully engineered transgenic animal system really has many of the tests that are needed to select the winning antibody inherently built into them as natural checkpoints. So you can essentially try and test millions of different sequence possibilities.

Speaker 7: A carefully engineered transgenic animal system really has a many of the tasks

Speaker 7: that are needed to select the winning antibody inherently built into them as natural checkpoints so you can essentially try and test millions of different sequence possibilities rather than just doing it in a model. And obviously the biological system can weed those out. Now we do leverage AI in other ways downstream from that with large amounts of data. And I think that's where a lot of that power comes from. So I know I got a little technical there, but hopefully that makes sense. That's great. Thank you so much.

Rather than just doing it in a in a in a model and obviously the biological system can read those out now we do leverage AI in other ways downstream from that with large amounts of data and I think that's where a lot of that power comes from so I know you've got a little technical there, but hopefully that makes sense.

That's great. Thank you so much.

Your next question comes from Stephen <unk> from Stifel. Please go ahead.

Yes, good afternoon, thanks for taking the questions.

I appreciate some of the macro commentary that you provided I know some of your peers have been kind of talking about that.

Speaker 14: I appreciate some of the macro commentary that you provided. I know some of your peers have been...

I guess.

Have you seen much in the way of.

Any uptick of attrition just on the discovery program frog.

Speaker 14: If you expect that to be kind of the better surrogate of some of the mac...

Would you expect that to be kind of a better surrogate if some of the macro challenges.

Given some of the re prioritization of R&D spend.

Okay.

Just kind of broader pipeline streaming efforts that were starting to see across the space.

Yeah, I mean a.

Speaker 2: yeah i mean uh... it great great question he uh... you know i'd say really nothing specific there on on the attrition front you know as we noted uh... uh... obviously i'll just say it the out that attrition is a natural part of the pharmaceutical industry as we all know you know uh... many things fail and that's uh... uh... the fact that there is attrition is obviously expected this last quarter um... we we only saw attrition in the discovery phase

Great Great question Steve.

I would say really nothing specific there on the attrition front as we noted.

Obviously, I'll just say at the outset attrition is a natural part of the pharmaceutical industry as we all know.

Many things fail and that's.

The fact that there is attrition is obviously expected this last quarter.

We only saw attrition in the discovery phase.

Speaker 2: and just in discovery stage assets. You know, looking back a little bit, you know, in the fourth quarter of last year, we saw first.

And just in discovery stage assets looking back a little bit.

In the fourth quarter of last year, we saw first program attrition.

Speaker 7: program attrition uh... at the clinical stage uh... two partners had a good uh... certain therapeutic areas or specific therapeutic areas uh... that those at that's themselves uh... you know may have potential in in other hands but are not included in our program count anymore

At the clinical stage two partners had exited.

Certain therapeutic areas or specific therapeutic areas.

Those assets themselves.

<unk> may have potential in other hands, but are not included in our program count anymore.

Speaker 7: I bring that up as an example. It's difficult to say, is that a macro thing? Is that just larger partners focusing in those specific instances? It's very difficult to say. So I think it's harder to answer your question specifically, but these are all metrics that we always monitor all the time. And it obviously keep having deep dialogue with our partners. So hopefully that gives you a little more color. And I guess the work that's ongoing in the...

I bring that up as an example, it's difficult to say is that a macro thing is that just larger partners focusing in those specific instances it very difficult to say so I think it's hard to answer your question specifically, but these are all metrics that we always monitor all the time and.

Obviously keep having deep dialog with our partners. So that hopefully that gives you a little more color.

Okay, and I guess the work that's ongoing in the ion channel space and other these again are being kind of.

Licensed on a on a target exclusive basis, but I guess for those targets that have already been claimed by either GSK Roche and I understand that all of these are are difficult to drug, but I guess, how would you kind of characterize these targets that they've selected.

Speaker 14: I guess for those targets that have already been claimed by either GSK or Roosh, and I understand that all these are difficult to drug.

The hierarchy of things that are difficult to do within the ion channel space itself.

How much more kind of green space.

And in the target Universe do you think that you have over the next kind of 135 years.

Speaker 7: Yeah, a great, great question, Steve. You know, the description, obviously there's a substantial amount of confidentiality considerations and other things with partners that we always respect, of course. But the GSK relationship is around specific targets for neurological disorder.

Yeah, Great Great question Steve.

The description I, obviously, theres, a substantial amount of confidentiality considerations and other things with partners that we always respect of course, but the.

The GSK relationship is around.

Specific targets for neurological disorders.

Speaker 7: And at the discovery phase, it was an agreement that was originally struck a couple of years ago, so it's progressed well. Obviously, we announced the milestone in this quarter. And I'll just say when folks are pursuing iron channels and transporters, these are generally considered high value targets, right? And I'll just comment generally, I think GFK has a really ambitious,

And this is at.

