We are right at 8:00 A.M. Pacific Time, 11:00 A.M. Eastern Time. We are going to get rolling here. Before I jump in, I just want to take a quick moment and mention that our team today will be making forward-looking statements. Those involve risks. Our business faces risks, our industry faces risks, our world faces risks, and I encourage investors to review our SEC filings for a fulsome discussion of risks. Welcome to what is essentially OmniAb's first Investor and Analyst Day by name. We did something similar to this, an R&D day when we launched our OmnidAb single domain technology a few years ago. This is the first time we have hosted something like this here at our site in Emeryville. I really appreciate that many of you flew out here long distances or drove across bridges or both to get here.
We are really, really proud of our East Bay home here. It is a very efficient place for us to do business. We are looking forward to kind of sharing our labs and touring the folks that are here in person. Today's agenda, I am just going to do a quick business overview. We will cover licensing strategy, talk a little bit about our transgenic chicken platforms, our new OmniTides platform, and then we will have a substantive discussion around xPloration, and then also a taste of how we continue to leverage AI within our business. Then Kurt will do a wrap up. At the end of the formal presentation, we will do a Q&A section. Those in the room we will have a mic and you can ask questions. For those that are on the webcast, you can actually click on the question box.
Those will go directly to Kurt and we can address those in the Q&A section as well. Here are today's presenters. One thing that I will just recount for everyone, a couple of weeks ago or a little more than that, maybe about a month ago, I was touring an investor through our labs and as we were walking to the elevator here, he said this business is really fortunate in that it has both of the critical Ts. He used the term Ts. I said, "Well, what are the Ts?" His comment was team and technology. I fully agree with that sentiment. We have really an esteemed and decorated team, an esteemed and decorated board of directors as well. Candidly, it is an honor for me to work with and lead the team that is shown here on this slide.
This group has played a really critical role in a variety of ways, each of them in building the foundation for this business. Also now positioning it for growth. The folks on here are company founders and entrepreneurs. They are inventors. They are innovators of technologies that are having important impacts on the industry, not only technologies here at OmniAb, but in prior lives. They are experienced global executives as well. I am really pleased to have the opportunity for these folks to present to investors today. Todd here on the upper row will present on our licensing strategy. Todd played a really critical role in forming what became the technical and business foundation of OmniAb. We did a string of acquisitions years ago, six acquisitions in less than five years. Todd played a key role in that and now leads our licensing.
Bill Harriman was a Co-Founder of Crystal Bioscience who we acquired back in 2018. Crystal was the original innovator of the transgenic chicken, actually in this building where we're standing today. This is technically, I guess, the birthplace of the transgenic chicken, a couple of floors down in a smaller suite. Bill was the Chief Scientific Officer there. Yas joined us three years ago, right at the time we were beginning to realize that we had the ability to engineer a variety of novel scaffolds into the transgenic chicken and were starting to realize how important that could be to the industry. Prior to joining, Yas was Chief Technical Officer at FairJourney Biologics, as well as the scientific Co-Founder of Carterra, which is an instrumentation company that plays a critical role in discovery.
Prior to that was actually a collaborator around the chicken when she was leading antibody discovery programs at Pfizer. So a long history there with the technology. Brian McGinnis joined us recently, most recently heading business development at Bicycle Therapeutics, which was an early mover in bicyclic compounds. So more from the therapeutics perspective, but it's great to have Brian on board managing the business development activities associated with our new OmniTides platform. Amechi joined us in July as Chief Operating Officer. Many here have already met Amechi. Amechi has obviously had a multi-decade successful global career in instrumentation, most recently at Thermo Fisher and then prior to that at Danaher. Bob Chen will present today on how we're leveraging AI. Bob was a co-founder at xCella Biosciences, who we acquired back in 2020.
xCella was spun out of the Stanford School of Bioengineering, and really the foundation of that was what became and is xPloration. So it's great to have Bob presenting on AI and how we're leveraging that. Kurt will finish up today. Many of you, I think all of you know Kurt. Had a long career at Amgen. Like me, has spent a number of years now in the royalty generation space and the technology space, most notably at Halozyme as well. So again, an honor for me to have these folks here presenting for you today, and looking forward to updating you on what we've been working on. So this is our mission at OmniAb. It's simple. It's straightforward.
I'm actually not going to read it to you, but what we want to do today is give you a sense of how we do this, and then also how we translate that into value creation for our shareholders. That's what we're focused on, and I think we're well-positioned to do so. So slide seven here is a simple overview of our business. We very intentionally have built a business that is designed to benefit from durable revenue streams, whether that's pharmaceutical royalties or whether that's high margin proprietary consumables. It really starts on the left hand of this slide with our proprietary transgenic animals that allow us to create in vivo libraries for both antibodies and peptide discovery, as well as our novel screening technologies.
Not only xPloration, which you are going to hear a lot more about today, but also our ion channel screening technologies, which position us quite well. We coined this term years ago, BI, or biological intelligence. We marry that obviously with AI. AI is a natural place for us to be, and we have been for many years. We amass huge amounts of data that do not exist anywhere else. That data is highly relevant to discovery. That marrying of BI and AI is really an important differentiating factor of our business. We now have scale. We have a lot of leverageability in this business. We have built this business specifically to have leverageable technologies and now have multiple revenue streams. We have more than 110 active partners, more than 125 active programs, over $3 billion in contracted milestones, and an average royalty across our portfolio of 3.4%.
xPloration is something that we believe is really poised for significant growth and the ability to create multiple revenue streams. Amechi is going to talk more about the market and our analysis and opportunities there. We wanted to frame what we see as the key pillars of value here at OmniAb. We feel like we are now better positioned than we have ever been to drive value for our stakeholders, largely because we have these multiple ways to create value. It starts on the left with our pipeline and our partnerships.
We have continued to build up a growing pipeline of partners or a growing portfolio of partners. Our partner pipeline of programs has continued to grow. Now we are starting to see a ripening of some of the late-stage assets with what our partners are calling pipeline-in-a-product opportunities, and I think that is a really important maturation of our pipeline.
In the center are our discovery technologies. We continue to leverage our vantage point in the industry to develop new technologies and almost as importantly, new workflows that enable efficient drug discovery. We are seeing an increase in the pace of novel drug discovery, of partners going after new novel targets, and we think we are unusually and very well-positioned to meet those needs. Our xPloration platform, as I said, we are very excited about. A lot of that excitement is informed by robust primary market research that Amechi will talk much more about in his section. I am going to kind of step back now. Just for a moment, I want to talk about royalties generally. Kurt will talk in his section about the value of aggregating royalties.
I will just say, just as a personal note, I have spent the last 16 years or so of my career in and around pharmaceutical royalty generation. It has been interesting seeing that area evolve over that 16-year period of time. More and more players are out there getting involved in royalties, writing checks to get access to royalties. That is not really our model. For us, it is far more scalable, far more efficient for us to essentially create tools, leverage our vantage point in the industry to create tools that allow us to generate royalties or generate and grow a portfolio of royalties that way. That is the model we have pursued, and I think we are showing the efficiency of that over time. Why are royalties so valuable? Why is there so much interest in royalties?
One, they have predictable and recurring cash flows, require limited operating expense and limited operating expense risk, can provide broad exposure to a growing healthcare market, and you can build up a diverse portfolio. If you have platforms that are broadly applicable to a variety of therapy areas, that allows you to create a diverse portfolio of royalties. Lastly, they often come with strong intellectual property protection in a variety of forms, including, of course, patents, but also regulatory exclusivities. There's often proprietary manufacturing or other knowhow that can protect novel pharmaceutical products and royalties. IP, we see as a really important advantage here at OmniAb. As you'd expect, we have a suite of novel technologies that I'll talk about more in a moment. We have over 350 technology patents on our technologies, many of which those technologies we'll be highlighting today.
They cover a variety of factors. Our transgenic animals, methods for creating the transgenic animals, our screening technologies, various elements of xPloration, et c. We've got that broad intellectual property estate that we pursue globally. Importantly, the way our license agreements are structured and the way that our royalties are protected and linked are to the patents that the partners file on the drug that comes out of our technologies. What that does is it creates a really diverse intellectual property foundation upon which our royalties are based. It also creates an ever elongating tail of protection. On the right-hand side of this slide, you can see the patent applications that are filed by our partners for which the primary invention is a compound that has come out of our technologies.
