Omeros Corporation — 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015; quarterly figures below refer to the three months ended December 31, 2015. Omeros is a biopharmaceutical company whose first marketed product, OMIDRIA, launched broadly in the U.S. in April 2015. Its pipeline includes clinical-stage programs in complement disorders, CNS conditions, addiction and urology.
Financial performance and position
| Metric | FY 2015 | FY 2014 | Q4 2015 |
|---|---|---|---|
| Total revenue | $13.5 million | $0.5 million | $6.7 million |
| OMIDRIA net product sales | $13.3 million | None | Not separately stated |
| Operating loss | $71.2 million | $70.0 million | $18.0 million |
| Net loss | $75.1 million | $73.7 million | $19.8 million |
| Basic and diluted loss per share | $2.00 | $2.22 | $0.52 |
| Cash used in operating activities | $65.2 million | $58.0 million | Not stated |
- FY 2015 cost of product sales was $1.0 million, implying an approximate 92% gross margin on OMIDRIA sales before other operating expenses.
- Research and development expense was $48.4 million, versus $47.9 million in 2014; selling, general and administrative expense rose to $35.3 million from $22.6 million, primarily reflecting OMIDRIA launch and selling costs.
- At year-end, cash, cash equivalents and short-term investments totaled $28.3 million, including only $1.4 million in cash and cash equivalents and $26.9 million in short-term investments. A further $10.7 million was restricted, including $10.0 million required under the loan agreement.
- Notes payable, net of discount, totaled $49.8 million. The new $50.0 million loan bears 9.25% interest, requires interest-only payments through July 2017 and matures January 2020; scheduled principal and interest payments begin August 2017.
- Working capital was $20.9 million, compared with a deficit of $9.3 million at year-end 2014. Total shareholders’ deficit was $26.2 million; accumulated deficit was $403.1 million.
Material changes and developments
- FY revenue increased sharply from 2014 as U.S. OMIDRIA sales began; quarterly revenue rose from $0.2 million in Q4 2014 to $6.7 million in Q4 2015. Annual net loss increased modestly, while operating cash use rose by $7.2 million.
- Omeros raised $79.1 million net in a February 2015 stock and pre-funded warrant offering and received $22.3 million net from the December refinancing after repaying its prior loan. Financing cash flow was $86.8 million for the year.
- OMIDRIA received European Commission marketing approval in July 2015. Country-level pricing and reimbursement decisions and commercial partners are still needed before sales can begin in those markets.
- OMS721 advanced in complement-mediated disorders: the company reported positive early Phase 2 dose-ranging observations and planned Phase 3 enrollment in aHUS. These were early, limited-patient findings, not confirmatory evidence of efficacy.
Outlook, risks and unusual items
- Management expects continued losses until product sales, partnerships or licensing revenues cover operating expenses and debt service. The filing gives no specific sales or earnings guidance. The auditor’s report states that recurring losses and the company’s financial condition raise substantial doubt about its ability to continue as a going concern; additional financing, positive operating cash flow or strategic arrangements are needed.
- Loan covenants require minimum OMIDRIA revenue levels in 2016–2018 and $10.0 million of restricted cash and eligible investments. A covenant breach could trigger default and acceleration. Omeros established a $100 million at-the-market equity facility in January 2016, subject to company-directed sales and a 1.7% commission.
- Supply transition is a key execution risk: commercial production at Patheon ceased at year-end 2015, and Hospira’s manufacturing transfer and validation were incomplete. Omeros expected existing and final Patheon supply to bridge the gap until Hospira production, anticipated in 2017, but cannot assure timing or supply sufficiency.
- Par challenged three OMIDRIA patents through an ANDA Paragraph IV filing. Omeros sued; the resulting stay of FDA final approval is expected to run until late January 2018. Litigation outcome could affect future generic competition and sales.
- OMS824 schizophrenia trials remained suspended at FDA request, while Huntington’s disease development faced dosing limitations. Fagron had not met diligence obligations or initiated OMS103 sales; Omeros was evaluating its options.
- Unusual items include a $1.3 million loss on early extinguishment of debt in 2015. The $12.5 million litigation settlement recorded in 2013 did not recur.
Investor verification priorities
- Track OMIDRIA sales growth, gross-to-net deductions, wholesaler inventory and the loan’s minimum-revenue tests; verify that reported sales convert into timely cash collections.
- Assess whether liquidity and access to the ATM or other financing can fund operations and debt service, given the going-concern warning and recurring operating cash outflows.
- Verify Hospira validation, inventory coverage and continuity of commercial supply through the manufacturing transition.
- Monitor the Par patent litigation and the status of any generic application, including the expected 2018 stay endpoint.
- Evaluate the evidence and timelines for OMS721 trials and regulatory discussions, and clarify the resolution of Fagron’s OMS103 non-performance.