OmniAb, Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis and the unaudited interim financial statements included in this Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2025 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Annual Report”). Forward-Looking Statements This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, our expected cash runway, our business strategy, our expectations regarding the application of, and the rate and degree of market acceptance of, our OmniAb ® technology platform and other technologies, our expectations regarding the addressable markets for our technologies, including the growth rate of the markets in which we operate, the potential for and timing of receipt of milestones and royalties under our license agreements with partners, our research and development plans, the potential for our partnered or internal programs to progress in their development, the anticipated timing of the initiation and completion of preclinical studies and clinical trials by our partners, the timing and likelihood of regulatory filings and product approvals by our partners, the potential for and timing and geographic markets of any commercial product launches by our partners and potential for commercial success, our ability to enter into any new, or maintain existing, strategic partnerships or collaborative relationships, our ability to obtain and maintain intellectual property protection for our platform, products and technologies, the timing and likelihood of success, plans and objectives of management for future operations, and future results of anticipated business development and product development efforts, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions, including, without limitation, the risk factors described in Part II, Item 1A, “Risk Factors” of this Quarterly Report. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Overview OmniAb licenses cutting-edge discovery research technology to pharmaceutical and biotech companies and academic institutions to enable the discovery of next-generation therapeutics. Our technology platform creates and screens diverse antibody repertoires and is designed to quickly identify optimal antibodies and other target-binding proteins for our partners’ drug development efforts. This includes xPloration, our AI-powered, high-throughput single B-cell screening platform. At the heart of the OmniAb platform is what we call Biological Intelligence™, which powers the immune systems of our proprietary, engineered transgenic animals to create optimized antibody candidates for human therapeutics. We believe the OmniAb animals comprise the most diverse host systems available in the industry. Our suite of technologies and methods, including computational antigen design and immunization methods, paired with high-throughput single B cell phenotypic screening and mining of next-generation sequencing datasets with custom algorithms, are used to identify fully human antibodies with exceptional performance and developability characteristics. We provide our partners both integrated end-to-end capabilities and highly customizable offerings, which address critical industry challenges and provide optimized discovery solutions. As of June 30, 2026, we had 110 active partners with 425 active programs using the OmniAb technology platform, including 29 OmniAb-derived antibodies in clinical development by our partners, two under regulatory review, and three approved products developed and commercialized by our partners. Our proprietary technologies are joined with and leverage a suite of in silico , artificial intelligence and machine learning tools for therapeutic discovery and optimization that are woven throughout our various technologies and capabilities. 24 Table of Contents Additionally, an established core competency focused on ion channels and transporters further differentiates OmniAb’s technology and creates opportunities in many important and emerging target classes. OmniAb technologies are designed to be leveraged for the discovery of a variety of next-generation antibody-based therapeutic modalities, including bi- and multi-specific biologics, antibody-drug conjugates, CAR-T therapies, targeted radiotherapeutics, peptides and many others. The OmniAb suite of technologies spans from Biological Intelligence-powered repertoire generation to cutting-edge antibody discovery and optimization offering an increasingly efficient and customizable end-to-end solution for the growing discovery needs of the global pharmaceutical industry. We partner with pharmaceutical and biotechnology companies and leading academic institutions that vary in size, clinical stage, geography and therapeutic focus. Our partners gain access to wide repertoires of antibodies and state-of-the-art screening technologies designed to enable efficient discovery of next-generation novel therapeutics and deliver high-quality therapeutic antibody candidates for a wide range of diseases. Our partners can select a biological target to treat a disease and define the antibody properties needed for therapeutic development or use certain of our technologies directly in their own laboratories. Our license agreements with pharmaceutical and biotechnology partners generally include: (i) upfront or, in some instances, annual payments for technology access; (ii) payments for performance of research services; (iii) downstream payments in