That says a lot about the conviction of our partners around the molecules that they've discovered, and their investment there from a global perspective. Here on slide 11, we have what I'll call our continuum of technologies. We think about these in sort of three basic buckets. Creation of novel libraries that are targeted for the partner's needs, our novel screening technologies, and then ultimately, delivering at the end of the day. We can do downstream work, prioritization, and selection of candidates for our partners. Many of our partners will do that work in their own labs, which is completely fine. We can do that work as well. On the creation side, on the left, it really starts with our source technologies, our core genetic engineering capabilities, our IP and knowhow around that. We've built up a multi-species platform of discovery technologies.
You'll hear a lot about our transgenic chicken platforms today. Bill Harriman will highlight our OmnidAb single domain platform that we launched a few years ago. Yas and Brian will talk a lot more about our OmniTides platform as well. In the center of the slide here, you see our high throughput screening technologies. xPloration, which Amechi will talk through, is an ultra-high throughput single B-cell screening platform that allows massive amounts of data generation and screening, high throughput single-cell phenotypic screening, which is a big need in the industry. I'll talk a little bit more about our ion channel capabilities as well. That also falls within the screening, but touches other elements of our technology. That's an area of increasing interest, especially for some of our larger partners, our larger Big Pharma and global partners.
As I mentioned, we have a suite of delivery work that we can do, prioritization of candidates, binding kinetics, epitope binning, those sorts of things. Along the bottom of this slide, you see our OmniDeep platform that we launched a few years ago. This is our suite of in silico tools that are really woven throughout our platform. When you're in a position like ours where you're generating large amounts of data that don't exist anywhere else in the literature, leveraging in silico tools and AI to process that data, to guide that data selection is a natural place to be and a place we've been for many years. Now I'm going to talk a little bit more, as I mentioned, about ion channels, and their role in health and disease.
Ion channels as targets have long been viewed as kind of holy grail targets for almost any modality, almost any way of attacking them, but especially for antibodies. When you see the areas of biology that ion channels touch and are involved with, you can get a really clear understanding that these are big markets, these are significant unmet needs, and you can understand why there's an interest in our ion channel capabilities. We announced a new deal back in August with Eli Lilly for an undisclosed ion channel target, for an undisclosed modality. That's a deal with substantial downstream economics that has garnered some attention and also, I think, created more visibility for this element of our technology stack. We really do believe we've built and developed an industry-leading platform for ion channel discovery.
We partner largely with Big Pharma players who are interested in pursuing these ion channel targets and want access not only to our suite of discovery technologies, but also our custom cell lines, our custom reagents, our ultra-high throughput screening capabilities that are very specific to ion channels. The visual here on the right shows where we have stable cell lines, in some cases novel screening assays. These agreements are generally multi-year agreements. They typically include much larger license and service fees, including time and pass-through costs, in addition to milestones and royalties. We think this will continue to be an important part of our business and a growing element as we move forward. I'm quickly going to run through some metrics that we report quarterly. These numbers here on the next few slides are as of June 30th.
We'll give our Q3 number updates as we normally do when we report our Q3 results in a few weeks on October 30th. You can see here our growth in active partners over recent years, net of attrition. You see the categorization of those partners. Really these deep relationships with our partners provide a unique vantage point on the industry and really inform our investment priorities, our innovation priorities, etc. The next slide here shows the breakdown of active programs. Again, nice growth, net of attrition. Over 98% of our active programs have contracted future economics to OmniAb. We have over $3 billion in total potential contracted milestones. On the pie chart there in the near center of this slide, you can see how those are broken down between clinical milestones and commercial milestones. Heavily weighted to the clinical side.
You also see the distribution of our contracted royalty rates and the ranges. a fairly tight range there. Our average royalty across our portfolio is about 3.4%. Active clinical programs and approved products. This number continues to grow. We continue to expect new clinical entrants this year. You see this broken down also by source technology. The ones there in the hashed in the center pie chart are ones that are derived from our novel chicken technologies. You can also see the breakdown of therapy areas of these programs that is becoming more diverse over time. And importantly, these 34 programs have about $340 million of contracted remaining potential milestones to OmniAb. The next slide shows our clinical and commercial partner pipeline. These are for programs that have contracted remaining downstream economics to OmniAb. Importantly, this has really started to mature this year.
We have seen much more, I will say, crowding in a good way on the center and right-hand side of this slide, as more programs enter into later-stage clinical development. We have had a couple of programs in recent months jump directly from phase I into phase III. The Ramantamig program with Johnson & Johnson that is pursuing multiple myeloma, and the Merck KGaA precemtabart tocentecan ADC, which is going after a variety of indications that I will talk about in a moment.
You can also see the little chicken icon here, which indicates programs that are derived from our transgenic chicken technologies. I mentioned at the outset the value of our Partner Access program. And we have a select number of late-stage partner programs where the partners are starting to refer to these programs as either pipeline-in-a-product programs or programs with first-in-class or best-in-class potential. Especially important as you think about aggregating royalties are pipeline-in-a-product programs.
These are ones that I pay attention to. One, they have multiple ways to win, multiple ways to create value. Importantly, I will point out the IMVT-1402 and TEV-408 programs, both of which have had data in recent months and years, both of which have potential in as many or even more potentially as five indications. You can see the potential first indications and then the added indications on the far right of the slide. The Merck KGaA program is one that jumped directly from phase I to phase III earlier this year in recent months. Currently pursuing colorectal cancer, but has potential in a variety of other areas as well. So you can see the conviction of the partners in the investments that they are making in these programs, and we are excited to continue to see the data mature and partners aggressively pursuing regulatory progress with these.
This next slide shows partner commitment to programs that are in the clinic. These are data that we track internally. We have not presented these previously, but I think they are an important sort of viewpoint or provide an important insight into how partners are investing in our programs. You can see the number of clinical trial starts on the left-hand side, and then also the number of planned or enrolled patients across the portfolio of clinical programs that have been produced with our technology. And as another measure of the partner's conviction here, we estimate that based on the data that is shown here, these partners have committed or are spending more than $2.4 billion advancing programs for which are ones that are derived out of our technology.
I think it says a lot about the value that we are bringing to our partners, and the conviction that they have around these programs. This next slide shows selected partner clinical readouts that are coming in the last part of this year, in just the last few months of 2026 and during 2027. These NCT numbers that are referenced here are pulled directly from clinicaltrials.gov. The placement on this graphic are based on the primary completion dates for the partner programs for these clinical trials. A substantial number of readouts over the next 15 months, about 19 clinical trial readouts in that period of time. We see some phase I data that is coming out in other indications for the Merck KGaA precemtabart tocentecan, the ADC program I was referring to, but some really exciting programs also in readouts in the middle of next year.
The IMVT-1402 readouts, which are potentially pivotal readouts for that program. Also the Ramantamig readouts as well that are garnering a lot of attention. We are excited about the flow and the data that is to come as our pipeline matures. Lastly here, as I kind of wrap up before I hand it over to Todd, I wanted to kind of give a little bit of an overview of our expectations for the business in the short term, in the midterm, and in the long term. We have spent a lot of time, as I said at the outset, building a business that is designed to benefit from durable revenue streams, that is highly leverageable and efficient. In the next couple of years, we expect our portfolio to continue to mature. We expect to continue to see milestones coming in from late-stage assets.
Generally, milestones get larger as a program progresses later in development. We expect to see a potential launch of IMVT-1402 in its first indications, and we will continue to build a foundation for xPloration that you will hear a lot more about in Amechi's section. In the midterm, I expect our business will continue to evolve and grow. We will continue to diversify our revenue mix, with multiple new assets launching. We will continue to grow our portfolio. We expect we will see other major new product launches. We get very excited as we look even more deeply into our portfolio, and we will continue to manage, or really leverage, I should say, our vantage point in the industry to inform our technology innovations, our technology investments. In the long term, we will see continued launch of new products.
