Omeros Corporation — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Omeros is a commercial-stage biopharmaceutical company; its marketed product is OMIDRIA, used during cataract and intraocular lens replacement surgery. The company is also developing narsoplimab (OMS721) and other clinical and preclinical programs.
Financial results and liquidity
| Metric | Q1 2019 | Q1 2018 |
|---|---|---|
| Net product sales | $21.8 million | $1.6 million |
| Research and development expense | $26.3 million | $18.1 million |
| Selling, general and administrative expense | $14.6 million | $10.9 million |
| Operating loss | $19.2 million | $27.7 million |
| Interest expense | $5.6 million | $2.8 million |
| Net loss | $24.3 million | $30.1 million |
| Basic and diluted loss per share | $0.50 | $0.62 |
| Cash used in operating activities | $12.9 million | $11.3 million |
- OMIDRIA sales were $21.8 million, up from $1.6 million, following reinstatement of Medicare Part B transitional pass-through reimbursement effective October 1, 2018. Gross-to-net deductions were 27.0% of gross sales, compared with 28.9% a year earlier.
- Cost of product sales was $0.1 million. The filing does not present a gross-margin percentage.
- At March 31, cash and cash equivalents were $4.1 million and short-term investments were $43.2 million, totaling $47.2 million available for general corporate use, down from $60.5 million at year-end. Net receivables were $24.7 million; current liabilities were $44.5 million.
- Convertible notes had $210 million principal outstanding, with a net balance-sheet carrying value of $151.2 million. The unsecured notes bear 6.25% interest and are due 2023. The CRG loan had been repaid in November 2018.
- Shareholders’ deficit was $121.0 million. Adoption of the new lease standard resulted in recognition of $17.5 million of right-of-use assets and total lease liabilities of $29.1 million.
Changes and management commentary
- Revenue increased sharply as OMIDRIA demand recovered with separate reimbursement restored. Management expected sales to continue increasing in 2019 but could not estimate the magnitude. The current pass-through extension runs through September 30, 2020; permanent or similar reimbursement afterward is uncertain.
- Net loss narrowed year over year, while operating cash use increased. Management attributed the cash-use increase mainly to lower collections of receivables versus the prior-year period and inventory purchases, partly offset by lower net loss and increased accounts payable and accrued expenses.
- R&D spending rose, principally from narsoplimab manufacturing scale-up and the start of OMS527 Phase 1 clinical work. Management expected R&D costs to increase during 2019 as narsoplimab trials, manufacturing preparations, and potential HSCT-TMA regulatory submissions advanced. SG&A was also expected to rise slightly.
- Management reported three narsoplimab Phase 3 programs underway: HSCT-TMA, IgA nephropathy, and aHUS. The company was preparing potential HSCT-TMA BLA and MAA submissions and collecting additional clinical data. OMS527 Phase 1 completion was expected in Q2 or Q3 2019; OMS906 clinical trials were targeted to begin in the first half of 2020.
Outlook, risks, and contingencies
- Going concern: The company stated that substantial doubt existed about its ability to meet obligations through May 9, 2020 and continue as a going concern. Its assessment did not assume meaningful future OMIDRIA sales growth, new financing, or partnerships. Management planned to fund operations through OMIDRIA sales and could pursue financing or strategic transactions; if needed sources were unavailable, it might delay trials, reduce R&D, or restructure.
- Omeros continued to incur losses and expected losses to continue until product revenues or other sources sufficiently cover operating costs, capital expenditures, and debt service.
- Contract commitments included $13.7 million of potential termination fees for specified goods and services agreements. The filing reported no material legal proceedings and no material change to the risk factors in the 2018 Form 10-K.
- Forward-looking plans depend on clinical outcomes, regulatory decisions, reimbursement policy, manufacturing, and access to capital. The company said it could not assure permanent separate reimbursement for OMIDRIA after September 2020.
Important facts for investors to verify
- Whether OMIDRIA sales, collections, and cash generation support the company’s funding needs, and the duration of available liquidity.
- Progress toward durable separate reimbursement for OMIDRIA after September 30, 2020, and the commercial effect if that reimbursement is not secured.
- Timing, evidence requirements, and regulatory outcomes for narsoplimab HSCT-TMA submissions, alongside enrollment and results in the IgA nephropathy and aHUS trials.
- Ability to meet the $210 million convertible-note obligations and other debt-service needs while funding clinical development and lease commitments.
- Whether management’s planned cost reductions or additional financing would be required if sales growth, partnerships, or capital-market access fall short.