Good afternoon, welcome to OmniAb Inc.'s second quarter 2023 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 like to turn the call over to Kurt Gustafson, OmniAb 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. There are slides to accompany today's remarks, and they are available in the Investors Section of our website at omniab.com. 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. These forward-looking statements are qualified by the cautionary statements contained in today's press release and our SEC filings.
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. Joining me on the call today is Matt Foehr, OmniAb's President and CEO. 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.
Thanks, Kurt. 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 4 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. In a simple sense, it's a model based on licensing innovative technologies to partners. OmniAb is differentiated in the marketplace by having the most diverse host systems for fully human bispecific, fully human and bispecific antibody discovery, with the industry's only four species platform. That includes transgenic mice, rats, chickens, and cow-based technologies.
Our partners have an increasing number of antibodies in 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. 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. 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 to OmniAb antibodies, with over 300 programs in various stages of research and development.
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. We believe we're in a great position to capitalize on this opportunity with our unique and expanding technology offerings. This past May, we introduced our newly branded OmniDeep offering, which is a suite of in silico capabilities, including structural modeling, large multi-species antibody databases, molecular dynamics simulations, artificial intelligence, and machine and deep learning sequence models that are applicable across our technology platforms to further enhance our partners' discovery process. In addition, we plan to introduce our novel heavy chain-only OmniChicken that we will be branding as OmniDab in the fourth quarter of this year.
I'll save more detailed Dab and our excitement around that technology until later this year when we launch it. 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. We're poised for continued growth, as shown here on Slide number 6, by the new license agreements we signed during the second quarter. 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. Regarding Merck, this is a new agreement and is with the U.S. Merck & Company, not to be confused with the German Merck KGaA, with whom we also have an agreement.
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. 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. 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 the future needs of our partners, as well as our commitment to continued innovation. Here on Slide number 8, 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. 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. In this quarter, attrition was seen only in the discovery stage of our partnered pipeline.
The pie chart on the right-hand side of this slide breaks down our 305 programs by stage of development. The discovery phase consists of 261 programs, in addition to 15 programs now in the preclinical stage. In the clinic, at the end of June, our partners had 22 programs in Phase I, two programs in Phase II, one in Phase III, as well as one program currently under regulatory review. There are three approved drugs utilizing OmniAb-derived antibodies, and we're recognizing royalty revenue from commercial sales of Zimberelimab and sugemalimab 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, with one Phase III program moving to a regional filing for approval, shown here on this Slide number 8 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. 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.
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. We all 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, OmniAb is in a very solid position for continued growth, with an increasing number of both active programs and active partners. Moving now on to Slide number 9. As I mentioned in the second quarter, two new programs entered the clinic, with Immunovant, who initiated a Phase I clinical trial of IMVT-1402, which is a subcutaneous FcRn inhibitor.
Also, Genor Biopharma initiated a Phase I/II study to investigate the safety, tolerability, and preliminary efficacy of GLS-012 as a monotherapy in combination with GLS-010 in subjects with advanced solid tumors that had progressed following standard treatment. 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, 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. I'll highlight a few of them on this slide, Slide 10, starting with batoclimab. During the second quarter, we earned milestone revenue related to advancement of batoclimab into pivotal studies in two additional indications of CIDP and TED. These are additional indications from the Phase III work that was started in generalized myasthenia gravis earlier in the year. In addition, Harbour BioMed announced that China's NMPA accepted its Biologics License Application for the treatment of generalized myasthenia gravis. For the same indication, HanAll announced that they're progressing towards initiation of a Phase III trial in Japan later this year.
As for the next generation anti-FcRn, IMVT-1402, I mentioned that Immunovant initiated a Phase I trial to evaluate safety, tolerability, and pharmacodynamics. They communicated that initial data are expected in the second half of this year. One of our newer partners, Cessation Therapeutics, announced that they've received authorization to initiate a Phase I clinical trial. CSX-1004 was first discovered via collaboration with Scripps Research Institute and subsequently licensed to Cessation for development. Cessation is developing this compound for the prevention of fentanyl overdose, which is an indication that obviously has an important and urgent unmet medical need. Aptevo Therapeutics announced data for its bispecific AML drug candidate, APVO436. It plans to initiate two Phase II clinical trials in AML populations.