Expect the xPloration install base to expand greatly as we expand our reach and spread more instruments. That ought to produce recurring revenue in the form of high-margin consumables. We will continue to have a robust and efficient and diversified partnering model. We really want to continue to leverage this vantage point in the industry that we have and we have created. Whoop, dropped some water there. Continue to have a controlled expense structure to really demonstrate the efficiencies that we have built in the business, and the efficiencies that we have kind of built across our business platform. That is an overview of how we are seeing the business, and I am going to turn it over to Todd now to give you a little overview of our licensing strategy and plan. Todd, hop on up.
Thanks, Matt, and good morning, everybody. Todd Pettingill, Vice President of Business Development. Today I am going to talk about our licensing at OmniAb. I will focus on a couple different aspects. Number one, how we see the market evolving, and two, how we are positioning ourself to optimally capitalize on those movements and maximize value for our shareholders.
On what the market is doing, we see several positive developments that are combining to become a very strong tailwind for the licensing business. First, just the space we are in. We are in the biologic space. Biologics have historically been known more and more to have a higher probability of success than other types of medicines, so it is a great place to be. Additionally, the industry, generally speaking, recently has come to the realization that there has been a bit of target crowding, and there is a need to spread out and investigate new areas.
With that, we are positioned well. We have a broad range of technologies that can help people to approach the new targets that they are focused on. Additionally, as they are looking to new targets and looking for new technologies, they are focusing on new types of scaffolds, different types of antibodies, different types of biological structures, and we are fortunate to have a wide range of technologies that are useful for these medicines.
Also, it is no secret that more and more the industry is starting to incorporate in silico development into discovery efforts, and we are positioned well to not only provide the data sets or the data that can power these models they are working with, but also generate and screen through data on a high level, quick level as Bob Chen will be speaking to later on. Finally, the overall biotech market is definitely been in a better position over the last several quarters.
It was a little tough sledding for the last several years, but things are definitely opening up, and this is putting our partners in a position where they have stronger sources of capital, enabling them to approach the targets and the drugs that they are seeking to develop. Now looking backwards, OmniAb, we have spent the last several years focused on creating a wide range of partners, and this has put us in a unique position where we can listen to what our partners are saying, we can hear what they are focused on, what they are interested in learning, and while we will never share that with other people, it does allow us to think about and inform how we focus our internal R&D efforts.
We build out the technologies that our partners are interested in. For example, over the last couple of years, we have launched several different technologies. We have our heavy chain-only chicken, OmnidAb, our ultralong CDR chicken, OmniUltra, and today we are going to be talking about OmniTides, our peptide discovery platform. For all of these have been a result of us working with or listening to our partners, figuring out what they are interested in, and then adjusting our R&D accordingly.
As you can see, it has been paying off. Over the last several years, a bigger and bigger portion of our partners have been focused on these new technologies. Finally, not only are we innovating in our technologies, we are also innovating in how we structure our deals. We pride ourselves on going to the market and saying, "Hey, come to us. We can figure out a structure that works for you." Our goal is to get our technology in the hands of as many people as possible.
These are some of the structures that we're working with, but we're open to a wide range. I'll go through each of them. First, our standard tech licensing. In this structure, people come to us, they're looking to get access to one or more of our technologies. We'll sign a deal that gives them access, and the great thing about how we structure these is we can be pretty agnostic about how we structure them. We're looking for a risk-adjusted NPV neutral type deal, but with adjusting appropriately for probability of success, we can move payments forward to more of an upfront structure or backwards to more of a back-end structure, and more or less, we're aiming for the same risk-adjusted NPV. We have a lot of flexibility in how we structure these deals.
But generally speaking, there's always some element of upfront payment, service fee, clinical milestones, royalties. Next, we have our ion channel screening group, or screening deals, which are driven by our ion channel screening group. We're fortunate at OmniAb to have a group that came into the fold indirectly through an acquisition. Our ion channel screening group, they've been together for many decades, and they're known in the industry as one of the best ion channel screening groups out there. When new targets come into interest, they're one of the first people that the industry participants come to. What that allows us to do is we can get, number one, these deals, they rely a lot more on the service. So there's a larger upfront. Additionally, there's bigger back-end milestones and royalties. These are the sources of some of our larger deals.
Next, we have the entrepreneur enablement program. This is pretty similar to our standard tech licensing with the main difference that we can work with people who are capital constrained. We find either new industry participants that have interesting scientific ideas or people that have proven themselves and also have interesting ideas, and we can work with them and provide our technology where with other customers, we're more cash focused on the upfront. With this particular program, we can take equity upfront. This allows us to enable our partners who normally wouldn't be able to get access to our technologies. We can give our technologies to them. Also, though, we can provide ourselves with additional equity upside upon the success of these companies. Finally, we have our asset-based deals.
We have a series of assets that are on our shelves, either through, say, we've done a proof of concept study, or we have an asset for another reason. They're generally more advanced, so when we go to market, we can command a much larger upfront. And there's still some element of milestones and royalties on the back end as we do these deals. These are some of the deals we work with, but again, I want to emphasize that we're highly focused on coming up with a wide range of deal structures that work for our partners.
And again, at the end of the day, we are trying to maximize, get our technology into as many people's hands as possible, and drive as much deal-making in order to drive the overall value of the company. So with that, I'll turn it over to Bill, who's going to be talking about the benefits of working in our transgenic chickens.
Thanks, Todd. I'm Bill Harriman, Senior VP of Discovery Partnership Management and Technology Development. I'm going to provide you an overview of the transgenic chickens we've developed over the past decade or so. First, let me start with addressing the question of why we're working with chickens in the first place. It might sound a little bit odd if you're familiar with immunizations being in rodents and more standard animals. But if you think about it a bit more, it actually makes a lot of sense to use chickens. The primary advantage of using chickens as an in vivo host for antibody discovery really stems from the substantial, really enormous phylogenetic distance between chickens and humans. When you go to an animal to raise an antibody to a human target, you're relying on that animal to recognize your target as a foreign protein.
Obviously, if it's exactly the same, it's not going to recognize it. The amount of differences between the human target and the immunized species ortholog makes a big difference. The more different, the more foreign it's going to look, and therefore, the more robust type of immune response you'll see from that animal. When you look at the numbers in terms of the sequence similarities and structural similarities, it's really driven by evolution, by genetic drift. What you need to look at, relevant numbers are what's the last common ancestor, let's say, for the mammals. It's about 100 million years ago. That means from that branch point, the mammals sort of broke on their own lineages and evolution occurred on everything in the genome. The branch point, the last common ancestor between mammals and birds, is like 300 million years ago.
So much more time for genetic drift to occur, meaning that for pretty much any target you look at, you're going to see more differences between the orthologs of human and chicken versus human and any other mammal. That, in essence, is what we call the chicken advantage. As a host, it's advantageous to use a chicken to make antibodies to human proteins. Another concept that you might've heard of a little bit, but I'd like to introduce a little more, is biological intelligence. This is something we actually trademarked about five years ago, and it refers really to leveraging the incredible power of the adaptive immune response. This is something that all vertebrate animals have. We all have some sort of immune response to foreign pathogens or anything new that comes along.
This is comprised of both cellular and genetic elements that work together to be able to address any challenge at a molecular level that comes along. Even for things that the host animal's never seen before immunologically. This is why animal immunization is still the preferred choice for antibody discovery and has actually produced the vast majority of approved antibody drugs. As genetic engineers, we aim to tap into the system. It's a powerful system. It exists in nature. It's there. Vertebrate animals have it. We want to get in there and actually tap into by introducing scaffolds and frameworks that are designed specifically with intent for making therapeutics. By doing this, we'll increase the efficiency of the therapeutic discovery process. Chickens are particularly suitable for engineering applications because of their unique genetic architecture. I won't go into the details of that.
On top of that, chickens have this advantage in terms of immune recognition that I just spoke of. That said, performing genetic engineering in a chicken requires a stack of very specialized proprietary knowledge. Some of this, if you go on the tours with us later, you'll see a little glimpse of what I'm talking about there. The fact is that OmniAb is currently the only company that's offering engineered chicken platforms for therapeutics. Okay, so here's an overview of our transgenic chicken platforms. At the top, we have OmniChicken and OmniClic. These are both designed to generate antibodies with classical IgG formats. OmniClic is a variant featuring a common light chain design that is geared towards the generation of manufacturing-friendly bispecific antibodies. Our other scaffold designs include OmniDab and OmniUltra, each of which can generate novel binding domains outside of the classical format.
