OmniAb(US:OABI)2023-11-09 22:01PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated and Combined Financial Statements (unaudited) This section presents the unaudited financial statements for OmniAb, Inc. for the period ended September 30, 2023, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, reflecting a net loss of $15.7 million for the third quarter and $36.6 million for the nine-month period, with total assets of $391.7 million as of September 30, 2023 Condensed Consolidated and Combined Balance Sheets As of September 30, 2023, total assets were $391.7 million, a decrease from $421.2 million at December 31, 2022, primarily due to lower cash and accounts receivable, while total liabilities decreased to $67.2 million from $79.8 million, and total stockholders' equity declined from $341.4 million to $324.5 million, mainly driven by the accumulated deficit from net losses during the period Condensed Consolidated and Combined Balance Sheets (in thousands) | | September 30, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $106,848 | $124,950 | | Total assets | $391,708 | $421,212 | | Total current liabilities | $25,060 | $26,022 | | Total liabilities | $67,159 | $79,839 | | Total stockholders' equity | $324,549 | $341,373 | | Total liabilities and stockholders' equity | $391,708 | $421,212 | Condensed Consolidated and Combined Statements of Operations and Comprehensive Loss For the third quarter of 2023, total revenues were $5.5 million, a decrease from $6.9 million year-over-year, while the net loss widened to $15.7 million from $12.6 million, and for the nine months ended September 30, 2023, revenues increased to $29.3 million from $23.7 million, driven by higher license and milestone revenue, but increased operating expenses led to a larger net loss of $36.6 million compared to $29.2 million in the prior year period Statements of Operations Highlights (in thousands, except per share data) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $5,477 | $6,910 | $29,342 | $23,732 | | Loss from operations | $(20,315) | $(14,909) | $(48,213) | $(35,698) | | Net loss | $(15,738) | $(12,596) | $(36,566) | $(29,154) | | Net loss per share, basic and diluted | $(0.16) | $(0.15) | $(0.37) | $(0.35) | Condensed Consolidated and Combined Statements of Stockholders' Equity Total stockholders' equity decreased from $341.4 million as of January 1, 2023, to $324.5 million by September 30, 2023, primarily due to the net loss of $36.6 million incurred over the nine-month period, partially offset by $18.9 million in share-based compensation expense - The company's retained earnings shifted to an accumulated deficit of $(25.3) million by September 30, 2023, from retained earnings of $11.3 million at the beginning of the year, reflecting the net losses incurred post-separation16 Condensed Consolidated and Combined Statements of Cash Flows For the nine months ended September 30, 2023, the company generated $11.5 million in cash from operating activities, an increase from $3.6 million in the prior-year period, while cash used in investing activities was $23.1 million, primarily for the purchase of short-term investments, and cash used in financing activities was $0.4 million, resulting in an overall decrease of $12.1 million in cash and cash equivalents during the period Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $11,468 | $3,556 | | Net cash used in investing activities | $(23,106) | $(13,112) | | Net cash (used in) provided by financing activities | $(396) | $9,556 | | Net change in cash, cash equivalents and restricted cash | $(12,034) | — | Notes to Condensed Consolidated and Combined Financial Statements The notes provide detailed explanations of the financial statements, covering the November 2022 separation from Ligand and business combination with APAC (treated as a reverse recapitalization), significant accounting policies including revenue recognition and share-based compensation, details on goodwill, intangible assets, commitments, stockholders' equity structure including warrants and earnout shares, and the calculation of net loss per share - On November 1, 2022, OmniAb completed its separation from Ligand and a business combination with APAC, accounted for as a reverse recapitalization, with financials prior to this date on a carve-out basis from Ligand, and subsequent periods on a standalone consolidated basis222432 - The company qualifies as an emerging growth company and has elected to use the extended transition period for new accounting standards4041 - As of September 30, 2023, there were 16.3 million Earnout Shares and 19.0 million warrants outstanding, which are contingently issuable or exercisable and could be dilutive in the future127129132 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, business strategy, and liquidity, noting that for the first nine months of 2023, revenue grew 24% year-over-year, driven by a significant milestone payment, but operating expenses also increased 30%, leading to a higher net loss, with the company's business model relying on its OmniAb® technology platform to form partnerships, generating revenue from licenses, services, milestones, and future royalties, and as of September 30, 2023, the company had $96.6 million in cash, cash equivalents, and short-term investments, believed to be sufficient for at least the next 12 months Overview OmniAb's mission is to enable rapid therapeutic development via its drug discovery technology platform, which combines proprietary transgenic animals and high-throughput screening (termed Biological Intelligence™), partnering with pharmaceutical and biotech firms, structuring deals that typically include upfront/annual license fees, service