OmniAb, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. OmniAb develops antibody-discovery technologies and earns revenue from partner licenses and milestones, research services, and royalties. Since its November 2022 separation from Ligand and business combination, it reports as a standalone company; 2022 comparative periods before the separation are carve-out combined results, which may limit comparability.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $6.9 million | $7.2 million | $23.9 million | $16.8 million |
| Operating loss | $19.4 million | $12.6 million | $27.9 million | $20.8 million |
| Net loss | $14.7 million | $10.3 million | $20.8 million | $16.6 million |
| Net loss per share | $0.15 | $0.12 | $0.21 | $0.20 |
| Operating cash flow | Not separately stated for the quarter | $17.7 million | $7.8 million |
- Q2 revenue fell 4% year over year: license and milestone revenue rose 86% to $4.3 million, while service revenue fell 48% to $2.5 million; royalties were $0.2 million.
- Six-month revenue rose 42%. License and milestone revenue increased to $17.0 million, including a $10.0 million milestone for the first EU commercial sale of teclistamab; service revenue decreased 36% to $6.4 million.
- Operating expenses increased 34% in Q2 and 38% for the six-month period. Research and development and general and administrative costs increased, including personnel, facilities, and public-company costs. Interest income was $1.3 million for Q2 and $2.6 million for six months.
- Gross margin is not separately presented in the filing. No borrowing debt balance is shown on the balance sheet.
Liquidity and balance sheet
- At June 30, cash and cash equivalents were $21.0 million and short-term investments were $82.2 million, totaling $103.1 million; total current assets were $115.9 million and current liabilities were $24.2 million.
- Cash, cash equivalents, and restricted cash declined $12.3 million during the first half. Operating activities provided $17.7 million; investing activities used $29.4 million, largely reflecting purchases of short-term investments and contingent-liability payments; financing activities used $0.6 million.
- Total liabilities were $71.4 million. Operating lease liabilities totaled $26.5 million, and contingent liabilities totaled $6.2 million.
- Management expects existing cash, cash equivalents, investments, and cash it expects to generate from operations to support operations for at least 12 months. The company expects ongoing losses and says additional financing may be needed if cash flows or demand are insufficient.
Changes, outlook, and risks
- Management attributed the Q2 service-revenue decline to completed work on certain ion-channel programs and a one-time adjustment related to extending a GSK program. The license and milestone increase included milestones for batoclimab pivotal studies.
- At June 30, the company reported 74 active partners, 305 active programs, 29 active clinical programs, and three approved partner products. It highlighted the launch of OmniDeep, a suite of in-silico discovery and optimization tools.
- No quantitative revenue or earnings guidance is provided. Management expects near-term revenue to be materially influenced by milestones and sees potential for royalties over the longer term, but timing and success depend on partners’ development and commercialization decisions.
- Key risks include dependence on partners and uncertain development, regulatory, and commercial outcomes; potential need for additional capital; and uncertainty in contingent milestone valuations. Management reported no material change to previously disclosed risk factors. It reported no known legal proceeding expected to have a material adverse effect, while noting litigation outcomes are inherently uncertain.
- Following a director’s death, the company notified Nasdaq on August 7, 2023 that it was temporarily out of compliance with audit and compensation committee composition requirements. It intends to appoint independent directors within the applicable cure periods.
- Management concluded disclosure controls were effective as of June 30, 2023 and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether milestone revenue is repeatable, and how partner program progress may translate into future milestones and royalties.
- Cash use and liquidity runway, particularly given continued operating losses and management’s expectation of ongoing investment.
- How much reported operating cash flow reflected timing-related working-capital changes, including a $23.0 million decrease in accounts receivable.
- Potential share dilution: 60.9 million anti-dilutive or contingently issuable share equivalents were excluded from diluted loss per share at June 30; also review outstanding options and earnout shares.
- Progress toward restoring Nasdaq committee compliance and the effect of the standalone-company transition on comparisons with pre-separation periods.