In case of OmniDab, it's inspired by a class of antibodies found in camelids, which are comprised of a heavy chain without a light chain at all. Heavy chain-only antibodies are the basis of single domain antibodies, also known as VHH antibodies or nanobodies, which feature a small modular binding domain of 12 to 15 or tethered together or to other binding domains to generate multispecific molecules. As standalone molecules, single domain antibodies are valued for tissue penetration, stability, and solubility. Also, there's no light chain, so the manufacturing process is also more simplified as well. Our most recently launched transgenic chicken is called OmniUltra, which is inspired by a subclass of cow antibodies, which again, have a unique structure. These feature ultralong CDRH3 domains.
As you probably know, antibodies have three CDRs in the VH and the VL, and the CDRH3 is the most prominent one in all antibodies. But in cow antibodies, it's super prominent. It actually has a length that's three to four times what's found in a normal human antibody, and it comprised of a stalk and knob structure. Because of its unique shape of the antibody, it allows the antibody to interact with targets differently than conventional antibodies, which are typically more of a flat or planar surface. This gives potential access of OmniUltra antibodies to buried epitopes and deep clefts on targets. Even more interesting, we find that often the knob domains themselves, that are protruding out from the base of the antibody, is sufficient to confer binding specificity and affinity.
This attribute is exploited by our OmniTides platform, which you will hear about in a few minutes from my colleague, Yas. Collectively, OmniAb's transgenic chicken platforms offer versatile ways of interacting with the targets based on proven scaffolds found in nature. For each scaffold, a vast sequence space of target-specific binding molecules can be generated just through the simple process of immunization. We orchestrate the genetics, but actually the animals do most of this work. I want to take a little deeper look into the OmnidAb platform in particular. This is for the discovery of single-domain antibodies. The traditional approach, the traditional in vivo approach, is to use wild-type llamas or camels because these are among the rare animals that actually produce heavy chain only antibodies. In this process, immunization occurs over the course of several months. It is followed by a display-based discovery process.
If successful, the affinity-matured camelid antibodies to the target of interest will be found. However, you are not done yet. A number of further engineering steps are needed before you can make a therapeutic. Starting with humanization, these are llama antibodies. The typical process is to graft the CDRs from the llama antibody onto a human framework. One issue is that the human framework, humans do not have heavy chain only antibodies. We are not evolved in nature to have antibodies that express without a light chain. Some further framework engineering is required on the human antibody in order to make it work and make it an effective molecule as a single domain antibody. These engineering steps will often require or cause some loss in affinity of the original camelid antibody.
You have lost something because you have changed it, so you have got to add the affinity back, so it is additional engineering. My point here is that there is multiple engineering steps you need to go through when you are going from a camelid antibody to a potential therapeutic. These take time, resources, etc. In our approach with OmnidAb, what we do is we address that engineering need to make a human VH work well as a single-domain antibody. That is an engineering step that you have to do every time. We do it upfront at the genetic level. By genetically baking in the essential attributes needed for single-domain therapeutics, we can go over the immune response to OmnidAb chickens for the affinity and specificity. This is what they do naturally. This is the in vivo process.
Then coming directly out of the OmnidAb animal, we have molecules that are much closer to being ready to go for preclinical and clinical development. Overall, the OmnidAb platform provides an efficient strategy that can fit well with an accelerated discovery and development timeline. As an example of this, by accessing the pre-engineered single domain human scaffold in our OmnidAb chickens, it is possible for our partners to move through preclinical development quite quickly. In this case study example, we were able to immunize a cohort of animals, execute an xPloration screening campaign, and deliver candidate antibodies to our partner in around seven months.
Since our candidates required only minimal, if any, engineering, the partner was able to select leads just a few months after that. So remarkably fast, allowing a rapid progression into IND-enabling studies. For this program, it was less than two years from the start of immunization to the clinic. I will leave you now with Yas, who will introduce you to our newest innovation, the OmniTides platform.
Hi, everybody. Pleasure to be here. My name is Yasmina Abdiche, and I am the SVP of Exploratory Research and Advanced Characterization here at OmniAb. I am really thrilled to tell you about OmniTides today. We are introducing this new platform, and it extends our reach into a high-value market that is adjacent to the antibody market that we have historically tailored our platforms towards. This is really opening up a whole new kind of innovation opportunity and expanding our reach to different partners. As you have heard in the context of therapeutic antibodies, the immunization of animals is really a well-established, clinically proven method, and it has yielded most of the approved antibodies on the market today. As you have heard, we have a suite of transgenic animals that addresses that market.
Here, what we are doing is we are repurposing the immune system, you could consider it nature's discovery engine, to discover peptides. As I mentioned, this really opens up new possibilities for us. Peptides have really been reinvigorated in recent years with the explosive use of GLP-1s, and these kind of medicines can really transform diseases in different ways. We really see peptides in a targeting strategy as being a really exciting opportunity for us, especially in radio and in peptide conjugates. This is because of their small size. They are able to penetrate tumors very effectively, and they have tunable clearance, and for imaging, that clearance timeframe can match the radioactive decay half-lives of radionuclides. What we have realized is that the therapeutic peptide community is very different from the antibody discovery market.
We have developed a peptide discovery to synthesis workflow to really address this market and make ourselves more familiar to the peptide community. That is really the essence of OmniTides. Here I wanted to clarify how OmniTides is different and complementary to other ways of generating peptides as therapeutics. The main differentiator is really the stage at which optimization is incorporated. Because OmniTides is powered by the OmniUltra chicken that Bill was telling you about, peptide libraries have been naturally optimized in vivo, and this is through powerful biological mechanisms, the biological intelligence that we told you about. This is affinity maturation, clonal expansion, natural selections to really deliver binder clones. This really eliminates or reduces the need for downstream optimization. The second point I want to draw your attention to is the custom nature of the library.
For most of the other methods, they are kind of immune campaign. Every single one is a bespoke, custom library. Thank you. The third point is manufacturability. The peptides evolve on a developable scaffold facilitating their downstream production by chemical synthesis. This is a critical factor in determining whether a drug is going to be a success. Let us consider the other methods. They very broadly fall into two buckets. The first is combinatorial chemistry and display. This is really a brute force method that screens massive libraries very broadly. But oftentimes, the candidates need extensive optimization to bring that affinity and stability to a drug-like level. The other approach is really very opposite. It is rational design.
Here you really focus on one or two candidates, and you are really very much guided by structural or other methods, just the very deeply focused optimization of a few things. This really requires a lot of information. OmniTides is actually compatible with these two methods, but it really just gives you that pool of very high-value candidates to begin with. This really expedites the discovery to lead times. I want to share with you the OmniTides workflow. It is really quite simple because what we do is we start with the OmniUltra chicken. This is immunization, and what happens then is that it will produce these antibodies that have this protruding stalk knob feature that Bill Harriman was telling you about. You can think of this as an antibody that is displaying a peptide that is integrated into the antibody structure.
We screen the output of an immunization campaign using xPloration, and you will hear more about this from my colleague, Amechi . Having identified potential binders at the B cell secretion stage, we can then reconfirm these hits by recombinantly making them on an inert scaffold of an antibody and having this protruding peptide attached to it. We can also just make the peptide by chemical synthesis. This is pretty amazing that this little peptide that was discovered within the context of an antibody can actually function as an autonomous unit, and it contains all the optimization that you would expect from antibodies. We have actually established a stable of peptide vendors that have reliably and reproducibly been able to chemically synthesize peptides coming from this OmniTides workflow. Conveniently, these peptides spring into shape by random oxidation.
