Omeros Corporation — FY2012 Form 10-K
Reporting period: Fiscal year ended December 31, 2012. This is an annual report, not a standalone fourth-quarter filing; quarterly figures are included where relevant. Omeros is a clinical-stage biopharmaceutical company with no approved products and no product-sales revenue. Its revenue came from grants and program-funding agreements.
Financial performance and liquidity
| Metric | FY2012 | FY2011 |
|---|---|---|
| Revenue | $6.0 million | $4.5 million |
| Research and development expense | $31.9 million | $23.7 million |
| Selling, general and administrative expense | $11.0 million | $8.2 million |
| Operating loss | $36.9 million | $27.4 million |
| Net loss | $38.4 million; $1.59 per share | $28.5 million; $1.29 per share |
| Net cash used in operating activities | $34.6 million | $25.7 million |
- Fourth-quarter 2012 revenue was $1.6 million and net loss was $7.7 million, compared with $1.1 million and $10.2 million, respectively, in fourth-quarter 2011. Fourth-quarter operating expenses were $9.1 million versus $11.0 million.
- Cash, cash equivalents and short-term investments totaled $22.4 million at year-end 2012, down from $24.6 million. Working capital was $15.4 million; total assets were $26.6 million; shareholders’ deficit was $6.5 million. No product margins are reported because there were no product sales.
- Oxford debt principal was $20.0 million at year-end, bearing fixed interest of 9.25%. Payments are interest-only through December 2013, followed by 36 monthly principal-and-interest payments beginning January 2014; maturity is December 2016. Substantially all assets other than intellectual property secure the loan.
- Management said available cash and investments, together with capital it might raise under financing facilities, were expected to cover anticipated expenses, capital expenditures and debt payments for at least 12 months. This expectation depends partly on raising additional capital.
Material changes and operating developments
- Revenue increased 33% year over year, mainly from Vulcan funding and NIH grants. R&D expense rose 35%, reflecting OMS302 Phase 3 work and advancement of PDE10, MASP-2 and GPCR programs. SG&A increased 34%, including legal and planned-launch marketing costs.
- Net loss widened by $9.9 million, and operating cash use increased by $8.9 million. The company raised $32.3 million net in a July 2012 public offering and received $6.5 million net proceeds from its December debt amendment.
- OMS302 completed two Phase 3 trials, both reporting statistically significant results for maintaining pupil dilation and reducing early postoperative pain. OMS103HP’s 2012 Phase 3 trial missed its primary KOOS Symptoms endpoint but met a secondary endpoint for reduced postoperative pain.
- The company reported a $3.95 million litigation settlement expense and an equal $3.95 million insurance recovery in 2012. The recovery was subject to an ongoing dispute with insurer Carolina Casualty, which could seek repayment.
Outlook, risks and contingencies
- Management planned to submit an OMS302 NDA to the FDA in the first half of 2013 and an EU marketing application in mid-2013. If at least one application were approved on the anticipated timetable, the company expected to begin marketing in 2014. Approval and timing were uncertain; 2014 was described as the earliest expected year for commercial revenue.
- Management planned another OMS103HP Phase 3 trial, targeting enrollment in the first half of 2013. The filing cautions that further trials, negative results or regulatory requirements could delay or prevent approval.
- Other stated development plans included initiating clinical trials for OMS721 and OMS527 during 2013. OMS201 development was paused for resource reasons, with no activity expected during 2013. The company expected losses and cash use to increase as it advanced trials, expanded R&D and prepared for a possible OMS302 launch.
- Key risks include regulatory and clinical failure or delay; uncertain market adoption and reimbursement; reliance on contract manufacturers; a need for additional capital and potential shareholder dilution; debt covenants and repayment obligations; and the possibility that funding or trial costs constrain other programs.
- The company remained in litigation with CCIC over insurance coverage and was cooperating with an NIH administrative review of two grants related to former employee allegations. The filing says the U.S. government had declined to intervene in related False Claims Act claims, but retained the ability to pursue them. Potential financial consequences were uncertain.
- Auditors issued unqualified opinions on the financial statements and internal controls; management reported effective disclosure controls and internal control over financial reporting as of year-end.
Important facts for investors to verify
- Subsequent FDA and EMA actions on OMS302 applications, and whether approval and the projected 2014 launch timetable were achieved.
- OMS103HP follow-up Phase 3 results, including whether the primary pain endpoint was met and whether additional studies were required.
- Cash burn, remaining liquidity and access to financing: the Azimuth equity facility was due to expire June 1, 2013, and management said realizable proceeds could be substantially below its $40 million headline amount. The separate ATM allowed sales of up to $60 million but did not guarantee proceeds.
- Developments in the CCIC coverage dispute and NIH review, including any repayment demand, government action, penalties or settlement.
- Debt service and covenant status, plus potential dilution from equity issuance, options and warrants.