the form of preclinical, intellectual property, clinical, regulatory, and commercial milestones; and (iv) royalties on net sales of our partners’ products, if any. License agreements with academic institutions are typically structured with revenue sharing. We succeed when our partners are successful, and our agreements are structured to align economic and scientific interests. Our license agreements typically include reporting requirements, which provide us updates from our partners on the status of their programs. In addition, we track our active partnered programs by reviewing our partners’ public announcements and maintaining close communications with our partners to the extent possible. In some instances, a partner may not publicly announce milestones, in which case, we would be generally dependent on our partner to track, report and disclose to us milestones at the time of achievement. Our license agreements typically grant a perpetual license to our technology and are typically terminable by our partners without penalty with specified notice. However, all milestone payments and royalties survive termination and continue with respect to any OmniAb-derived antibodies. The royalty term is generally the longer of 10 years from the first commercial sale or through the last expiration in any jurisdiction of the patents covering such OmniAb-derived antibody. Importantly, our royalty term is typically linked to the patents that our partners file related to the antibody discovered using our technology, which both lengthens and diversifies the royalty streams we receive. Our typical royalty rates for antibody discovery contracts are currently in the low- to mid-single digits and can vary depending on other economic terms in the agreement. Although our license agreements with pharmaceutical and biotechnology partners typically include technology access fees, milestone payments and royalties, each agreement is negotiated separately and as a result, the financial terms and contractual provisions vary from agreement to agreement. By providing a full suite of antibody discovery technologies with streamlined economics, we believe we offer an attractive option to industry stakeholders. We believe the long-term value of our business will be driven by royalties given that such payments are based on global sales of potential future partner programs, which generally provide for larger and recurring payments as compared to technology access, research and milestone payments. We believe our revenue will be materially driven by milestones and services in the shorter term, and by royalties in the longer term, from our partnered programs. However, there is significant uncertainty in timing and likelihood of reaching marketing authorization in drug discovery and development, and we cannot be certain when, if at all, royalty payments will be a material portion of our revenue. Furthermore, we do not control the progression, clinical development, regulatory strategy or eventual commercialization of programs discovered using our platform, and as a result, we are dependent on our partners’ efforts and decisions with respect to such programs. Key Business Metrics We regularly review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe that the following metrics are important to understanding our current business. These metrics are highly dependent on information provided by our partners and may change or may be substituted for additional or different metrics as our business continues to grow. Metric Active Partners Active Programs Active Clinical Programs and Approved Products Approved Products December 31, 2025 107 407 32 3 Additions 6 25 4 — Terminations (3) (7) (2) — June 30, 2026 110 425 34 3 25 Table of Contents Active partners represents the number of partners that have rights to an active program or have executed a license agreement in advance of initiating an active program. A partner is removed from the metric when the partner informs us they are terminating their license or they are no longer in business. We view this metric as an indication of the competitiveness of our platform and our current level of market penetration. The metric also relates to our opportunities to secure additional active programs. Active programs represents a program for which research work has commenced or where an antigen is introduced into our animals and remains so as long as the program is actively being developed or commercialized. This number includes active clinical programs and approved products separately disclosed in the table above. We view this metric as an indication of the usage of our technology and the potential for mid- and long-term milestone and royalty payments. Active clinical programs and approved products represents the number of unique programs for which an Investigational New Drug Application (“IND”) or equivalent under other regulatory regimes has been filed based on an OmniAb-derived antibody and which are in clinical development by our partners. We continue to count programs as active as long as they are actively being developed, under regulatory review or commercialized. Where the date of such application is not known to us, we use the official start date from clinical trial registries for the purpose of calculating this metric. This number includes approved products separately disclosed in the table above. We view this metric as an indication of our near- and