At the discovery Phase there was an agreement that was originally struck a couple of years ago. So it's progressed well, obviously, we announced the milestone.

In this quarter.

And I'll, just say when when folks are pursuing ion channels and transporters. These are generally considered high value targets right and I'll just comment generally I think GSK has a really ambitious innovation agenda in this area.

Speaker 7: The innovation agenda in this area, they stated publicly a goal to positively impact the health of 2.5 billion people by the end of 2030. So that's a really aggressive goal and an ambitious one. And we're excited to be collaborating with them. I think these are our programs where we've got

They've stated publicly a goal to positively impact the health of $2 5 billion people by the end of 2030, so that's it.

A really aggressive goal and an ambitious one.

We're excited to be collaborating with them I think these are programs, where we've got.

Speaker 7: distinct capabilities and still lines and reagents and other things as well as high throughput screening you know as well as the ability to leverage multiple modalities which I think are the kinds of things that can attract more of these sorts of partnerships potentially in the future

Distinct capabilities and cell lines, and reagents and other things as well as high throughput screening.

As well as the ability to leverage multiple modalities, which I think are the kinds of things that can attract more of these sorts of partnerships potentially in the future.

Great. Thanks for taking my questions.

Your next question comes from Matt Hewitt from Craig Hallum. Please go ahead.

Speaker 15: Hi, this is Jack on from Matt. Thanks for taking our questions. Obviously you've recently just launched on Medipen. I was just kind of curious what the initial reception is then for your customers. Thanks.

Hi, This is Jack on for Matt Thanks for taking our questions.

We've recently, just launched omni deep and I just kind of curious what the initial reception has been for your customers. Thanks.

Yes, Thanks Jack.

Speaker 7: Yeah, thanks, Jack. I'll say very positive. We launched it at the Pag's conference in Boston in May. And I'll say that the feedback in the room is a big area, big presentation, very well attended, and the feedback from partners who were sitting in the room was almost immediate. And it continues to be an area of focus in terms of

I'll say very positive we launched it at the pegs conference in Boston in May.

And.

I will say that the feedback in the room.

Our big area of Big Big presentation, very well attended and the feedback from partners who were sitting in the room was almost immediate.

And it continues to be an area of focus in terms of.

Speaker 2: Not only new programs, but potentially taking different approaches to increase the success, the potential success.

Not only new programs, but potentially taking.

Taking different approaches to increase the success the potential success rate of some existing programs with partners and our obviously our research and innovation team.

Speaker 7: rate of some existing programs with partners and our, obviously, our research and innovation team and our BD team continues to partner on that as we talk with partners about it. So the feedback has been quite positive. Thanks for taking my question.

Our BD team continues to partner on that is as we talk with partners about it. So the feedback has been quite positive.

Thanks for taking my question.

Your next question comes from Chad why trustee from TD Cowen. Please go ahead.

Hey, Matt Hey, Kurt it's Chad on for Steve.

Speaker 16: Yeah, congrats on the GSK milestone. Could you give us some more detail as to what differentiates your tech stack compares to also claim that these historically difficult targets such as iron channels are an opportunity that they're pursuing as well?

Hey, Jed.

Yes, congrats on the GSK milestone could you give some more detail as to what differentiates your tech stack from peers, who also claim that these historically difficult targets, such as ion channels or an opportunity that they're pursuing as well.

Speaker 7: Yeah, yeah, sure. Happy to talk more about it. I think one of the few things differentiate our

Yeah, Yeah sure happy to talk more about it I think one of the few things differentiate.

Our technology at the core is the foundation of the multi species approach that we can present, but beyond that.

Speaker 7: right? I the core is that the foundation of the multi species approach that we can present but beyond that

Speaker 2: You know, we highlighted a little bit about our commitment to continually expanding our capabilities around the ion channel space. We have a long history here that really dates back decades in terms of building high throughput screening that can be applicable to a variety of modalities. I think that is extremely important in this space.

We highlighted a little bit about.

Our commitment to continually expanding our capabilities around the ion channel space, we have a long history here.

That really dates back decades in terms of building high throughput screening.

That can be applicable to a variety of modalities I think that is extremely important in this space where.

Speaker 2: where, and especially in the industry overall, where the lines between different approaches and modalities are becoming creatively blurred intentionally. And I think we are really at a spot where we can leverage that different than others. We've also built up an extensive bank of custom cell lines that are specifically designed.

And especially in the industry overall, where the.

The lines between different approaches and modalities are becoming creatively blurred intentionally and I think we are really at a spot where we can leverage that different than others. We have also built up an extensive bank of custom cell lines that are specifically.

<unk> designed to.