Lastly, we re-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. This triggered a $2 million progression payment for OmniAb, and Kurt will discuss the accounting for this. We're particularly excited about this program with GSK, as it demonstrates the capabilities of our highly differentiated ion channel and transporters technology platform. 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.
Our ion channel platform at OmniAb leverages our proprietary expertise in a combination of biological assays, medicinal chemistry, and in silico and computational chemistry applications to enable the discovery of ion channels targeting therapeutics in a variety of formats and modalities. We believe our differentiated core capabilities can assist partners in 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. We have an extensive bank of custom cell lines, reagents, and assays that are designed to accelerate ion channel drug discovery and development. 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.
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 agreements. We have agreements with GSK for two neurology targets that are in discovery phase, and another partner is Roche for three undisclosed targets that are also in the discovery phase. In total, we're eligible to receive a billion in milestones on these five programs alone, along with royalties should a program be commercialized. This last slide for me, which is Slide number 13 in our deck, highlights our key areas of focus going forward. 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.
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 at the foundation of what we do, and that focus is 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, with heavy hearts, we announced the passing of a beloved Board member here at OmniAb, Sunil Patel. Sunil was an accomplished biotech executive, who was a longtime colleague and a co-architect of what we're building here at OmniAb.
I'll add that the team here is honoring Sunil's contribution and legacy as we continue to do our important work, expand our technology, and grow our business. 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. With that, I'll, I'll pass it back over to Kurt now for a discussion of our second quarter financial results. Kurt?
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 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. You'll recall that OmniAb derives 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' programs.
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. We saw an increase in license and milestone revenue based on milestones that were hit this quarter, mostly related to progress with batoclimab, 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. 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 partners. As a result, we are no longer earning service revenue for these programs, but would still have the opportunity to earn milestones and royalties should these programs advance.
Second, the research period for one of our GSK ion channel programs was extended by approximately one and a half years. 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. This resulted in a one-time 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. 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.
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. 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. Turning to operating expense. Our R&D expense for the second quarter was $14.1 million, compared to $11.5 million in the prior-year quarter. 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 headcount and other costs associated with being a newly established public company. The net loss for the second quarter was $14.7 million or $0.15 per share, versus a net loss of $10.3 million or $0.12 per share in the prior year period. 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 it's highly scalable. While we are committed to growing the business and keeping our technology cutting edge, we're also committed to deploying our capital efficiently.
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. Turning to our quarterly results, I'd like to make a few comments on some of the underlying trends that we see. Excluding the milestone revenue recognized specifically for teclistamab, 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.
As we think about our operating expense going forward, I had indicated last quarter that our Q1 2023 actual results would be a good baseline from which we would grow. 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. 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. With that, I'd like to open up the call for questions. Operator?
Thank you. Ladies and gentlemen, should you have a question, please press the star followed by the one on your touchtone phone. If you'd like to withdraw your question, please press the star followed by the two. If you're using a speakerphone, please leave your handset before pressing any keys. One moment, please, for your first question. Your first question comes from Puneet Souda from Leerink Partners. Please go ahead.
Yeah. Hi, guys. Thanks for taking the questions. Matt, maybe, first one, you know, obviously you talked about some of the headwinds in the market, and, as you pointed out, there's a potential that you could see that, 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, you know, projects that they can potentially bring to you because you're providing them value and cost, reduction. Maybe talk to us about you know, h ow do they think about that, as they think about, you know, the discovery stages and getting into Phase I?
Yeah, Puneet, thanks. This is Matt. I, I appreciate the question. I mean, one of the things I'll, I'll highlight that obviously this quarter, 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 develop new medicines. Neurocrine, of course, has a 30-year-plus history in innovations and success of pursuing really what have become life-changing medicines in the neurology and neurological disease space. 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.
You know, 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, right? To your question of how we do that, we obviously get into a lot of deep discussions with our partners of areas they're interested in and why they see our technologies unlocking opportunities for them. That obviously translates into, you know, 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 innovation, and that is also, I think, an important part as well.
Obviously, our innovation is, is informed by our deep relationships with partners. There's, like, what we like to call an intelligent feedback loop, where you get a sense of where the industry's headed, and that informs the, the sorts of innovations and investments we want to make in our technology it's really, at the end of the day, about, about speed and opportunity, and efficiency and, and quality of the product, in this case, the, the antibodies that, that are coming out of our plasma.