mid-term potential revenue from milestone fees and potential royalty payments in the long term. Approved products represents an OmniAb-derived antibody for which our partner has received marketing approval. We view this metric as an indication of our near- and mid-term potential revenue from royalty payments. Our business metrics are subject to risk and uncertainties related to our dependence on our partners providing timely and accurate information, which impacts our ability to objectively and accurately characterize the current level of activity for each program. In addition, changes in our key business metrics do not directly correlate to current revenues. For more information, see the section in our 2025 Annual Report titled “Risk Factors - Our management uses certain key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions, and such metrics may not accurately reflect all of the aspects of our business needed to make such evaluations and decisions, in particular as our business continues to grow. ” 26 Table of Contents Results of Operations Comparison of the Three and Six Months Ended June 30, 2026 and 2025 Revenue Three Months Ended June 30, (Dollars in thousands) 2026 2025 Change % Change License and milestone revenue $ 9,515 $ 1,242 $ 8,273 666 % Service revenue 2,473 1,936 537 28 % xPloration revenue 1,161 608 553 91 % Royalty revenue 266 111 155 140 % Total revenue $ 13,415 $ 3,897 $ 9,518 244 % • License and milestone revenue fluctuates depending on the timing of new license agreements with partners and partners’ achievement of milestones. Because of these factors, license and milestone revenue could fluctuate significantly from period to period. License and milestone revenue increased primarily due to a $8.3 million increase in milestone revenue. • Service revenue increased primarily as a result of an increase in ion channel programs. • xPloration revenue increased primarily as a result of instrument sales and related consumables. • Royalty revenue increased primarily due to higher net sales from partners’ product sales in China. Six Months Ended June 30, (Dollars in thousands) 2026 2025 Change % Change License and milestone revenue $ 21,540 $ 3,263 $ 18,277 560 % Service revenue 4,580 3,839 741 19 % xPloration revenue 1,215 650 565 87 % Royalty revenue 507 299 208 70 % Total revenue $ 27,842 $ 8,051 $ 19,791 246 % • License and milestone revenue increased primarily due to a $18.3 million increase in milestone revenue. • Service revenue increased primarily as a result of an increase in ion channel programs. • xPloration revenue increased primarily as a result of instrument sales and related consumables. • Royalty revenue increased primarily due to higher net sales from partners’ product sales in China. Costs and Operating Expenses Three Months Ended June 30, (Dollars in thousands) 2026 2025 Change % Change Cost of xPloration revenue $ 610 $ 262 $ 348 133 % Research and development 9,586 10,864 (1,278) (12) % General and administrative 6,653 7,684 (1,031) (13) % Amortization of intangibles 3,053 3,228 (175) (5) % Other operating expense (income), net 150 (1,922) 2,072 (108) % Total costs and operating expenses $ 20,052 $ 20,116 $ (64) — % • Cost of xPloration revenue consists of contract manufacturing costs, material parts costs and associated freight, shipping and handling costs, royalty costs, and other direct costs related to xPloration revenue recognized in the period. Cost of xPloration revenue increased as a result of higher instrument and consumables sales compared with the prior year period. • Research and development expenses consist of (1) personnel related expenses, including salaries, benefits and share-based compensation, (2) external expenses, including third-party costs for goods and services such as lab supplies and contract research, and (3) facility and other overhead expenses, including depreciation and occupancy costs. Research and development expenses declined primarily due to lower personnel costs, including share-based compensation and 27 Table of Contents salaries and wages resulting from our 2025 reorganizations, as well as lower facility-related costs following a fixed asset impairment charge recorded in the fourth quarter of 2025. Three Months Ended June 30, (Dollars in thousands) 2026 2025 Change % Change Personnel related expenses $ 4,784 $ 5,517 $ (733) (13)% External expenses 3,035 3,249 (214) (7)% Facility and other overhead expenses 1,767 2,098 (331) (16)% Total research and development expenses $ 9,586 $ 10,864 $ (1,278) (12)% • General and administrative expenses declined primarily due to lower personnel costs, including share-based compensation and salaries and wages resulting from our 2025 reorganizations, and lower other professional fees. • Other operating expense (income), net during the three months ended June 30, 2026 primarily includes a contingent liability adjustment associated with certain ion channel programs. Other operating income, net during the three months ended June 30, 2025 includes a gain of $3.0 million from the sale in May 2025 of a small molecule Kv7.2 program to Angelini Pharma S.p.A. (“Angelini”), partially offset by the contingent liability adjustment associated with that program of $1.0 million. Six Months Ended June 30, (Dollars in thousands) 2026 2025 Change % Change Cost of xPloration revenue $ 625 $ 265 $ 360 136 % Research and development 19,226 23,466 (4,240) (18) % General