Speaker 2: to facilitate the discovery in these areas, in some of these specific areas. That's something that's been built up over many years. And when you marry that with our other discovery and repertoire generation and screening technologies, it really does, I think, position us in a pretty unique fashion. And I think that's why folks like GSK and Roe sure are attracted to us for these sorts of parts.

Tate.

The discovery in these areas and some of these specific areas. That's something that's been built up over many years and when you marry that with our other discovery and repertory generation and screening technologies. It really does I think position us in a pretty unique fashion and I think thats why folks like like GSK and <unk>.

<unk> are attracted to us for these sorts of partnerships.

Really helpful and I appreciate the improved downstream economics regarding iron channels.

Speaker 17: really helpful and I appreciate that improved downstream economics regarding our channels, but there's sort of precedent that exclusivity of targets has led to some significant upfront payments. So is there an opportunity here to drive some upside in the near term?

But there's sort of precedent that exclusivity or targets has led to some significant upfront payments.

Is there an opportunity here to drive some upside in the near term.

Yeah.

Speaker 4: All deals are become a negotiation, right? And so I think to the extent that we show success that we always try to leverage that for higher payments, I think as we look historically, a lot of the difference between this and the antibody business has been more just on the exclusivity. The other thing that I would point out on the ION channel side and Matt talked a little bit about the expertise that we have. And so for the most part with these ION.

All deals are becoming negotiation right and so I think to the extent that we show success there.

Yes.

We always try to leverage that for higher payments.

Think as we as we look historically a lot of this.

The difference between this and the antibody business has been.

More just on the exclusivity.

Other thing that I would point out on the ion channel side, Matt talked a little bit about the expertise that we have.

So for the most part with these ion channel programs.

Speaker 4: You know, there's a license for a target on an exclusive basis, but then we are continuing to do all of that work. And so a big portion of the service revenue.

There is a license fee.

We're targeting on an exclusive basis, but then we are continuing to do all of that work and so a big portion of the service revenue that we generate comes from the ion channel side of the business in many cases.

Speaker 4: that we generate comes from the ION Channel side of the business. In many cases, the partners are prepain for that and sort of gave the example today on the specific GSK program where, you know, they paid $7 million up front that was being amortized over the research period. So we are able to generate, you know, relative to the antibody side of that business, you know.

The partners are prepaying for that sort of gave the example today on the specific GSK program, where.

They paid $7 million upfront that was being amortized over the research period. So.

We are able to generate relative to the antibody side.

Of that business.

Speaker 4: call it outside economics just on a relative basis. But a lot of that is just this function of that they've found an exclusive basis. Thank you taking the questions, guys.

Call It outsized economics, just on a relative basis.

A lot of that is just the function of that its on an exclusive basis.

Thanks for taking the questions guys.

Yes, Thanks Ed.

Ladies and gentlemen.

Should you have a question. Please press the star followed by the one your next question comes from UNC from B Riley. Please go ahead.

Hi, This is Brendan on for you all and thanks for taking our questions.

Speaker 18: You've talked to someone about the trends you've been seeing in the Discovery stage. Can you comment on the clinical stage regarding the layers of cancellations of clinical trials? Can you comment on what you've observed so far related to the projects you're tracking in the biologic?

You've talked.

Some of the trends you've been seeing in the discovery stage, but could you comment on the clinical stage.

Regarding delays or cancellations of clinical trials can you comment on what you've observed so far related to the projects you're tracking on the biologics development.

Speaker 2: Yeah, this is Matt, I'll comment. Kurt may have some comments here. You know, when we started the year, we said we expected three to five new clinical entrants this year.

Yeah. This is Matt I'll comment Curt may have some some.

Here, we started the year, we said we expected three to five new clinical entrance this year.

Speaker 2: At the end of Q2, we were actually already at three. And today we're focused now on a higher area there of four to five this year.

At the end of Q2, we were actually already at three and today we.

We're focused now on a higher higher area. There are four to five this year.

Speaker 7: And so we're seeing nice clinical progression or graduation into the clinical stage. We're pleased this quarter to see.

And so we're seeing nice.

Clinical progression or graduation and into the clinical stage. We're pleased this quarter to see.

Speaker 2: Samath has moved out of discovery into preclinical, which means that they're then preparing to enter the clinic. So we are seeing nice progression in the portfolio. I don't know if heard anything you'd wanna add to that. I mean, we have not actually seen a lot of clinical attrition in terms of the clinical attrition that we have seen.

Some assets move out of discovery into preclinical which means that they are then preparing to enter.

The clinics. So we are seeing nice progression in the in the portfolio I don't have heard anything you'd want to add to that.

<unk>.

We have not actually seen a lot of clinical nutrition and in terms of the clinical nutrition that we have seen it's really not it's been a function of partners exiting therapeutic areas as opposed to sort of any failure of a study or something like that as Matt said attrition as part of this business and it will happen.