Got it. With that question, I was wondering, clearly, 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? Let me just follow up with a question on China. You know, I know you mentioned GLS-012, anti-LAG-3 in the Phase I 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. Thank you.
Yeah. Yeah, I'll take that, Puneet. I'll take the China part first, and then Kurt maybe can add, add some color as well. Obviously, we announced this quarter that Gloria entered the clinic in China, so it's nice to see. It's always nice to see clinical progression out of our pipeline. We obviously have a couple of drugs that are approved in China that, that Kurt can probably comment on as well. A lot of that in terms of the, the later stage, visible programs out of China, really come out of some very early partnerships with OmniRat that were struck years ago. Those programs progressed quickly through the clinic, and then. Approaching the clinic, which is really a representation of what you see in our pipeline with some of our assets. Maybe, Kurt, you want to talk a little bit as well?
Yeah, Puneet. I mean, we don't have any specific knowledge, 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 have been supply chain issues in the first half of the year, in part due to challenges with COVID. They also indicated that they expect that those supply chain issues will be alleviated, alleviated in the second half of the year, so they were forecasting, you know, sales to pick back up. We obviously earn a royalty on that. I think the first part of your question, you know, our partnerships are designed really to align sort of the economics that our partners pay with, with success, right?
I do think in a difficult, you know, if we're in a difficult funding environment, our model is conducive to have people continue to use it because they're not paying for, or large sums of money until they actually have success, say, you know, discovering a drug and actually moving it into the clinic. I do think that there's opportunities there, and, you know, we're still continuing to see growth across our key metrics.
Got it. Super helpful. I'll hop back into the queue.
Thanks, Puneet.
Your next question comes from Robyn Karnauskas from Truist Securities. Please go ahead.
Hi, team. Thanks so much for taking my questions. I'm going to start off with a couple that I don't know you'll be able to answer. 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? Are your ion channel programs do they have better economics, given the scarcity of, like, being able to develop small molecules to those or or biologics to those programs? I would think that they'd have better economics because you're adding a lot more value.
Yeah, Robyn, thanks. I'll answer your, your second question first on, on the ion channel programs. Really, the, the short answer is yes. The way those, those programs are structured, we are granting exclusivity to the target, to the specific target with that, with those partners. They're accessing not only technology and capability, but novel cell lines, novel reagents, novel screening technologies, et cetera. That then drives really a different and a higher economic structure. You know, the five programs that, that are, are highlighted in, in the deck today, for, for ion channel and transporter collaboration, both those are with GSK and with Roche. Those, those five programs alone have a billion in milestones and, and royalties that are higher than our standard platform license agreements.
Those are, those are, assets that we're excited about. Obviously, we highlighted the GSK program today, but the short answer is yes. Now, to your, your first question about the different sorts of deals. We have in recent quarters leaned into not only license agreements with leaders in the industry, commercial, you know, those that are investing a lot in R&D and commercialization, like Merck and Neurocrine, but also with academic centers, leading academic centers.
Just as a general matter of policy and based on confidentiality, we don't, we don't disclose specific deal structures, but we have in our corporate deck, we've outlined typical deal terms for all of our deals, and they fall within boundaries that we've previously disclosed. There are multiple parts of the deals. There are upfront payments, there are milestones, there are royalties, and there's an interplay between those. In terms of access to the platform, there really are not major differences between the deals signed with say, a traditional commercial pharma and the academic centers. 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 get spun out into companies. Really, the only difference is we'll 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. At a basic sense, they're very similar. There are just some specific provisions that are more applicable to the academic setting.
That's really helpful, and I guess a follow-up is, like, a billion is a lot. Have you been able to negotiate, since you've been working with these companies, a little bit more disclosure about what you need to see to get those milestones? My last question, sorry for so many, you don't talk a lot about OmniDeep, and I know you believe that nature-based immune response are best, but I'm just wondering if you're willing to leverage OmniDeep platforms to do AI, ML-based in silico antibody design. It's a hot topic right now, so I thought I'd ask that question. Thanks.
Yeah, sure.
On the, on the first part, just, you know, financially, the way these deals are structured, they're really structured the same way as our other, our other deals, right? There are, you know, typically clinical stage milestones as they progress through the clinic and royalties. You know, the difference is the magnitude of the payments are larger, and mostly because of a function of the exclusivity on which we, you know, have written these deals. On the antibody side, you know, all of the things that people are going after, those are non-exclusive targets, whereas with the ion channels, these targets are being licensed out on an exclusive basis, and as a result, that's, that's what triggers the larger economics. But there's nothing, there's nothing unusual necessarily about the types of things. They fall within that same sort of deal structure of upfront payment and milestones and royalties.
