Omeros Corporation (OMER) — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Omeros is a clinical-stage biopharmaceutical company. It sold OMIDRIA in December 2021; continuing operations primarily reflect drug development and corporate costs, while OMIDRIA royalties and related accounting gains are reported in discontinued operations.
Key financial results
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Continuing operating expenses | $50.8 million | $39.8 million | $123.3 million | $130.7 million |
| Net loss from continuing operations | $54.8 million | $44.3 million | $136.0 million | $144.2 million |
| Income from discontinued operations | $37.3 million | $21.6 million | $54.7 million | $57.8 million |
| Net loss | $17.5 million | $22.7 million | $81.3 million | $86.4 million |
| Net loss per share | $0.28 | $0.36 | $1.30 | $1.39 |
- Revenue and margins: The filing reports no product sales in continuing operations. Omeros is not presenting a meaningful operating margin for its development-stage continuing business.
- Expense trends: Q3 R&D rose to $38.6 million from $25.8 million, largely due to narsoplimab manufacturing and OMS1029 entering clinical development. Nine-month R&D declined to $86.2 million from $88.4 million. SG&A fell to $12.2 million for Q3 and $37.1 million for nine months, versus $14.0 million and $42.3 million.
- Cash and liquidity: Cash, cash equivalents and short-term investments totaled $221.0 million at September 30, 2022, versus $157.3 million at December 31, 2021. Management said available resources and expected OMIDRIA royalties were adequate to fund operations at least through November 9, 2023.
- Cash flow: Nine-month operating cash use was $61.1 million, compared with $91.5 million in 2021. Investing activities used $19.1 million; financing provided $124.9 million, mainly from the DRI royalty transaction. Cash and cash equivalents ended the period at $145.5 million.
- Debt and obligations: Convertible notes had $320.0 million of principal outstanding ($95.0 million due November 2023; $225.0 million due February 2026); their net carrying value was $314.8 million. The company also recorded a $125.0 million OMIDRIA royalty obligation after selling a portion of future royalties to DRI. Total shareholders’ equity was negative $46.3 million.
Material changes and unusual items
- Omeros received $125.0 million from DRI on September 30 in exchange for capped rights to certain OMIDRIA royalties through 2030. DRI’s maximum payout is $188.4 million; the obligation is accounted for as a liability.
- OMIDRIA royalties earned in the first nine months were $47.6 million. Discontinued-operations income included a $30.5 million nine-month remeasurement gain on the royalty asset; Q3 included a $29.0 million remeasurement gain. These noncash items materially affected reported net loss.
- The FDA’s Office of New Drugs denied Omeros’s appeal of the narsoplimab HSCT-TMA Complete Response Letter in November 2022, after quarter-end. The decision described a possible resubmission path relying on pivotal-trial survival data versus historical controls, potentially with an independent literature analysis; approval and timing remain uncertain.
- In the I-SPY COVID-19 trial, narsoplimab showed a modeled mortality-risk reduction in the randomized population but did not shorten time to recovery. The treatment arm was stopped following a biased consented-population analysis; further development depends on external funding or support.
Outlook, risks and contingencies
- Management expected Q4 2022 R&D expense to decrease from Q3, as no additional narsoplimab drug-substance manufacturing was expected, and SG&A to remain similar to Q3. Longer-term development costs are uncertain.
- Key programs include narsoplimab in HSCT-TMA, IgA nephropathy and aHUS; OMS906 in PNH and C3 glomerulopathy; and Phase 1 OMS1029. Management anticipated an IgA nephropathy proteinuria-data readout by mid-2023; aHUS recruitment had been slow.
- OMIDRIA royalties depend on Rayner sales and contractual terms. A potential $200.0 million milestone is conditional on separate U.S. Medicare Part B payment being secured for at least four continuous years before January 1, 2025. CMS’s 2023 rule continued separate payment for OMIDRIA in ambulatory surgical centers.
- The $95.0 million 2023 Notes mature in November 2023. Management expects to address repayment through available cash, operations, potential OMIDRIA milestone proceeds, strategic transactions, equity sales or additional debt. Repayment is a significant liquidity consideration.
- Other disclosed exposures include $20.6 million of contractual termination fees for certain third-party work, $36.1 million of remaining rent under the initial office/lab lease term, and potential development milestones and royalties. The filing reported no material legal proceedings as of filing.
Investor facts to verify
- Progress, required evidence, cost and timing for any narsoplimab BLA resubmission following the OND decision, and the FDA’s eventual determination.
- Quarterly operating cash use and the company’s liquidity runway, particularly ahead of the November 2023 note maturity.
- Actual OMIDRIA sales and royalty receipts, DRI’s priority payments and remaining caps, and the likelihood of the conditional $200.0 million milestone.
- Clinical-trial enrollment and readouts for narsoplimab, OMS906 and OMS1029, alongside their funding and manufacturing needs.
- The effect of noncash royalty-asset remeasurements on reported discontinued-operations income and net loss.