Omeros Corporation — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed March 1, 2021. Omeros is a commercial-stage biopharmaceutical company. OMIDRIA, used in cataract and lens-replacement surgery, was its only FDA-approved U.S. product. Its lead candidate, narsoplimab, had a BLA under FDA priority review for HSCT-TMA.
Financial performance and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Net product sales | $73.8 million | $111.8 million |
| Cost of product sales | $0.9 million | $0.9 million |
| Research and development | $110.8 million | $109.7 million |
| Selling, general and administrative | $72.7 million | $64.6 million |
| Operating loss | $110.6 million | $63.4 million |
| Net loss | $138.1 million | $84.5 million |
| Net loss per share | $2.41 | $1.71 |
| Cash, cash equivalents and short-term investments | $135.0 million | $60.8 million |
| Working capital | $114.5 million | $48.3 million |
Gross profit was approximately $72.9 million, or 98.8% of sales, based on reported net sales and product cost. The company reported operating cash outflow of $100.1 million, investing cash outflow of $67.0 million, and financing cash inflow of $174.5 million. Investing outflows primarily reflected purchases of short-term investments. Cash and investments increased substantially with financing proceeds, including a $93.7 million common-stock offering and issuance of 2026 convertible notes.
At year-end, convertible notes had $320.0 million aggregate principal outstanding ($95.0 million due 2023 and $225.0 million due 2026), with a net carrying value of $236.3 million. Interest expense was $26.8 million; the company also recorded a $13.4 million loss on extinguishment of debt. It had no borrowings under its $50 million accounts-receivable-based credit facility. Lease liabilities totaled $32.6 million. Shareholders’ deficit was $120.8 million.
Material changes and unusual items
- OMIDRIA sales fell 34% year over year. COVID-19 reduced elective cataract procedures from mid-March through late June; uncertainty around reimbursement also slowed wholesaler orders in September and the fourth quarter.
- Medicare pass-through reimbursement expired October 1, 2020. In December, CMS confirmed retroactive separate payment for OMIDRIA in the ASC setting under its non-opioid surgical-drug policy. That policy remains subject to annual CMS rulemaking.
- Quarterly 2020 sales were $23.5 million, $13.5 million, $26.1 million and $10.6 million, respectively. Fourth-quarter sales were down from $33.4 million in fourth-quarter 2019; fourth-quarter 2020 net loss was $37.3 million versus $29.2 million a year earlier.
- The company issued $225.0 million of 5.25% convertible notes due 2026 and repurchased $115.0 million principal amount of its 2023 notes. It also raised $93.7 million net from a public stock offering, increasing outstanding shares to 61.7 million at year-end from 54.2 million.
- Management cited an accumulated deficit of $872.7 million and continued operating losses. The $12.0 million income tax benefit in 2020 related to the convertible-note issuance; deferred tax assets remained fully offset by a valuation allowance.
Outlook, management commentary and risks
- Management said available cash and investments, OMIDRIA sales and, if approved, narsoplimab sales were expected to fund operations for at least the next 12 months. This is management’s expectation, not a revenue or profitability forecast. The company reported no formal quantified guidance.
- The narsoplimab HSCT-TMA BLA received priority review, with an FDA action date of July 17, 2021. Management planned a U.S. launch soon after approval; launch preparations were underway. An EU marketing application was targeted for 2021.
- Management expected R&D expense to increase in 2021, including continued Phase 3 programs and commercial drug-substance manufacturing, and SG&A to increase for planned narsoplimab commercialization.
- Other programs included Phase 3 narsoplimab trials for IgA nephropathy and aHUS, a Phase 3 COVID-19 trial, and Phase 1 development of OMS906. Management reported encouraging compassionate-use COVID-19 outcomes but cautioned that these results may not predict trial success or regulatory authorization.
- Key risks include dependence on OMIDRIA and continued separate reimbursement; COVID-19 effects on procedures and trials; narsoplimab approval, clinical outcomes and manufacturing capacity; reliance on third-party manufacturers; concentrated wholesaler customers; financing needs, debt service and potential shareholder dilution; and regulatory, reimbursement, competition and intellectual-property uncertainties.
- On March 1, 2021, the company entered an at-the-market sales agreement allowing up to $150 million of common-stock sales. Use of the program is optional but could dilute shareholders.
Most important facts for investors to verify
- Whether CMS continues separate ASC payment for OMIDRIA and whether sales recover after the 2020 procedure and ordering disruptions.
- The FDA’s decision on narsoplimab by the stated July 17, 2021 action date, any label or post-approval requirements, and the actual commercial launch and uptake if approved.
- Cash burn, available liquidity and financing needs against management’s at-least-12-month funding expectation, including debt interest and maturities.
- Progress, enrollment, timing and results for narsoplimab’s other trials, and whether COVID-19 findings are confirmed in controlled clinical testing.
- Manufacturing readiness and supply continuity for OMIDRIA and narsoplimab, plus potential dilution from convertible notes, equity offerings and outstanding awards.
The independent auditor issued an unqualified opinion on the financial statements and internal controls over financial reporting as of December 31, 2020.