Yeah, and I'll be happy to comment on the AI question, Robyn. Obviously, given the visibility and use of AI associated with technology, technologies or industries that are, I'll say, highly visible in a popular sense or are, are touted in a popular sense, this is obviously a question we do get. OmniDeep, I'll just say, is our suite of in silico tools for therapeutic antibody discovery and optimization that are really woven throughout our various technologies and capabilities. These tools include structural modeling and large, very large multi-species antibody databases, AI and machine learning sequence models, and more. It really allows for optimization of identification of candidates that come out of our technology.
Now, there's, you know, to the core of your question, obviously, there's a lot of discussion around AI and its use, you know, kind of sole AI approaches. I think 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, for a long time, actually, especially on the screening side, and some of our work around the ion channels and transporters.
We have deep expertise here in our organization that we really kind of rolled out in the concept of OmniDeep 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. In fact, more than a couple of years ago, we actually did a deal with Landing AI for a vision portion of AI that we incorporated into our exploration platform successfully that has really been a, you know, a kind of a wild success story around how we leverage our screening.
I'll say on a technical level, there's a lot of limitations to just AI approaches, so really the power of OmniDeep comes from marrying it to 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 a 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. I know I got a little technical there, but hopefully, that makes sense.
That's great. Thank you so much.
Your next question comes from Stephen Willey, from Stifel. Please go ahead.
Yeah, good afternoon. Thanks for taking the questions. Appreciate some of the macro commentary that you provided. I know some of your peers have been kind of talking about that of late. I guess, have you seen much in the way of any uptick of attrition just on the discovery program front? Would you expect that to be kind of the better surrogate of some of the macro challenges, just given some of the reprioritization of R&D spend and broader pipeline streaming efforts that we're starting to see across the space?
Yeah. I mean, a great, great question, Steve. You know, I'd say really nothing specific there on the attrition front. You know, as we noted, obviously, I'll, I'll just say at the outset, attrition is a natural part of the pharmaceutical industry, as we all know. You know, many things fail, and that's, yeah, the fact that there is attrition is, is obviously expected. This last quarter, we, we only saw attrition in the discovery phase, 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 program attrition at the clinical stage. Two partners had exited certain therapeutic areas or specific therapeutic areas.
Those assets themselves, you know, may have potential in, in other hands, but are not included in our program count anymore. I bring that up as an example. It's difficult to say. Is that a macro thing? Is that just, you know, larger partners focusing in those specific instances? It's very difficult to say. 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 dialogue with our partners. Hopefully that gives you a little more color.
Okay. I guess the work that's ongoing in the ion channel space, I know that these, again, are being kind of licensed on a target exclusive basis. I guess for those targets that have already been claimed by either GSK or 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 in the hierarchy of things that are difficult to do within the ion channel space itself? How much more kind of green space in, in, in the target universe do you think that you have over the next kind of one, three, five years? Thanks.
Yeah, 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. The GSK relationship is around specific targets for neurological disorders. This is 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. I'll just say when folks are pursuing ion channels and transporters, these are generally considered high-value targets, right? I'll just comment generally, I think GSK has a really ambitious innovation agenda in this area.
They've stated publicly a goal to positively impact the health of 2.5 billion people by the end of 2030. That's 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 distinct capabilities and cell 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.
Great. Thanks for taking the questions.
Your next question comes from Matt Hewitt from Craig-Hallum. Please go ahead.
Hi, this is Jack on from Matt. Thanks for taking our questions. obviously, you recently just launched OmniDeep, and I was just kind of curious what the initial reception has been from your customers. Thanks.
Yeah. Thanks, Jack. I'll say very positive. We launched it at the PEGS conference in Boston in May. I'll say the, the feedback in the room is a big area, a big presentation, very well attended and the feedback from partners who were sitting in the room was, was almost immediate. It continues to be an area of focus in terms of, not only new programs, but potentially, taking different, approaches to increase the success- the potential success rate of some existing programs with partners. Our, obviously our research and innovation team, and our BD team continues to partner on that as, as we talk with partners about it. The feedback's been quite positive.
Thanks for taking my question.