This is pretty phenomenal because it means that you do not have to engage complex chemistries for orthogonal protection strategies. The other thing is that because they conform to a common topology, if you wanted to do a directed oxidation, you could, because they are not enormously different. This is quite important because this does not compromise the diversity because the target binding regions are contained in the loop areas, whereas the scaffold helps the stability. On the right here, you see a picture of a sensorgram, and you will see on the tour later in the advanced characterization how we generate these types of data. But what this is telling us is that this is a very high-affinity interaction. This chemically synthesized peptide is able to bind its target, and it does so with a very high affinity.
The affinities that we get out without any further optimization are pretty much the same as those that you would get from an optimized other method. So they are already kind of ready to go at an affinity that is biologically relevant. Furthermore, and this is very important because they are on this developable scaffold that is really kind of locked in there, they are very stable. They have exceptional heat resistance. You can freeze thaw them. You can actually incubate them for an hour.
You can boil them in very strong acid, and they will still retain their shape and their target binding. This is relevant for radio because when you do radio labeling, some of the conditions that you use are high heat and low pH. Then finally, they are very strongly stable in serum. So this is proof that they do not get proteolytically degraded. The workflow is really tailored to the peptide discovery market, and it is amenable to multiple applications. I will now pass you to my colleague, Brian, who will tell you more about that. Thank you.
Thanks. Okay. All right. Thanks, Yas. So I am Brian McGinnis, Senior Director of Business Development, and my primary focus is to look after and partner the new peptide library, which Yas has just run through. By a number of measures, peptides are a rapidly growing class of therapeutics. Most tangibly, they account for 10% of FDA approvals between 2020 and 2024, and as of 2026, there are around 130 FDA-approved peptide and peptide-based therapeutics. This is driving rapid market growth from an estimated $117 billion in 2026 to a predicted potential in excess of $300 billion by the mid-2030s. Fueling that market growth is the reality that peptides are impacting a broad range of high-value, high unmet need therapeutic areas.
The aim of this chart is just to give you a high-level qualitative view of the relative size and growth rate of the peptide markets in the top five therapeutic areas that are being impacted by peptide approvals. Perhaps not surprisingly, the metabolic disorders through drugs like the various GLP-1 agonists that there are out there have an in excess of 60% market share. However, indications with broad therapeutic application, broad therapeutic scope, and high unmet need like oncology and various neurological indications are well-established and growing rapidly. As such, they offer a potentially very deep well of opportunities for novel peptide therapeutics. So what is driving that growth? What is behind that growth? Peptides are an extremely versatile modality with a broad range of potential applications.
The standalone therapeutic peptides on the top left-hand quadrant of this slide, such as those addressing metabolic disorders, are clearly a very important class. Because they combine the beneficial attributes of both small molecules and antibodies, excuse me, the universe of potential applications for the OmniTides peptides stretches beyond the standalone therapeutics. In particular, driven by high unmet need, developments of new modalities and advances in understanding of disease biology, there is a significant interest that is growing rapidly in peptide drug conjugates and peptide-based precision targeting of a range of therapeutic payloads, and that is kind of essentially the right-hand side of this slide. Such formats are accessing significant strategic upside by virtue of their ability to enable the development and application of a whole new generation of novel targeted therapeutic agents.
For all the reasons that Bill and Yas have really very neatly outlined and underpinned by the biological intelligence at the heart of their derivation, OmniTides peptides are a highly versatile modular format, perfectly suited for precise target-specific delivery of a broad range of therapeutic payloads. This opens up a host of partnering opportunities for us, both with our existing and entirely new partners, looking either solely or additionally for a novel peptide format in their pipeline.
As a result of conversations that we have been having in the space, we believe that the three delivery formats at the top of this diagram are particularly well-suited to the benefits of the OmniTides platform and are likely to be the most attractive place for us to focus initially, for potential partnerships. However, more broadly, we believe that the OmniTides platform ultimately has the potential to address unmet need in applications with an estimated total market for peptide relevant indications valued at around $1 trillion. With that, I would like to hand over to my colleague, Amechi, to talk about the xPloration platform.
Thank you, Brian. Good morning, everyone. My name is Amechi Nwachuku. I am the COO, and I am pleased to introduce the xPloration platform. I will explain what makes this technology distinctive, as well as share why it is that we believe that it can become an important complementary and durable revenue contributor for OmniAb. I am excited to share that we are bringing xPloration to more researchers. Starting today, we are making it available to all customers. As you may remember, in May of 2025, we launched the Partner Access program, and that gave our 100+ OmniAb partners access to be able to use and try the xPloration platform in their workflows. Their experience over the last year has been really positive.
They've given us positive feedback about how this was able to impact the work that they do every day, whether they were in Big Pharma companies, whether they were at global CROs or small biotech companies. At the same time, it gave us increased confidence to now offer xPloration for broader availability. Starting this month, as a consequence, we're going to be making the instrument, the proprietary consumables, the software, and the support available to all customers. I'm now going to walk you through what the instrument is, explain what it does, explain a little bit about the market, and also how it is that we intend to build this business. xPloration is a novel platform for B cell screening. For antibody discovery teams that use the xPloration platform, they're going to be able to explore more boldly to do their work without the usual limitations.
That means that they'll be able to go from dissociated samples to the targeted hits over the course of a morning. As a consequence, over the course of a year, they're going to be able to do more campaigns and reach a candidate sooner. Thank you. The xPloration itself is an AI-enabled high throughput platform with proprietary consumables for finding and selecting B cells that are producing the antibodies of interest. The system is a benchtop instrument. It fits practically into any lab without any complicated infrastructure. It is fluidics-free. It runs from a standard power outlet. It requires no external plumbing, air, or vacuum, and it doesn't require a specialist to operate. A key component is the proprietary micro capillary array that has 1.5 million micro capillaries built into it.
These allow for individual B cells to be sorted and separated for deep parallel analysis without any microfluidics. The researchers load the B cells and the assay reagents, for example, target cells or reporter cells or beads into the array in under five minutes. Then four exchangeable fluorescence channels allow several assays to be run on the cells in a single screen. The instrument then scans every capillary using AI-based image analysis and can identify thousands of positive hits in real time. With this support, the researcher can select the cells of interest in the course of minutes. Once they've selected those, then a precision laser extracts gently the selected live cells into a 96-well recovery plate. The result then is a meaningfully different workflow. They can screen millions of B cells and get to hundreds or thousands of intact hits in a half a day.
Work that used to take them weeks or months can be done in a morning or in an afternoon. xPloration gives discovery teams the freedom to be bolder in their work. It enables them to work and screen outside the usual limitations, and it delivers high throughput in an instrument that's easy to use, robust in routine lab operation. The core application for xPloration is a market that's large and attractive. B cell screening, we estimate at more than $500 million annually and growing at double digits. On the left, you can see how we think about this market. We think of it as industry and academia, with industry making up approximately 80% of the market. Academia is smaller, but still remains strategically important. For us, we intend to serve both customer groups. Along the bottom, you see the competitive environment we operate in.
It includes generalized technologies such as FACS or single-cell NGS. It also includes specialized technologies like optofluidics, droplet fluidics, nanowell technologies, and others. We also see the potential for eventually growth into new applications, including broader antibody repertoire screening, protein repertoire screening, organism screening, while our immediate focus will be on the core application where we believe xPloration already competes favorably. Our partner experiences have convinced us that xPloration competes favorably with the existing methods on the core value drivers of higher throughput, ease of use, robustness, and lower cost. Our primary market research provides additional evidence for that. We commissioned two studies from Percepta Associates, each involving more than 200 respondents across industry and academia. The first one was a quantitative market analysis.
It examined the market size and the dynamics, it looked at the competitive landscape, and they projected plans of potential customers to acquire new technologies. The second was a conjoint preference analysis. It examined customer needs, tested alternative product configurations, compared those configurations with the existing technologies, and measured how customers value the attributes that xPloration can bring to bear for them. These studies led to three important findings that make us even more confident in bringing xPloration to general availability now. The first is that the timing is favorable. Almost 2/3 of the market, 63% of respondents, project that they will need a new screening platform in the next three years. Of those, more than 20% within the next 12 months. More than half, 55%, anticipate investing in advanced in vivo screening, which is the core technology that xPloration delivers on.