and administrative 13,272 15,599 (2,327) (15) % Amortization of intangibles 9,081 6,456 2,625 41 % Other operating expense (income), net 104 (2,672) 2,776 (104) % Total costs and operating expenses $ 42,308 $ 43,114 $ (806) (2) % • Cost of xPloration revenue increased as a result of higher instrument and consumables sales compared with the prior year period. • Research and development expenses declined primarily due to (1) lower personnel costs including reduced severance, salaries, and share-based compensation resulting from our 2025 reorganizations, (2) lower external expenses primarily from certain ion channel programs, and (3) lower facility expenses from reduced depreciation following the Icagen fixed asset impairment in 2025. Six Months Ended June 30, (Dollars in thousands) 2026 2025 Change % Change Personnel related expenses $ 9,579 $ 12,366 $ (2,787) (23)% External expenses 6,175 6,972 (797) (11)% Facility and other overhead expenses 3,472 4,128 (656) (16)% Total research and development expenses $ 19,226 $ 23,466 $ (4,240) (18)% • General and administrative expenses declined primarily due to lower personnel expenses related to lower share-based compensation, lower salaries and wages from reduced headcount following our 2025 reorganizations, and lower other professional fees. • Amortization of intangibles increased primarily due to the write-off of the net carrying value of $2.9 million of certain legacy small molecule ion channel intangible assets. • Other operating expense (income), net during the six months ended June 30, 2026 primarily includes a contingent liability adjustment associated with certain ion channel programs. Other operating income, net during the six months ended June 30, 2025 includes a gain of $3.0 million from the sale in May 2025 of a small molecule Kv7.2 program to Angelini and a $0.9 million reduction in contingent liabilities attributed to changes in certain ion channel programs, which were partially offset by the $1.0 million contingent liability adjustment associated with the Angelini program. 28 Table of Contents Other Income (Expense), net Other income (expense), net during the three and six months ended June 30, 2026 and 2025 primarily related to interest earned on short-term investments and remained relatively consistent period over period. Income Tax Benefit (Expense) Three Months Ended June 30, (Dollars in thousands) 2026 2025 Change % Change Loss before income taxes $ (6,212) $ (15,756) $ 9,544 (61) % Income tax benefit (expense) 353 (119) 472 (397) % Net loss $ (5,859) $ (15,875) $ 10,016 (63) % Effective tax rate 5.7 % (0.8) % Six Months Ended June 30, (Dollars in thousands) 2026 2025 Change % Change Loss before income taxes $ (13,477) $ (34,062) $ 20,585 (60) % Income tax expense (89) (13) (76) 585 % Net loss $ (13,566) $ (34,075) $ 20,509 (60) % Effective tax rate (0.7) % 0.0 % Our effective tax rate is affected by recurring items, such as the U.S. federal and state statutory tax rates and the relative amounts of income we earn in those jurisdictions. The tax rate is also affected by discrete items that may occur in any given year but are not consistent from year to year. Our effective tax rate for each of the three and six months ended June 30, 2026 and 2025 differed from the federal statutory tax rate of 21.0% primarily due to the valuation allowance established on federal and state attributes, the tax impact of stock award activities, and the benefit related to research and development tax credits. 29 Table of Contents Liquidity and Capital Resources As of June 30, 2026, our cash, cash equivalents and short-term investments were $52.0 million. We believe our existing cash, cash equivalents and short-term investments are sufficient to support operations through at least the next 12 months from the date of issuance of these financial statements. If our anticipated cash flows from operations and current cash are insufficient to satisfy our liquidity requirements because of increased expenditures or lower demand for our technology platform, or the realization of other risks, we may be required to raise additional capital through issuances of public or private equity or debt financing or other capital sources. Such additional financing may not be available on terms acceptable to us or at all. In any event, we may consider raising additional capital in the future to expand our business, to pursue strategic investments or acquisitions, to take advantage of favorable market conditions or financing opportunities or for other reasons. Our future capital requirements will depend on many factors, including, but not limited to: • our ability to achieve revenue growth, which is dependent on the ability of our partners to successfully develop and commercialize therapies based on antibodies discovered using our platform; • the costs of expanding our operations, including our business development and marketing efforts; • our rate of progress in selling access to our platform and marketing activities associated therewith; • our rate of progress in, and cost of research and development activities associated with, our platform technologies and our internal developed programs to the extent we pursue any such programs; • the effect of competing technological and market developments; • delays or issues with any of the above, including that the risk of each may be exacerbated by tariffs or trade policies, any