payments, development milestones, and sales royalties, and as of September 30, 2023, the platform has yielded 3 approved partner products, with 27 more in clinical development - The company's business model is centered on its OmniAb technology platform, which provides partners with access to diverse antibody repertoires from proprietary transgenic animals like OmniRat®, OmniChicken®, and OmniMouse®171172174 - As of September 30, 2023, OmniAb had 76 active partners with 314 active programs, including 27 in clinical development, one under regulatory review, and three approved products172 - In May 2023, the company launched OmniDeep™, a suite of in silico tools for therapeutic discovery and optimization, designed to improve the efficiency of drug development174 Key Business Metrics The company tracks its performance using key metrics that indicate market penetration and future revenue potential, with all key metrics showing growth as of September 30, 2023, compared to the end of 2022, with active partners increasing by 10%, active programs by 8%, and active clinical programs by 19% Key Business Metrics Growth | Metric | September 30, 2023 | December 31, 2022 | % Change | | :--- | :--- | :--- | :--- | | Active partners | 76 | 69 | 10% | | Active programs | 314 | 291 | 8% | | Active clinical programs | 31 | 26 | 19% | | Approved products | 3 | 3 | —% | Results of Operations For the nine months ended September 30, 2023, total revenues increased by 24% to $29.3 million, primarily due to a 143% rise in license and milestone revenue, which included a $10.0 million milestone for teclistamab, partially offset by a 37% decline in service revenue, while total operating expenses grew by 30% to $77.6 million, driven by higher personnel costs and public company expenses, resulting in an increased loss from operations of $48.2 million Revenue Comparison - Nine Months Ended September 30 (in thousands) | Revenue Type | 2023 | 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | License and milestone revenue | $18,986 | $7,826 | $11,160 | 143% | | Service revenue | $9,425 | $14,922 | $(5,497) | (37)% | | Royalty revenue | $931 | $984 | $(53) | (5)% | | Total revenues | $29,342 | $23,732 | $5,610 | 24% | - The significant increase in license and milestone revenue was primarily due to the recognition of a $10.0 million milestone for the first commercial sale of teclistamab in the E.U.188 Operating Expenses Comparison - Nine Months Ended September 30 (in thousands) | Expense Type | 2023 | 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $41,759 | $35,445 | $6,314 | 18% | | General and administrative | $25,444 | $14,697 | $10,747 | 73% | | Total operating expenses | $77,555 | $59,430 | $18,125 | 30% | - The increase in G&A expenses was primarily due to higher personnel-related costs and costs associated with operating as a public company190196 Liquidity and Capital Resources As of September 30, 2023, OmniAb held $96.6 million in cash, cash equivalents, and short-term investments, with management believing these funds, along with expected cash from operations, are sufficient to support its needs for at least the next 12 months, and for the first nine months of 2023, net cash from operations was $11.5 million, while the company may receive up to $218.6 million from warrant exercises, which is unlikely while the stock price is below the $11.50 exercise price - The company had cash, cash equivalents, and short-term investments totaling $96.6 million as of September 30, 2023195 - Management believes existing cash and expected operational cash flow will be sufficient to fund operations for at least the next 12 months195 Cash Flow Summary - Nine Months Ended September 30 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by Operating activities | $11,468 | $3,556 | | Net cash used in Investing activities | $(23,106) | $(13,112) | | Net cash (used in) provided by Financing activities | $(396) | $9,556 | Item 3. Quantitative and Qualitative Disclosures about Market Risk The company states that there have been no material changes to its market risks from those disclosed in its 2022 Annual Report on Form 10-K - As of September 30, 2023, there were no material changes to the company's market risks as discussed in the 2022 Annual Report211 Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of September 30, 2023, with no changes in internal control over financial reporting occurring during the quarter that materially affected, or are reasonably likely to materially affect, these controls - Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023213 - There were no material changes in the company's internal control over financial reporting during the third fiscal quarter214 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any legal proceedings that it believes would have a material adverse effect on its business, financial condition, or results of operations - The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business217 Item 1A. Risk Factors The company reports that there have been no material changes to the risk factors previously disclosed in its 2022 Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the company's 2022 Annual Report218 Other Items (Items 2, 3, 4, 5) This section confirms that there were no unregistered sales of equity securities, no defaults upon senior securities, no mine safety disclosures to report, and no other information to disclose for the period - Item 2: None219 - Item 3: None220 - Item 5: None222 Item 6. Exhibits This section provides a list of all exhibits filed with the Form 10-Q, including governance documents, agreements, officer certifications required by the Sarbanes-Oxley Act, and interactive data files (XBRL)