Omeros Corporation — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Omeros is a clinical-stage biopharmaceutical company. It sold OMIDRIA in December 2021; its operating results are presented as discontinued operations, while Omeros retains royalty rights.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Continuing operating expenses | $37.4 million | $45.6 million | $72.5 million | $90.9 million |
| Loss from continuing operations, including interest and other income | $41.7 million | $50.2 million | $81.2 million | $100.0 million |
| Income from discontinued operations | $10.8 million | $21.6 million | $17.3 million | $36.3 million |
| Net loss | $30.8 million | $28.6 million | $63.9 million | $63.7 million |
| Net loss per share | $0.49 | $0.46 | $1.02 | $1.02 |
- Omeros reported no continuing product sales. OMIDRIA royalties earned were $17.2 million in Q2 and $31.1 million for the first half; these reduce the royalty asset rather than being reported as product revenue. The filing reports $10.1 million and $17.1 million, respectively, of discontinued-operations royalty interest income and remeasurement adjustments.
- Research and development expense fell 22% in Q2 and 24% in the first half year over year, principally reflecting lower manufacturing, preclinical, and internal costs. Selling, general and administrative expense also declined, mainly from lower prior-year pre-launch marketing and differences in legal costs. Margins are not meaningful given the absence of continuing product revenue.
- At June 30, cash and cash equivalents were $14.1 million and short-term investments were $108.4 million, totaling $122.6 million for general corporate use; receivables were $14.5 million. Cash and investments declined $19.7 million during Q2 and $34.7 million during the first half, according to management.
- First-half operating cash use was $34.7 million, compared with $67.8 million a year earlier. Investing cash use was $52.1 million, largely reflecting purchases of short-term investments; financing provided $0.1 million.
- Total assets were $345.6 million and current liabilities were $38.5 million. Current assets were $192.7 million, including $43.8 million of short-term OMIDRIA royalty asset.
- Convertible notes had $320.0 million principal outstanding ($314.4 million net carrying value): $95.0 million of 6.25% notes due November 2023 and $225.0 million of 5.25% notes due February 2026. No borrowings were outstanding under the $50 million SVB credit line, which expired August 2, 2022.
Material changes and business developments
- Compared with Q2 2021, the loss from continuing operations narrowed by $8.5 million, but discontinued-operations income fell by $10.7 million; consequently, the total net loss increased by $2.3 million. First-half net loss was broadly unchanged year over year.
- OMIDRIA royalty asset was $170.6 million at June 30, down from $184.6 million at year-end after royalties earned and remeasurement adjustments. The asset excludes the potential $200 million milestone.
- Management estimated available resources, expected royalties, and receivables would fund operations at least through August 9, 2023. This depends partly on forecasts and is not assured. The company may use its $150 million at-the-market equity facility, financing, strategic transactions, or spending reductions; no shares had been sold through that facility as of June 30.
Outlook, risks and contingencies
- Narsoplimab: FDA issued a Complete Response Letter for the HSCT-TMA application in October 2021, citing difficulty estimating treatment effect and need for additional information. Omeros filed a Formal Dispute Resolution request in June 2022 and expected an FDA decision in August 2022. Approval, resubmission requirements, timing, and costs remain uncertain.
- Pipeline: Phase 3 programs include narsoplimab for IgA nephropathy and aHUS; management anticipated IgA nephropathy 9-month proteinuria data by mid-2023. aHUS enrollment was ongoing but slow. OMS906 completed a Phase 1 study, with a Phase 1b PNH study planned; OMS1029 dosing in a Phase 1 study began in August 2022, after quarter-end.
- OMIDRIA consideration: Omeros receives 50% of U.S. net sales until the earlier of January 1, 2025 or payment of a $200 million milestone; later U.S. royalties are generally 30%, subject to potential reduction, and foreign royalties are 15%. The milestone requires separate U.S. payment for at least four continuous years before January 1, 2025. A July 2022 CMS proposed rule would continue separate payment in ambulatory surgery centers through 2023 if finalized; the milestone is not assured.
- Funding and obligations: The $95 million notes mature in November 2023. Management expects to fund repayment through a combination of operating cash, potential OMIDRIA milestone proceeds, financing, stock sales, or strategic transactions. The filing also reports $30.5 million of firm goods-and-services commitments and $38.8 million of remaining non-cancelable rent under the initial lease term.
- Management expected R&D costs to increase modestly in Q3 2022 and SG&A to remain similar to Q2; it provided no clear full-year revenue or earnings guidance. Development delays, regulatory outcomes, clinical-trial costs, and ability to raise capital are key risks.
Important facts for investors to verify
- FDA’s decision and any required next steps for the narsoplimab HSCT-TMA application.
- Cash consumption, expected OMIDRIA royalty receipts, and the assumptions supporting the stated runway.
- Repayment or refinancing plans for the $95 million notes due November 2023, especially after the SVB credit line expired.
- Final CMS separate-payment policy and whether OMIDRIA can satisfy the conditions for the $200 million milestone.
- Enrollment, clinical readouts, and spending priorities across narsoplimab, OMS906, and OMS1029 programs.