The implication here is that there's a meaningful portion of the market that should be open to a new platform, just as we are opening xPloration for general availability. Secondly, xPloration competes favorably against the existing methods on the attributes that drive the purchasing decision. You can think of the attributes generally as grouped into three buckets, economics, productivity, and operability. Economics accounts for about 45% of the decision process, productivity about 40%, and operability for about 15%. On the economics, xPloration competes favorably, whether we're talking about the cost per screen or the cost per hit. On productivity, xPloration competes well and has the potential to be best in class on cells per screen, time per screen, and automation. On the operability, xPloration is distinctive in the ease of use.
The interpretation is that customers do not have to trade productivity for usability, and that xPloration offers a compelling mix of economics, productivity, and operability. The third big learning is that that preference translates into the intention to buy. More than 80% of the respondents said that they would definitely or probably purchase the winning xPloration concept in our conjoint analysis, and that result was consistent across industry, across geographies. Because it's one thing for respondents to say that they have a preference for a certain brand or for a certain mix. It's another thing for that preference to translate to an intention to buy. That's why we believe that xPloration is ready for broader commercialization. Customers, they see the value of xPloration. A meaningful portion of the market expects to purchase new equipment soon, and the product configuration competes favorably against existing alternatives.
So turning to the business model, xPloration combines an instrument-led customer relationship with three recurring revenue streams. The instrument is the starting point. Each capital sale establishes that customer relationship and expands the install base that supports the future recurring revenue. From there, the proprietary chips and kits generate high margin usage-based revenue with every run, and that revenue scales with adoption and as customers run more experiments. Software adds another recurring revenue stream. Annual licenses support analysis and data management. They create predictable revenue, and they can expand as we add more workflows and applications to the platform. Then service completes that model, the installation, the training, the preventive maintenance, these are all things that support instrument uptime and repeat purchases and customer retention. Typically, these would be multi-year service contracts that grow as the install base grows.
Together, these revenue streams, they can create, we believe, a durable and complementary source of growth for OmniAb. We expect that this year, 2026, xPloration will deliver between $2 million and $3 million of revenue. Then we expect that that will double in 2027 and double again in 2028. When we think about how that could evolve over time, on the right-hand side of the chart, we illustrate how the mix between instruments and the recurring revenue could evolve. As the instrument sales grow, they will likely be the biggest contributor over the next few years. But then the install base growth and the usage by customers of the platform will then drive the consumables, the software, and the service revenue, and that could become a larger part of the mix. That would add recurring revenue that's a little bit more predictable over time.
The implication is that xPloration could develop from an instrument-led business to a platform with meaningful recurring revenues. In terms of the margin profile, it would depend on any given period on that mix between the instruments and the recurring revenue. We expect that to evolve as the install base and the recurring revenue streams grow. We're excited. We're excited to make xPloration available to more researchers and to help antibody discovery teams screen more deeply, move more quickly, and reach candidates sooner. For those of you here in Emeryville, I invite you to see the xPloration in action during the tour following the Q&A. With that, I would like to invite Bob to share how we are enhancing discovery with AI.
Yes, I'm definitely excited to talk about how we're enhancing discovery with AI here at OmniAb. The explosive rise and expansion of AI tools in our industry has really created tailwinds for us, and they benefit our discovery workflows in multiple different levels, and I want to highlight two areas of positive impact here today. The first one is to our core discovery engine, and at the heart of that is biological intelligence. Building off of what we talked about already about biological intelligence is that we can think about it as a way to generate a large scale of data. The immune system has evolved over millions of years to, one, react to target and then generate a large space of possible molecules, tens of millions of sequences per each animal, and then deliver a pool of antibodies that are binding tightly and specifically.
This is a living system, and this living system where if you introduce a new target, a new data set will be generated each time. Another benefit to this living system is that all the sequences that come out have been vetted against a living host. This is a key advantage over purely in silico discovered molecules because, on a computer screen, an antibody might look really good, but when it is made and put into a host, it might have issues sticking to a tissue that is not desired, maybe causing immune response, or have some issues in actually just producing it. Our antibodies that come out of biological intelligence have already been pressure tested by nature. We are going to harness these advantages of this large scale of data, this high-quality set of sequences, and we feed them into OmniDeep, which is our AI tools.
These AI tools help us screen or identify these optimized antibodies and find the winning sequences. In our paradigm, biology generates and then AI selects. In our mind, this combination is better than each of them by itself. Additionally, each improvement to AI improves our toolkit that we use to mine this repertoire. The rise of AI and the increasing pace of the growth of that makes our biological intelligence, our biology, more valuable and not less. Let us see this process in action. At the very top, what we do is we feed in this biological intelligence into our deep screening and deep sequencing capabilities centered around xPloration and the large-scale data collection methods. This is data that is not simply scraped from public databases, but this is data from real immune systems reacting to real therapeutic targets and measured in our labs.
They feed into these databases that are built on multiple species. This is a unique advantage here we have OmniAb, where you have data from a variety of immune systems that have evolved separately, which gives us unique insights that we can then feed into our design tools and other deep learning models. That can then continue to loop back and feed next round of screening and discovery. This loop can improve over time. Another way that AI is really impacting us is that AI is impacting the wet lab and the bench level. We actually see AI not eliminating the lab, but rather transforming how the lab itself works. We are expanding xPloration with new capabilities to align with this vision. What we are building is now we are building a conversational AI layer for xPloration.
Our vision is that we want to make conversation and simple natural language the way to control instruments, which allows more users to use it. It decreases the amount of training needed to use our instrument. The goal is that a scientist simply gives scientific direction via input, an AI layer will then interpret and then direct a workflow, and the instrument will automatically screen and recover the cells by itself. We are currently building this software and also the AI layer to enable xPloration to fit into lab-in-the-loop and also build a foundation for future autonomous labs. This is something that we will announce in depth at the upcoming Antibody Engineering & Therapeutics Conference in December of this year. With all of the hype and enthusiasm around AI running various things in lab, we talk about AI running instruments, maybe experiments or labs.
One truth that is often underappreciated is that for AI to do this, you need an instrument that actually works. You need an instrument that works reliably. You need an instrument that works without someone just hovering over it and sending exit all the time. We believe that xPloration is the perfect platform to lead this charge because of its robust engineering architecture. Most lab equipment moves liquids through tubes or pipes called fluidics, and these fluidics inevitably can clog, leak, or have bubbles. This is a big place of failure, and these failures are often hidden both to the instrument and therefore to AI itself, where our technology is built around no fluidics. This eliminates this key point of failure. It is also built around validated components.
xPloration has been battle-tested in OmniAb as our discovery screening platform for years now, and we know it supports a very low-maintenance operation. Additionally, the instrument itself is very fast, as we mentioned, and that allows us to keep our cell components happy and healthy, which again, further reduces variability. We see xPloration as the right technology at the right time as we enter a place and time where the industry is now embracing the value of lab automation and instrumentation for large data generation and AI-aided discovery. Really, this enthusiasm for AI has sharpened people's appreciation for something we have been investing in for years, which is large, high quality, built-for-purpose data generated on instruments that you can trust. With that, I want to hand off to our CFO, Kurt, for the financials and wrap-up.
Thanks, Bob. I think we are trying to avoid a Marco Rubio incident, and so we had all these waters up here, but our previous presenters seem to just be karate chopping them off the stage. That is all right. I am here to wrap this thing up. Are we all right? All right. We are coming up on our fourth anniversary as a public company, and a lot has happened in those four years. We have launched four new platforms. We had OmniDeep, OmnidAb, OmniUltra, and today, Yas was telling you about OmniTides. We launched the Partner Access program for xPloration, and then Amechi was talking to you today about how we have expanded that program to go to all customers. During that time, we have also grown the number of partners that have access to our technology and the number of programs that were generated using our technology.
During that entire time, you can see that we have been finding efficiencies in the business and driving operating costs lower, which you see there on the left-hand side. R&D and G&A costs have been coming down over time. We have also taken some of those efficiencies and put them back into the business and funded certain opportunities that we think will drive growth and drive future value for the company. I think as we look to the future, one thing that I want to make sure that everybody understands is Matt and I and the entire OmniAb team here is really committed to making investments thoughtfully and prudently in the business in things that we think will make sure that drive value in the future and just like we have done over the last few years, as you can see on this chart.