Your next question comes from Chad Wiatrowski from TD Cowen. Please go ahead.
Hey, Matt. Hey, Kurt. It's, Chad on for Steven Mah.
Hey, Chad.
Yeah, 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, are an opportunity that they're pursuing as well?
Yeah, yeah, sure. Happy to talk more about it. I think a few things differentiate our technology, right? At the core is the foundation of the multispecies approach that we can present. Beyond that, 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 and especially in the industry overall, where the lines between different approaches and modalities are becoming creatively blurred intentionally. 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 specifically designed 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. I think that's why folks like GSK and Roche are attracted to us for these sorts of partnerships.
Really helpful. I appreciate the improved downstream economics regarding ion channels, but there's sort of precedents that exclusivity of targets has led to some significant upfront payments. Is there an opportunity here to drive some upside in the near term?
You know, all deals are, you know, become a negotiation, right? I think to the extent that we show success, that, you know, we always try to leverage that for, for higher payments. You know, I think as we, as we look historically, a lot of this, you know, the, the difference between this and the antibody business has been more just on the exclusivity. T he other thing that I would point out on the ion channel side, and Matt talked a little bit about the expertise that, that we have. For the most part, with these ion channel programs, you know, there's a license that, for a target on an exclusive basis, but then we are continuing to do all of that work.
So a big portion of the service revenue that we generate comes from the ion channel side of the business. In many cases, the partners are pre-paying for that, and sort of gave the example today on the specific GSK program where, you know, they paid $7 million upfront that was being amortized over the research period. We are able to generate, you know, relative to the antibody side of the, of that business, you know, call it outsized economics, just on a relative basis. But a lot of that is just this function of that it's on an exclusive basis.
Thanks for taking the question, guys.
Yeah. Thanks, Chad.
Ladies and gentlemen, as a reminder, should you have a question, please press the star followed by the one. Your next question comes from Yuan Zhi from B. Riley. Please go ahead.
Hi, this is Brandon Carney on for Yuan. Thanks for taking our question. You've talked some about the trends you've been seeing in the discovery stage. Can 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 in the biologics development?
Yeah. This is Matt. I'll comment, and 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. At the end of, of Q2, we were actually already at three. Today we, we, you know, we're focused now on a higher area there of four to five this year. We're, we're seeing nice clinical progression or graduation into the clinical stage. We're pleased this quarter to see some assets move out of discovery into preclinical, which means that they're then preparing to, to enter the clinic. We are seeing nice progression in the portfolio. I don't know, Kurt, anything you'd want to add to that?
No, I mean, yeah, we have not actually seen a lot of clinical attrition. In, in, in terms of the clinical attrition that we have seen, it's been a function of partners exiting therapeutic areas as opposed to sort of any failure of a study or something like that. You know, as Matt said, attrition is part of this business, and it will happen. Our experience thus far on the clinical side has actually been, you know, pretty darn good relative to, you know, industry averages.
Well, thanks. That's helpful. One last one from us. Have you noticed any shifted interest in biologics development due to the Inflation Reduction Act?
I mean, I'll just make a comment. I mean, our business is mostly on the antibody business, is on the antibody side. You know, it is probably a more attractive place to, to develop drugs, just given the benefits, that have been afforded by the Inflation Reduction Act. Given that we, you know, if we had a small molecule offering and a antibodies, 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 players, as evidenced by the four new deals that we've signed this quarter. Matt, I don't know if you have-
Yeah, I think I'd, I mean, I'd add that, you know, because of the higher success rates of antibody-based medicines as compared to small molecules, from a scientific and technical perspective, there's been an evolving shift in the industry because of those higher success rates. 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 for a select number of high-cost drugs starting, I believe, in 2026. There are exceptions to how those negotiations can happen and that sort of thing.
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. I think if anything, it can help accelerate the interest there. I think 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 shift. If anything, it just may accelerate it.
Okay, thanks for that commentary, and thanks for taking our questions.
Yep, thank you.
There are no further questions at this time. I will turn the call back over to the CEO, Matt Foehr.
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 and 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'll also be at H.C. Wainwright, Cantor, as well as the Craig-Hallum Capital conferences in New York in the fall. In the meantime, we appreciate your interest in OmniAb, and thanks again. Have a great day.
Ladies and gentlemen, this concludes your conference call for today. We thank you for joining, and you may now disconnect your lines. Thank you.