Omeros Corporation — FY2021 Form 10-K
Reporting period: Year ended December 31, 2021; filed March 1, 2022. This is an annual filing, not a standalone fourth-quarter report. Omeros is a clinical-stage biopharmaceutical company developing therapies primarily for complement-mediated and other immune disorders. OMIDRIA, its commercial product, was sold to Rayner on December 23, 2021.
Financial results and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Continuing-operations revenue | $0 | $0 |
| Continuing-operations loss, net | $191.5 million | $173.1 million |
| Net income (loss), including discontinued operations | $194.2 million | $(138.1) million |
| Net cash used in operating activities | $109.7 million | $100.1 million |
| Cash, cash equivalents and short-term investments at year-end | $157.3 million | $135.0 million |
- FY2021 net income was driven by discontinued operations: $385.8 million net income, including a $305.6 million net gain on the OMIDRIA sale and $80.1 million from OMIDRIA operations. It should not be read as recurring operating profitability.
- OMIDRIA generated $110.7 million of product sales in 2021 before the sale, versus $73.8 million in 2020. These amounts are classified as discontinued operations.
- Research and development expense from continuing operations was $118.8 million, up from $107.6 million; selling, general and administrative expense was $54.8 million, up from $49.3 million. With no continuing revenue, a continuing-operations margin is not meaningful.
- Year-end accounts receivable was $38.2 million; the company expected to collect it in full by March 31, 2022. Total assets were $419.3 million and shareholders’ equity was $23.8 million.
- Convertible notes had $320.0 million aggregate principal outstanding: $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 $313.5 million; FY2021 interest expense was $19.7 million.
- The $50 million revolving credit facility had no borrowings at year-end and was scheduled to mature in August 2022. The filing also reports $32.0 million of firm commitments for goods and services and $42.9 million of remaining non-cancelable rent under the initial office lease term.
Material changes and business developments
- Omeros received $126.0 million cash at closing for OMIDRIA and retained pre-sale receivables and liabilities. It is entitled to 50% of U.S. net sales through the earlier of January 1, 2025 or qualifying for the milestone; thereafter the U.S. royalty is generally 30%, subject to reduction to 10% under specified conditions. It also receives 15% of qualifying non-U.S. net sales.
- A $200.0 million milestone is contingent on separate Medicare Part B payment for OMIDRIA being secured for a continuous four-year period before January 1, 2025. The milestone was excluded from the recorded royalty asset because its achievement was uncertain.
- Net cash used in operations increased by $9.6 million year over year. Investing cash flow was $193.7 million provided, largely reflecting the OMIDRIA sale proceeds and investment activity; financing cash flow was $6.3 million provided.
- R&D spending increased, notably for narsoplimab and preclinical work on OMS1029. Management expected continuing R&D costs to rise in 2022 as Phase 3 programs and narsoplimab manufacturing continue.
Outlook, commentary and key risks
- Narsoplimab / HSCT-TMA: FDA issued a Complete Response Letter in October 2021, citing difficulty estimating treatment effect and requesting additional information. Following a February 2022 Type A meeting, Omeros was awaiting FDA’s response to its rebuttals. Management believes the submitted BLA merits approval, but approval, timing and required additional work are uncertain. The company targeted an EU marketing application submission in 2022.
- Pipeline: Narsoplimab Phase 3 trials in IgA nephropathy and aHUS were ongoing; enrollment in IgA nephropathy had been slowed in part by COVID-19. A Phase 2 COVID-19 study arm had concluded, with analysis pending. Omeros planned a Phase 1b OMS906 trial in PNH patients and said Phase 2 development of OMS527 depended on resources.
- Liquidity and funding: Management stated that cash, investments, receivables and expected OMIDRIA royalties were adequate to finance operations at least through March 2, 2023. This depends on forecasts and does not remove the need for future funding: operating cash use remained substantial, and $95.0 million of notes mature in November 2023. Omeros had an at-the-market equity facility allowing up to $150 million of share sales and said it could pursue financing or strategic transactions. It may delay trials or reduce R&D if needed.
- OMIDRIA royalty uncertainty: Royalty income depends on Rayner’s sales and CMS maintaining separate Medicare payment. A loss of that payment could reduce demand and lower the U.S. royalty rate; the contingent milestone is not assured.
- Other principal risks: clinical and regulatory setbacks, dependence on third-party manufacturing and supply, inability to raise capital, debt service and dilution, reimbursement and pricing pressure, competition, and COVID-19-related disruption. The company reported no material legal proceedings as of filing.
Important facts for investors to verify
- Subsequent FDA communications and the specific evidence or studies required to resolve the narsoplimab CRL, plus timing and cost of any resubmission.
- Actual OMIDRIA sales, royalty receipts and Medicare separate-payment status, including progress toward the $200 million milestone and any royalty-rate reduction triggers.
- Cash burn, collections of the $38.2 million receivable, and whether management’s runway estimate remains achievable without additional financing.
- Repayment or refinancing plans for the $95 million 2023 notes and the $225 million 2026 notes, including potential dilution on conversion.
- Enrollment, timelines and readouts for narsoplimab and OMS906 trials, and whether manufacturing capacity and funding can support planned development.