I also wanted to spend a couple of seconds on kind of the revenue profile of the company because I think the profile in this picture kind of shows you the value of this business model. Starting at the bottom and building up, we've got service revenue at that baseline of revenue, and that provides a nice base of revenue. The nice thing about service revenue is our typical service contracts can run anywhere from three months to three years. We actually have more visibility in terms of future revenue on that service line than we do on some of the other line items. One of the things that's maybe not so good about the service revenue is it comes with a cost, right? We have to dedicate resources in terms of the time of our scientists.
We have to spend other money in order to provide that service. We make a nice margin on it, but it's not the same sort of margin that we have on these other lines, like milestones and royalties. We spent a lot of time, we talk about milestones being highly variable, and that's true. In any given quarter, the amount of milestone revenue can be highly variable. However, with over 30 things in the clinic, we are starting to generate what I think is significant milestone revenue every year, and I think you've seen that this year. While individual milestones, yes, they can be variable, but the portfolio that we have right now is actually kicking off, I think, a nice amount of milestone revenue every year. The real value, I think in this business is sort of what you see here on the top around royalties.
What I'm trying to show in this picture is the compounding effect that you get when you aggregate royalties. Royalties should grow when you start stacking them on one another, and you can really see significant growth from the royalties. I think that's the real value of this business. I also think, as Matt talked about earlier, the day of sort of realizing these royalties is getting closer and closer every day, sort of based on where the partner programs are. Just to reiterate the guidance, we're reaffirming our 2026 guidance today. Still expect revenue to be in the range of $32 million-$36 million. Operating expenses in that, or cash operating expenses in that $51 million-$55 million range. We should be really close to breakeven this year, from a cash flow standpoint.
As for 2027, we'll give that guidance like we always do when we report our Q4 earnings. That should be late February or early March. Maybe just one last slide on some upcoming events. We've got our third quarter earnings call. That should be on October 30th. We're going to do that as a pre-market release. We will be at four different healthcare conferences in November. It's going to be a busy November for Matt and I. Our research teams will be at various scientific conferences. We're doing four different conferences in the fourth quarter, where we'll be highlighting some of the technology that you saw here today, and highlighting the xPloration instrument as well. That concludes our prepared remarks for today.
I am going to ask Matt and Amechi to come up on stage, and we are going to move directly into Q&A. For those of you in the room, we have a mic here, so if you want to ask a question, raise your hand and we will bring over the mic. If you could sort of hold on to asking your question until you get the mic, that would be great so everybody could see you.
Matt, don't move too far over to the right there on stage so we don't lose you. For those of you on the webcast, there should be a little dialogue box in the upper right-hand corner. If you click on that, you will be able to ask a question. That question will come directly to me. I will acknowledge you as the person asking the question, read the question for us here, and that's what we will handle. Maybe we start with someone in the audience here.
Yeah.
Hi there. Matt Hewitt from Craig-Hallum. You noted that the pharma and biotech funding environment has improved. Where do you typically see that first? First off, maybe are you seeing some of that spending improve? Where do you see it first? Is it with existing programs progressing into the next clinical phase? Is it maybe you are seeing the pipeline for xPloration kind of accelerate, and maybe you are seeing more sales there? Just walk us through where you would see that.
Yeah, I will comment, and then I will invite Amechi to make a comment as well. Yeah, Matt, I think it's a mix. I think the first place we see it is in the dialogue with existing partners, right? So those are deep, somewhat, I will say, technically intimate relationships where we understand what targets they are going after and what they are interested in.
That's probably one of the first places we see it, our existing partners spinning up new programs. I think, as Todd and Brian would say, you also see it inbound from new potential partners, right? That's another place where we will see it as well. I will just say, stepping back, I think the industry as a whole is in a very healthy place now.
We are noticing the Big Pharma is taking bigger swings, going after bigger indications, bigger drugs. I think that's a good thing. We're seeing more and more really innovative things around some of the smaller partners as the funding environment improves for them. I think it's a bit of a mix, right? You can kind of see it in a variety of ways, but probably one of the first is with those existing partners. I think Amechi Nwachuku can provide a little bit of color on the xPloration pipeline as well.
Yeah. I do believe part of what we saw in the research where roughly 2/3 of customers are thinking they want to invest in a new instrument in the next three years is a reflection of the thawing that we're seeing in life sciences tools in general. We've also anecdotally seen interest coming from CROs in xPloration because their demand for projects is also increasing. They're talking to us about, "Hey, would this enable us to be able to meet that increased demand?" I do think it's being reflected even on the capital equipment side.
Great.
Matt, maybe we'll take one here.
Oh, okay. Great.
We got a question from Joe Pantginis at H.C. Wainwright. His question is, what do you view as the key competition for xPloration?
If you recall the chart that I shared, there are some technologies that make up big chunks of the market as they are today. FACS makes a big chunk of the market. Single-cell NGS makes up a big chunk of the market. Hybridoma makes up a big chunk of the market. In addition to that, there are some more specialized technologies that are, when folks think of single B-cell screening, they think of those as being, let's call them, the prototypical technologies in our space, whether they are optofluidics or nanowell technologies, etc. The biggest in terms of what portion of customers use them are FACS, single-cell NGS, and hybridoma
Hi, Jillian Weiss from Rodman & Renshaw. Thanks for having me. I have a few questions. You mentioned the royalties, building those up over time. When might you consider monetizing a portion of the royalties with a third-party royalty investor, if that's a possibility? What would you need to see in the partner pipeline to make that worthwhile?
Yeah, great question, Jillian. I referred in my presentation to the fact that the royalty space over the last 15+ years has become a lot more crowded. There are more folks investing in royalties, a lot more folks trying to find exposure to royalties. And one of the things that does is, in my view, it makes assets and royalties like we have even more valuable. We actually get approached frequently by some of those buyers who want to buy a strip of a specific program or would like to buy a royalty. We haven't pursued those deals. We feel like the business is very well capitalized. And we do feel like those royalties are the juice of the future. Those royalties represent a lot of potential upside. While those folks do present themselves to us, we haven't pursued those sorts of deals.
All right. One more.
Sorry. It's okay. Can you hear?
Yeah, we can.
Okay, you can hear me now. I've noticed in most of the presentations that you've given, you mentioned how antibodies have a higher success rate than small molecules, like common theme. Have you looked at how your programs stack up against antibodies coming from other discovery platforms, and do you see any difference in how often they advance through trials or reach approval?
Yeah, a great question. Generally, when we look at our portfolio as a whole, especially as we look at downstream progression, we generally use the industry averages. When you look at our portfolio, and while we have a growing number of programs, over 425 programs, it's continued to grow net of attrition, we're still just a slice. There's still a big market out there for us.
There's not a lot of, I'll say, good data on the discovery transitions. From what our partners tell us, they often come to us for some of our technologies for targets that are quite difficult, and what we hear from our partners collectively is that they're very pleased with what they get out of us. That's why we see a lot of repeat partners. We see a number of partners coming to us when we launch new technologies. Hard to give you an exact answer there, but we think our technologies actually do position us quite well, and position our partners really well.
Okay, great.
Yeah. Yeah, Len. We can get a mic for Len.
Thank you. Len Yaffe, Stoc*Doc Partners. I was just wondering if you are comfortable commenting. It seems to me like you are entering this very potentially lucrative sweet spot where you have, you mentioned xPloration sales could increase by $8 million-$10 million over the next couple of years with higher-margin consumables, royalties coming on stream as products advance to a greater extent.
If comfortable, could you give us a sense for what your margin structure would look like in, say, 2030 as you cross through break even? Because a lot of this money is going to start dropping to the bottom line. You have done an excellent job controlling expenses and obviously the valuation inflection is going to be as you turn towards profitability. What type of margin contribution could we see from the aggregate revenue stream that is coming on over the next four years?
Yeah, Kurt, do you want to take that?