future pandemics or epidemic diseases, potential geopolitical instability, war, terrorism, inflation or rising interest rates; • the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patents and other intellectual property and proprietary rights; and • the costs associated with any technologies that we may in-license or acquire. On August 26, 2025, we completed a private placement (“August 2025 PIPE”) of 21,254,106 shares of our common stock at a price of $1.40 per share or, with respect to any purchaser that was an officer, director, employee or consultant of the Company, $1.85 per share. The aggregate gross proceeds from the August 2025 PIPE were approximately $30.0 million, before deducting placement agent fees and offering expenses. In December 2023, we entered into an Open Market Sale Agreement SM (the “Sales Agreement”), with Jefferies LLC (the “Sales Agent”) under which we may, from time to time, sell shares of our common stock having an aggregate offering price of up to $100.0 million in an “at the market” (“ATM”) offerings program through the Sales Agent. Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Sales Agent. The Sales Agent will receive a commission from us of up to 3.0% of the gross proceeds of any shares of common stock sold under the Sales Agreement. We are not obligated to sell, and the Sales Agent is not obligated to buy or sell, any shares of common stock under the Sales Agreement. During the six months ended June 30, 2026, we sold no shares of our common stock under the Sales Agreement. As of June 30, 2026, $88.3 million remains available under the Sales Agreement for future sales of our common stock. Additionally, we may receive up to $218.6 million from the exercise of our warrants, assuming the exercise in full of all the warrants for cash, but not from the sale of the shares of our common stock issuable upon such exercise. As of the date of this report, our warrants are “out of the money,” which means that the trading price of the shares of our common stock underlying our warrants is below the $11.50 exercise price of the warrants. For so long as the warrants remain out of the money, we do not expect warrant holders to exercise their warrants. Therefore, any cash proceeds that we may receive in relation to the exercise of such securities will be dependent on the trading price of our common stock. We anticipate that our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures and other general corporate purposes. 30 Table of Contents Cash Flow Summary Six Months Ended June 30, (in thousands) 2026 2025 Change Net cash provided by (used in): Operating activities $ (2,235) $ (21,018) $ 18,783 Investing activities 814 11,421 (10,607) Financing activities $ 233 $ 280 $ (47) Cash from Operating Activities: During the six months ended June 30, 2026, cash used in operating activities of $2.2 million primarily reflected our net loss of $13.6 million and changes in our operating assets and liabilities in the amount of $6.1 million, partially offset by net non-cash charges of $17.5 million which primarily included $9.1 million in amortization of intangible assets, $6.5 million in share-based compensation, $1.2 million in depreciation of property and equipment, and $1.2 million in amortization of operating lease right-of-use assets. During the six months ended June 30, 2025, cash used in operating activities of $21.0 million primarily reflected our net loss of $34.1 million, changes in our operating assets and liabilities in the amount of $1.5 million, partially offset by net non-cash charges of $14.6 million which primarily included $8.3 million in share-based compensation, $6.5 million in amortization of intangible assets, a gain on sale of an ion channel assets of $3.0 million, $1.8 million in depreciation of property and equipment, and $1.1 million in amortization of operating lease right-of-use assets. Cash from Investing Activities: During the six months ended June 30, 2026 , cash provided by investing activities of $0.8 million primarily consisted of $34.1 million of proceeds from the maturity of short-term investments, partially offset by $33.0 million of cash used to purchase short-term investments. During the six months ended June 30, 2025 , cash provided by investing activities of $11.4 million primarily consisted of $27.3 million of proceeds from the maturity of short-term investments and $3.0 million of proceeds from the sale of an ion channel asset , partially offset by $18.6 million of cash used to purchase short-term investments. Cash from Financing Activities: During the six months ended June 30, 2026 and 2025 , cash provided by financing activities was $0.2 million and $0.3 million, which primarily consisted of proceeds from the issuance of common stock from stock plans. Critical Accounting Policies and Estimates There have been no material changes to our critical accounting policies and estimates during the six months ended June 30, 2026, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2025 Annual Report. Recent Accounting Pronouncements For the summary of recent accounting pronouncements, see Note 2 – Summary of Significant Accounting Policies to our financial statements included in this Quarterly Report. Item 3. Quantitative and Qualitative Disclosures about Market Risk As of June 30, 2026, there were no material changes to our market risks from the discussion provided in Item 7A of our 2025 Annual Report.