Omeros Corporation — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 13, 2023. Omeros is a clinical-stage biopharmaceutical company. It sold OMIDRIA in December 2021 and now depends principally on royalties from that product while developing its drug candidates. Amounts below are U.S. dollars.
Financial performance and liquidity
| Metric | 2022 | 2021 | Context |
|---|---|---|---|
| Net income | $47.4 million | $194.2 million | 2022 included $229.4 million of after-tax discontinued-operations income, including a $200 million OMIDRIA milestone; continuing operations recorded a $182.0 million net loss. 2021 included a $305.6 million gain on the OMIDRIA sale. |
| Continuing R&D expense | $112.7 million | $118.8 million | Down $6.1 million; clinical R&D increased as OMS1029 entered clinical development, while preclinical expenses declined. |
| Continuing SG&A expense | $50.7 million | $54.8 million | Down $4.2 million, primarily due to reduced pre-commercial launch spending for narsoplimab. |
| Interest expense | $22.7 million | $19.7 million | Includes $2.9 million related to the DRI royalty obligation in 2022. |
| Cash used in operations | $86.5 million | $109.7 million | Operating cash outflow continued despite reported net income. |
Omeros reported no 2022 product sales from continuing operations. Rayner’s U.S. OMIDRIA net sales were $130.9 million; Omeros earned $65.4 million in royalties at the then-applicable 50% rate before the rate fell to 30% following the milestone event. The $200 million milestone receivable and substantially all other year-end receivables had been collected by the filing date. The filing does not provide a comparable continuing-operations gross margin for 2022; OMIDRIA’s discontinued-operations gross margin was $80.1 million in 2021.
At year-end, cash and cash equivalents were $11.0 million, short-term investments $183.9 million, and receivables $213.2 million. Cash plus short-term investments totaled $194.9 million. Financing cash flow was $124.2 million, primarily reflecting $125 million received from selling a portion of future OMIDRIA royalties to DRI; investing cash flow was a $127.6 million outflow.
Outstanding 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. The company also recorded a $126.3 million OMIDRIA royalty obligation to DRI at year-end. Shareholders’ equity was $85.7 million.
Material changes and business developments
- OMIDRIA: The 2022 milestone event triggered a $200 million payment, received in February 2023 with accrued interest, and reduced Omeros’s U.S. royalty rate from 50% to 30%. The rate may fall to 10% under specified conditions, including loss of separate Medicare Part B payment eligibility. DRI receives capped portions of future royalties through 2030 before Omeros receives its share.
- Narsoplimab in HSCT-TMA: FDA issued a complete response letter in 2021. Omeros’s formal appeal was denied in November 2022, although FDA identified possible routes to resubmission using response and survival data against historical controls, with or without an independent literature analysis. Omeros requested a meeting to clarify requirements; approval and timing remain uncertain.
- IgA nephropathy: The Phase 3 ARTEMIS-IGAN trial was ongoing. The filing primarily expects 36-week proteinuria data later in 2023. One overview contains a conflicting reference to “36-month” data; investors should verify the intended timing against subsequent company disclosures.
- Other pipeline: OMS1029 completed single-ascending-dose Phase 1 dosing in early 2023, with no identified safety concerns and preliminary results consistent with potentially less frequent dosing. OMS906 entered Phase 1b studies in PNH; a C3G study was planned pending approvals. OMS527 had completed Phase 1; further work included a primate study for levodopa-induced dyskinesia.
Outlook, risks and unusual items
- Management said existing cash, investments and receivables were expected to fund operations for at least the next 12 months. It cautioned that continuing operations had not established recurring revenue sufficient to cover costs and that additional capital may be needed, including to address 2026 debt.
- The $95 million 2023 Notes maturity was a near-term funding obligation. Management expected repayment could require a combination of cash, operating receipts, strategic transactions, equity issuance or additional debt. The company had an at-the-market equity facility of up to $150 million.
- Management expected 2023 R&D expense to be broadly similar to 2022. SG&A could rise if narsoplimab were approved and launch preparations began; otherwise it was expected to be no more than 2022 levels.
- Key risks include FDA’s additional-data requirements for the HSCT-TMA application; clinical, regulatory and trial-enrollment uncertainty; dependence on Rayner’s OMIDRIA sales and reimbursement status; cash burn and debt maturities; reliance on contract manufacturers; competition; and potential dilution or difficulty raising capital. The company had no internal manufacturing facilities.
- The I-SPY COVID-19 narsoplimab arm was stopped before its planned maximum enrollment. The randomized-population analysis suggested a mortality-risk reduction, but did not show faster recovery; the filing describes potential bias in the consented-population analysis and says further development depends on external funding and support.
- The auditors issued unqualified opinions on the financial statements and internal control over financial reporting. Management and the auditor reported effective controls as of year-end. The auditor identified valuation of the OMIDRIA royalty asset as a critical audit matter because it relies on forecasts and scenario probabilities.
Most important facts for investors to verify
- Subsequent cash position after collection of the milestone receivable, 2023 operating burn, and the company’s plan and ability to meet the November 2023 note maturity.
- FDA’s specific requirements and expected timing for any narsoplimab HSCT-TMA BLA resubmission, and whether the submission ultimately supports approval.
- ARTEMIS-IGAN data timing and outcomes, including the filing’s inconsistent “36-week” versus “36-month” reference.
- Rayner’s OMIDRIA sales, the royalty rate actually payable, DRI’s capped share, and any Medicare payment-status changes that could reduce Omeros’s royalties.
- Whether additional financing, asset licensing or equity issuance is needed, and the potential cost and dilution to shareholders.