Omeros Corporation — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Omeros is a clinical-stage biopharmaceutical company; OMIDRIA was sold in December 2021, and its remaining royalties and related income are reported as discontinued operations. Amounts below are in U.S. dollars.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / prior period |
|---|---|---|
| Continuing-operations revenue | No clear revenue value reported; the statement presents operating expenses and loss from operations | No clear revenue value reported |
| Research and development expense | $24.6 million | $24.1 million |
| Selling, general and administrative expense | $11.1 million | $11.0 million |
| Loss from operations | $35.7 million | $35.0 million |
| Interest expense | $7.9 million | $4.9 million |
| Interest and other income | $4.0 million | $0.5 million |
| Income from discontinued operations, net of tax | $6.0 million | $6.5 million |
| Net loss | $33.7 million; $0.54 per share | $33.0 million; $0.53 per share |
| Operating cash flow | $174.5 million provided | $15.2 million used |
Margins are not meaningful from the reported information because the filing does not present continuing-operations revenue. Q1 2023 operating cash flow included collection of Rayner’s $200 million OMIDRIA milestone payment; it should not be viewed as recurring operating cash generation. Investing activities used $181.3 million, primarily reflecting purchases of short-term investments.
At March 31, 2023, cash and cash equivalents were $3.8 million and short-term investments were $367.5 million, totaling $371.4 million; receivables were $10.0 million. Working capital was approximately $277.8 million. Total assets were $560.1 million and shareholders’ equity was $54.9 million, down from $85.7 million at year-end 2022.
Convertible-note principal totaled $320.0 million: $95.0 million of 6.25% notes due November 2023 and $225.0 million of 5.25% notes due February 2026. Net carrying value was $315.8 million. The OMIDRIA royalty obligation had a $126.0 million carrying value; DRI’s maximum remaining receipts under that arrangement were $183.5 million through 2030.
Material changes and notable items
- Omeros received the $200 million Rayner milestone payment in February 2023 after the milestone event occurred in December 2022. Receivables fell from $213.2 million at December 31, 2022 to $10.0 million at March 31, 2023, principally because the milestone receivable was collected.
- Following the milestone event, the U.S. OMIDRIA royalty rate fell from 50% to 30%. The filing says the rate could fall to 10% in specified circumstances, including a period when OMIDRIA is no longer eligible for separate Medicare payment.
- Interest expense rose $3.0 million year over year, primarily due to interest on the DRI royalty obligation entered into in September 2022. Higher investment balances and market rates contributed to increased interest and other income.
- Research and development costs increased modestly, with higher clinical spending on OMS906 and OMS1029 partly offset by lower preclinical spending. Management attributed higher SG&A excluding stock compensation mainly to employee-related costs.
Pipeline, outlook, and risks
- Narsoplimab: FDA previously issued a complete response letter for the HSCT-TMA application. Following an unsuccessful formal appeal, Omeros proposed an analysis of existing trial response and survival data and external data; it planned to meet with FDA to clarify resubmission requirements. Approval, timing, cost, and the requirements for resubmission remain uncertain. The company expected 36-week proteinuria data from its Phase 3 IgA nephropathy trial later in 2023.
- OMS906: The filing reported positive interim Phase 1b PNH results announced in April and updated in May 2023, including improvements in measured hemolysis markers. Further PNH and C3G studies were ongoing or planned; these are investigational results, not evidence of approval or established efficacy.
- OMS1029: The single-ascending-dose Phase 1 study was completed with no identified safety concerns, and a multiple-ascending-dose study was expected to begin in summer 2023.
- OMS527: In April, Omeros reported a $6.69 million NIH grant over three years to support development for cocaine use disorder. The program remains investigational.
- Management planned to fund operations for at least the next 12 months from existing cash and investments, Rayner royalties, and receivables, with potential narsoplimab sales conditional on FDA approval. The company expected to pay or refinance the $95 million notes due November 2023, potentially using cash, strategic transactions, equity or additional debt. It also maintained an at-the-market equity facility of up to $150 million, with no shares sold under it as of March 31.
- Management expected Q2 R&D costs to rise from Q1 due to clinical and manufacturing timing; SG&A and interest expense were expected to be similar to Q1. Longer-term development costs are uncertain. The company may need additional capital and could delay trials or reduce R&D spending.
- Other exposures include $26.1 million of firm goods-and-services commitments, up to $26.1 million of termination fees on certain third-party contracts, potential development milestones and royalties, and lease commitments. No material legal proceedings were reported. Management concluded disclosure controls were effective; no material internal-control change was identified.
Important facts for investors to verify
- FDA’s eventual requirements, timing, and prospects for narsoplimab HSCT-TMA resubmission, and the status of the IgA nephropathy readout.
- Whether the November 2023 notes are repaid, converted, or refinanced, and the resulting cash needs, interest cost, or dilution.
- How recurring cash burn and Rayner royalty receipts compare with management’s stated liquidity plan, excluding the one-time $200 million milestone collection.
- The durability of OMIDRIA’s separate Medicare payment and royalty rate, and the effect of DRI’s priority claims on future royalty cash flows.
- Full trial data and subsequent regulatory progress for OMS906 and other pipeline candidates, as well as any use of the ATM equity facility or other financing.