OMEROS CORPORATION — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015. Omeros is a biopharmaceutical company whose first commercial product, Omidria, was in a controlled U.S. launch; its broader U.S. launch began in early April, after quarter-end.
Key financial results
| Metric | Q1 2015 | Q1 2014 / comparison |
|---|---|---|
| Total revenue | $388,000 | $100,000 |
| Omidria product sales | $238,000 | None |
| Research and development | $9.3 million | $12.0 million |
| Selling, general and administrative | $9.0 million | $3.8 million |
| Operating loss | $17.9 million | $15.7 million |
| Net loss | $18.7 million | $16.6 million |
| Basic and diluted loss per share | $0.51 | $0.54 |
| Cash used in operating activities | $17.5 million | $11.1 million |
At March 31, cash, cash equivalents and short-term investments totaled $70.1 million. Total assets were $74.9 million, current liabilities $20.1 million, and shareholders’ equity $21.8 million, compared with a $42.7 million deficit at year-end 2014. Notes payable, net of discounts, totaled $32.9 million ($9.0 million current and $23.9 million long-term). The company reported no material product-sales deductions as of quarter-end.
Changes and financing
- Revenue grew from a low base with initial Omidria sales; product sales began in February 2015.
- R&D expense declined 22%, principally due to lower clinical manufacturing costs and suspended OMS824 trial activity. SG&A rose to $9.0 million from $3.8 million, mainly due to Omidria launch preparation.
- Net loss widened by $2.0 million, and operating cash outflow increased by $6.3 million year over year.
- A February public offering generated $79.1 million net proceeds from 3.4 million common shares and pre-funded warrants for up to 749,250 shares. The offering materially improved equity and liquidity but diluted shareholders.
- Investing cash outflow was $62.1 million, largely reflecting purchases of short-term investments funded by the offering. Financing cash inflow was $80.7 million.
Outlook, risks and notable items
- Management believed available cash, investments and anticipated Omidria sales, together with potential additional financing or partnerships, would fund expected operating costs, capital expenditures and debt service for at least 12 months. This outlook depends partly on future sales and access to capital.
- Management expected R&D costs to increase during the remainder of 2015 due to planned clinical manufacturing and study activity. No specific revenue or earnings guidance was provided.
- CMS transitional pass-through reimbursement was expected to continue through December 31, 2017. The stated reimbursement rate was WAC of $465 plus 6% through Q3 2015, then ASP plus 6%. Continued demand, payer coverage, pricing and reimbursement after pass-through status remain material uncertainties.
- The company expected an EMA committee opinion on the Omidria EU application in the first half of 2015 and planned to seek marketing and distribution partners outside the U.S.; approval and partnerships were not assured.
- OMS721 Phase 2 low- and higher-dose cohorts had completed treatment; the safety committee recommended a third, higher-dose cohort. The filing reported improvements across disease-activity markers, but these early observations do not establish efficacy. Compassionate-use access was approved for two patients; approval for another request was being pursued.
- OMS824 Huntington’s disease and schizophrenia programs remained suspended pending evaluation of a nonclinical rat-study observation and FDA review. The filing identifies regulatory, clinical, manufacturing, commercialization, reimbursement and additional-capital risks.
- Debt terms required monthly principal and interest payments of approximately $1.0 million beginning April 2015, at a stated 9.25% annual interest rate, with a $2.2 million maturity fee. Contractual obligations also included approximately $57.5 million of remaining lease payments and significant commercial-launch and supply commitments.
- Management concluded disclosure controls were effective at the reasonable-assurance level. New controls were implemented for the Omidria launch and third-party logistics functions.
Investor verification priorities
- Check subsequent Omidria sales, adoption, gross margins, inventory and cash collection after the broad U.S. launch.
- Verify actual Medicare and other payer reimbursement, pricing, and the effect of the transition from WAC-based reimbursement to ASP-based reimbursement.
- Track cash burn against the 12-month liquidity assertion, debt payments, and any need for further financing or dilution.
- Review EMA decisions and any international commercialization agreements, plus subsequent clinical and regulatory developments for OMS721 and OMS824.
- Assess manufacturing capacity and supplier concentration, as well as the company’s ability to meet contractual commitments and debt covenants.