Yeah, I think that for each of those revenue streams, it's different. What I tried to describe is, royalties and milestones, those just drop to the bottom line with 100% margin. The service revenue, like I said, we earn a margin on that, but it's not the same. As we think about the xPloration business, and Amechi, you can comment on this as well, there's sort of varying margins for that business as well. We make good money. I'll sort of describe, we make good money on the instrument, we make even better money on the other aspects of the consumables on that. So, you'll see that kind of margin vary depending on the product mix of sort of what's happening in any given quarter. But all of the programs with xPloration will generate a positive margin.
You said it well.
Yeah, that's right.
Yeah. I'll add just another comment that is sort of strung through our presentation today, but there are really complementary natures to the various elements of the business, and I think, Len, you summarized it well in terms of the high margin revenue. There are really some interesting parallels between the xPloration business in terms of selling an instrument at, as Kurt said, a very good margin, but then having very high margins on the downstream elements and licensing technologies.
You might not think there's a similarity between a transgenic rat or a transgenic chicken and an instrument, but in many ways there are, and they deepen the relationships we have with partners, and from a financial perspective, create these very durable stacking revenues that I think are going to become much more evident and really powerful in the next couple of years. We're excited about that.
Hi, Josh from H.C. Wainwright. From all the different applications you showed for OmniTides on slide 41, I'm curious where you're thinking, where do you expect to see the most initial interest from partners? I guess I was potentially thinking it would be peptide radioconjugates, but I'm curious what you're actually seeing.
I might ask Yas to come back up. She can probably comment on some of the early work there and kind of the value proposition that the OmniTides platform provides to the partners. Yas, go ahead.
Yeah. Thanks for the question. You're absolutely right. We do think that radio is a real sweet spot for us. Pretty much any peptide conjugate. Brian showed very nicely, there's kind of three areas, the oligo conjugates, the kind of more payload, kind of cytotoxic ones that one associates with kind of more traditional ADCs or antibody drug conjugates, but the radio conjugates. I would say that the radio field has really kind of transitioned away from kind of small molecules and large molecules to peptides because they, like I mentioned, their clearance profile is more kind of adaptable to the radioactive decay half-lives that are now commonly being used.
They provide this very targeted, high affinity, excellent stability. Like I mentioned, you can boil them. They're very amenable to the kind of conditions that you need to complex a radionuclide into there. We do see that with a lot of our collaborations. Peptide conjugates would also be kind of in that space, another area because of the tumor penetration. Then bispecifics, you could tether these things together as well. We do think that using them as targeting moieties is really a sweet spot.
Great. Thanks, Yas.
Here's a question from Kripa Devarakonda at Truist. She's got a bunch of questions, so I'm just going to pick out a few here. You note a majority of new partnerships are now driven by the newer chicken-based source technologies. What is the revenue per new deal on those versus legacy, the OmniRat, OmniMouse agreement? Kind of, is there a difference with the chicken programs?
Yeah. Partner to partner, program to program, there's a variety there, right? It depends on kind of the depth of the work that we're doing, the specifics of the program. While we've continued to grow our partner base and our program base, every deal can be a little bit different. Not only partner to partner, but even program to program in terms of the screening work that we may do, and those sorts of things. There's not really a tried and true exact number for that. We're obviously focused on optimizing the back end. Our business is really designed and focused around milestones and royalties, and that's where we generally will focus our negotiation.
Kind of her follow-up is around OmniTides. Would that be any different in some of these deals as well?
OmniTides obviously is powered by our OmniUltra chicken. The OmniTides workflow that Yas and Brian ran through or provided detail on has other elements to it downstream, but in many ways it is very similar to our other transgenic chicken work.
All right. I got a question here from Puneet Souda at Leerink Partners. This is around AI discovery. I think it is kind of a question. I think it would be helpful for you and the team to outline how you are situated in the growing AI landscape for pharma and biotech, especially how OmniAb is positioned versus the lab-in-the-loop workflow, computational AI model driven, and other workflows being employed by pharma. So kind of asking about how our animal platforms fit within that, how our other workflows would fit in with that.
Yeah, great. I will provide a little bit of color, and I will invite Bob actually to come back up as well. We are big believers in AI in many ways and have been for many years. AI is a natural place for us to go. We generate huge amounts of data that does not exist anywhere else in the literature. It is a natural place to go. I also see AI as a real tailwind for accelerating the earliest stages of discovery in terms of understanding targets. There was a story that came out around the AACR conference, which is a research conference centered around cancer, that this year there were upwards, I think, of 180 new targets that had never been disclosed before focused on cancer. That is a big spike.
I think that's evidence of a tailwind in terms of early discovery, and we feel like, especially our biological intelligence, our novel animal platforms are uniquely positioned to help partners as they navigate brand new targets. If you are looking at new biology, that needs to be directed in some way, and one of our partners drew an analogy for us recently, which was like if you're going after a novel target, all the data that exists in the literature could kind of fit in a bathtub and you're swimming in the ocean, so you don't really know where you're going, whereas our animals can create novel libraries that can then help focus that search and discovery. Downstream of that, we do see AI as a really powerful tool in screening, and Bob, maybe you can give a little color on kind of how we think about that.
Yeah, I think just to extend on kind of what I was sharing about it, there's two clear places where we can really impact kind of this growing use of AI in the field. The first one, as Matt just mentioned, is the source of data. It's very clear that public domain sequences have been really mined through overall, but we have this basically inexhaustible way to generate new data. Every time you immunize a chicken, even the same target, because they're genetically outbred, it's going to be different every time, and we have seen that, and we build those data sets as fit for purpose for partners. That's clearly one, as a way to fuel this kind of continuous interest in AI. The second one is the instrument itself.
The xPloration, I think, as we are building it and using it to be in the labs, people are looking for automating piece of workflows, automating discovery through immunizations. This is a key tool position to rise forward that as we're building those labs in more autonomous formats. Additionally, the third one is actually is we're really building a lot of R&D and being able to test designs and think about how we actually test AI designs with xPloration and this type of thing. So, there's a lot of convergence of what we've been working on, what the field is interested in.
Yeah. Great. Thanks, Bob. I think we've got time for one more question before we start our tours here.
Ooh, I have got a lot to choose from here.
Okay.
Here is one from Steve Willey at Stifel. His question, the Entrepreneur Enablement Program was characterized as a deal structure you can use when working with cash-constrained partners. Have you given any thoughts to expanding the use of this structure or equity investments in general in your partnerships with academic and venture partners? Then follow-up question, just thinking about the potential longer-term contribution of OmniTides, to future partnering activities, can you give some sort of estimate of what that deal flow might look like over the next three to five years? First question is—
Yeah.
—kind of entrepreneur enablement and equity in—
Yeah.
—other areas.
And we pride ourselves on being, I'll say, prolific licensors. Todd and his team have done a great job of growing the number of partners. That's obviously an integrated activity between business development and R&D as we get the news out about our technologies. As partners talk more about our technologies, that creates visibility. And we really leverage our vantage point to think creatively about how we can form those partnerships. Equity is a piece we've seen. We actually announced a deal about this time last year with ArrowMark Partners, where they were forming companies around certain assets that are linked to certain ones of our technologies where we get equity as well as downstream milestones and royalties.
So I think there's a variety of partner types that could fall into that entrepreneur enablement, for lack of a better term, program, where they're forming companies, gives us that upside opportunity with equity, but also secures downstream economics as well. I think OmniTides also presents those sorts of opportunities, especially as you have folks going after more and more innovative targets. We see more, I'll call them innovative modalities, a little bit of a small molecule or a peptide mixed with an antibody, things like that. We're very well-positioned to provide binding domains that can fit in a variety of modalities, and I think that gets the creative juices flowing of our partners, not only the big established ones, but also those that are VC-funded or just ramping up, and that creates a lot of business opportunity for us as we continue to build our portfolio. Good.
I've got more questions here that have been written in. We'll respond to those, I guess, Matt—
Yeah.
—via email. So thank you for those of you who submitted those questions.
Yeah. Great. We'll definitely get back to those. That's going to conclude our prepared portion and our Q&A now. For those that are here on-site, we'll cut off the video and say goodbye to the folks joining on video. Then we'll get organized for our lab tours and demonstrations. Thank you all for your attention. We'll look forward to engaging with you when we report our earnings on October 30th.