Omeros Corporation — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Omeros is a clinical-stage biopharmaceutical company. It sold OMIDRIA and related assets in December 2021; OMIDRIA results are presented as discontinued operations, leaving no product sales in continuing operations for the quarter.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Continuing-operations revenue | None reported | None reported |
| Research and development expense | $24.1 million | $32.5 million |
| Selling, general and administrative expense | $11.0 million | $12.8 million |
| Net loss from continuing operations | $39.5 million | $49.8 million |
| Income from discontinued operations | $6.5 million | $14.7 million |
| Net loss | $33.0 million; $0.53 per share | $35.1 million; $0.57 per share |
| Cash used in operating activities | $15.2 million | $40.3 million |
| Cash, cash equivalents and short-term investments | $142.2 million at March 31 | $157.3 million at December 31, 2021 |
| Convertible senior notes, net | $313.9 million | $313.5 million at December 31, 2021 |
Gross or operating margins are not applicable because continuing operations reported no revenue. Interest expense was $4.9 million, compared with $4.9 million a year earlier. Total assets were $369.3 million, and shareholders’ equity was a deficit of $4.9 million at quarter-end. The company had $16.3 million of receivables and no borrowings on its $50 million revolving credit facility.
Material changes and notable items
- Research and development expense fell $8.4 million year over year, primarily due to timing of narsoplimab manufacturing and OMS906 trial costs. SG&A declined $1.8 million, mainly reflecting lower narsoplimab pre-launch and marketing costs and the timing of legal costs.
- OMIDRIA royalties earned were $13.8 million; these reduced the OMIDRIA contract royalty asset rather than being reported as continuing revenue. Omeros also recorded $7.0 million of discontinued-operations income from royalty interest and remeasurement adjustments. The royalty asset was $177.7 million at March 31.
- Cash and cash equivalents fell from $100.8 million to $9.0 million, while short-term investments rose from $56.5 million to $133.3 million. Management attributed much of the investing cash outflow to investing proceeds from the OMIDRIA sale in short-term investments.
- In January, Omeros terminated part of its office and laboratory lease, reducing the right-of-use asset by $4.7 million and lease liability by $5.2 million, and recording a non-cash gain of $0.5 million.
Outlook, risks and contingencies
- Management said available assets and expected OMIDRIA royalties were adequate to fund operations at least through May 10, 2023. The estimate depends on expected cash flows; the filing also describes potential additional financing, licensing or spending reductions if needed.
- The FDA issued a Complete Response Letter for narsoplimab in HSCT-TMA in October 2021, stating that it had difficulty estimating treatment effect and needed additional information. After a February 2022 meeting, Omeros planned to request formal dispute resolution, seeking regular approval based on its existing BLA. Approval, a clear resubmission path, timing and required expenditure remain uncertain.
- Management expected Q2 2022 R&D and SG&A expenses to increase versus Q1, citing timing of development activities and employee-related costs. Narsoplimab trials in IgA nephropathy and aHUS were ongoing; enrollment in aHUS had been slow. The company expected to begin an OMS906 Phase 1b PNH trial in summer 2022 and was awaiting analysis of narsoplimab data in the I-SPY COVID-19 trial.
- Omeros owed $95 million principal on notes maturing in November 2023 and $225.0 million on notes maturing in February 2026. The company said it expected to fund repayment of the 2023 notes through a combination of operating cash, possible OMIDRIA milestone proceeds, strategic transactions, equity or additional debt.
- A potential $200 million OMIDRIA milestone depends on securing separate U.S. payment for at least four continuous years before January 1, 2025; it is not assured. U.S. royalty rates are also subject to contractual terms and reimbursement-related reductions. The filing identifies $31.0 million of potential contract termination fees and $41.1 million of remaining aggregate rent under the initial lease term. No material legal proceedings were reported.
Important facts for investors to verify
- Progress and outcome of the planned FDA formal dispute request, and any additional evidence or costs required for narsoplimab approval.
- Cash burn, royalty receipts and financing needs relative to management’s runway estimate, including the November 2023 note maturity.
- OMIDRIA sales, Medicare separate-payment status, royalty-rate terms and the conditions and timing for the potential $200 million milestone.
- Enrollment, trial results and timelines for narsoplimab and OMS906 programs, including the company’s stated Q2 expense increases.