Speaker 4: It's really not, it's been a function of partners exiting therapeutic areas, as opposed to sort of any failure of a study or something like that.

Speaker 4: You know, as Matt said, attrition is part of this business and it will happen.

Speaker 4: But our experience that's far on the clinical side has actually been pretty darn good relative to...

But our experienced thus far in the clinical side has actually been.

Pretty pretty darn good relative to industry averages.

Speaker 19: And one last one from us. Have you noticed any shifted interest in biologics development?

Thanks Thats helpful.

And one last one from US have you noticed any shifting interest.

Interest in biologics development.

Question reduction right.

I mean, I'll just make a comment I mean, our business is mostly on the antibody business on the antibody side. So.

Speaker 4: I mean, I'll just make a comment. I mean, our business is mostly on the antibody side. So it is probably a more attractive place to develop drugs, just given the benefits that have been afforded by the Inflation Reduction Act.

It is probably a more attractive place to develop drugs just given the benefits.

That had been afforded by the inflation reduction act, but given that we if we had a small molecule offering in antibodies offering would we see more people moving over the antibody I don't know.

Speaker 20: but given that we, you know, if we had a small molecule offering and an antibody offering, would we see more people moving over the antibody? I don't know. It's tough to say we believe that we've got a great platform and we're, you know, continuing to attract new...

It's tough to say, we believe that we've got a great platform and we are continuing to attract new new players as evidenced by the four new deals that we signed this quarter so Matt.

Speaker 4: new players as evidenced by the four new deals that we signed this quarter. So man, I don't know if you have. Yeah, I think I, I mean, I'd add that, um,

Yeah, I think I mean, I would add that.

Because of the higher success rates of of antibody based medicines as compared to small molecules from a scientific and technical perspective, there has been an evolving shift in the industry.

Speaker 2: you know, because of the higher success rates of antibody-based medicines as compared to small molecules.

Speaker 7: from a scientific and technical perspective. There've been a evolving shift in the industry.

Speaker 7: because of those higher success rates. So that's something obviously we see and hear and know. Now the IRA, obviously the legislation will allow Medicare to negotiate drug prices with manufacturers.

Because of those higher success rate so that's something obviously.

We see and hear and know now the IRA obviously legislation allow Medicare to negotiate drug prices with manufacturers.

Speaker 7: First select number of high cost drug starting I believe in 2026 and there are exceptions.

For a select number of high cost drugs, starting I believe in 2026, and there are exceptions to how all of those negotiations can happen and that sort of thing, but there are I'll say a longer tail. That's afforded to biologic medicines, which is something that may accelerate the interest in the industry.

Speaker 2: to how all those negotiations can happen and that sort of thing.

Speaker 10: But there are, I'll say, a longer tail that's afforded to biologics medicines, which is something that may accelerate the interest in the industry and a shift towards biologic medicines that we saw happening already in advance of IRA. So I think if anything, it can help.

<unk> and a shift towards biologic medicines that we saw happening already in advance of Iras. So I think if anything it can help.

Speaker 2: accelerate the interest there, but I think that the science and the probability of success and medical benefit in terms of the specificity that antibody-based medicine

Accelerate the interest there, but I think that the.

Science and.

The probability of success and medical benefit in terms of the specificity that antibody based medicines provide and predictability for development was already starting that shifts. So if anything it just may accelerate it.

Speaker 7: provide and predictability for development was already starting that shift. So if anything, it just may accelerate it. Okay, I think.

Okay. Thanks for the commentary and thanks for taking our questions.

Okay. Thank you.

There are no further questions at this time I will turn the call back over to the CEO Matt for.

Speaker 1: that this time I will turn the callback over to the CEO .

Great. Thank you and I'd like to thank everyone for participating in today's call and for your questions. We look forward to keeping you updated on our progress.

Speaker 7: Great, thank you. I'd like to thank everyone for participating in today's call and for your questions. We look forward to keeping you updated on our progress.

Speaker 2: Speaking with you next quarter, and at various investment conferences, we'll be attending in the coming weeks and in the fall, we'll be at the Steeple Conference. Coming up, we'll also be at HD Wainwright, Cancer, as well as the Craig Hall and Capital conferences in New York in the fall. So in the meantime, we appreciate your interest in Omnab and thanks again, have a great day.

Speaking with you next quarter.

And at various investment conferences, we'll be attending in the coming weeks and in the fall we'll be at the Stifel Conference.

Coming up we will also be at HC Wainwright cancer as well as the Craig Hallum capital conferences in New York in the fall. So in the meantime, we appreciate your interest in <unk> and thanks, again and have a great day.

Okay.

Ladies and gentlemen, this concludes your conference call for today, we thank you for joining and you may now disconnect your lines. Thank you.

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Speaker 21: Ro ST.

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