Omeros Corporation (OMER) Shares Soar Following Strong Quarter


OMER logoOmeros Corporation (NASDAQ:OMER) shares are on fire this evening, rising nearly 11%, after the drug maker reported better-than-expected 3Q Omidria sales.

Third Quarter Highlights

  • 3Q 2017 total and OMIDRIA® revenues were $21.7 million. Revenues from OMIDRIA sales rose 26 percent from 2Q 2017 and 92 percent from the prior year’s third quarter. Units sold to wholesalers, or “sell-in,” increased 26 percent quarter-over-quarter and 125 percent year-over-year.
  • Net loss in 3Q 2017 was $7.5 million, or $0.16 per share, which included $4.2 million ($0.09 per share) of non-cash expenses. Net loss in the prior year’s third quarter was $14.0 million or $0.34 per share, which included $3.1 million ($0.08 per share) of non-cash expenses.
  • At September 30, 2017, the company had cash, cash equivalents and short-term investments available for operations of $86.8 million plus the ability to borrow an additional $45.0 million from existing lenders.
  • Settled patent infringement lawsuit against Par Pharmaceutical, Inc. and its affiliate (collectively, Par) on favorable terms in October 2017.
  • Met with FDA in follow-up to FDA’s granting breakthrough designation for OMS721 in immunoglobin A (IgA) nephropathy; the Agency’s meeting minutes state that approval can be obtained with a single successful Phase 3 trial with reduction in proteinuria as the primary efficacy endpoint.
  • FDA granted OMS721 orphan drug designation in IgA nephropathy.

Recent Developments

  • In October, the company entered into a settlement agreement and consent judgment with Par, which resolved Omeros’ patent litigation against Par. The litigation concerned Par’s filing of an Abbreviated New Drug Application (ANDA) seeking approval from the FDA to market a generic version of OMIDRIA. Pursuant to the settlement agreement and consent judgment, Par is prohibited from launching a generic version of OMIDRIA until April 1, 2032 or as detailed in the settlement agreement. Par also acknowledged and confirmed the validity of Omeros’ OMIDRIA patents at issue in the lawsuit in the settlement agreement.
  • Highlights and developments regarding OMS721, Omeros’ lead human monoclonal antibody in its mannan-binding lectin-associated serine protease-2 (MASP-2) programs for the treatment of thrombotic microangiopathies (TMAs), including atypical hemolytic uremic syndrome (aHUS) and hematopoietic stem cell-associated TMA (HSCT-TMA), and for the treatment of complement-related renal diseases, including IgA nephropathy, include:
    • Omeros met with the FDA in follow-up to the FDA’s granting breakthrough designation for OMS721 in IgA nephropathy to discuss Phase 3 trial design. The Agency’s meeting minutes make clear that approval can be obtained with a single successful Phase 3 trial with reduction in proteinuria as the primary efficacy endpoint. Depending on the size of the effect on proteinuria, either full approval or accelerated approval is possible. If full approval is granted based on reduction in proteinuria, estimated glomerular filtration rate (eGFR) will be followed as part of the safety assessment. Any effect of OMS721 on eGFR is likely to result in additional label claims for the product. If, based on the effect on proteinuria, accelerated rather than full approval is granted, marketing of OMS721 would be allowed during which time confirmatory data on long-term effects of OMS721 on eGFR would be collected. These eGFR data, if satisfactory, would then form the basis for full approval.
    • Omeros reported in August that the FDA granted orphan drug designation to OMS721 for the treatment of IgA nephropathy. The FDA has also granted breakthrough therapy designation to OMS721 for the treatment of IgA nephropathy. In Europe, Omeros is pursuing orphan designation and Priority Medicines (PRIME) status from the European Medicines Agency (EMA) for OMS721 in the treatment of IgA nephropathy.
    • In October, Omeros announced the presentation by a trial investigator of a case report of a patient having co-existing HSCT-TMA and graft-versus-host disease (GvHD), which both resolved following OMS721 treatment. This case was presented at the European Society for Blood and Marrow Transplantation Crash Course on Diagnosis and Treatment of Noninfectious Complications after HCT in Granada, Spain. The company plans to initiate a Phase 3 clinical program in HSCT-TMA before year-end. Omeros is also pursuing breakthrough therapy designation from FDA and PRIME status from the EMA in this indication.
    • In November, Omeros announced the presentation at the American Society of Nephrology Conference of follow-up data on the four IgA nephropathy patients in the open-label portion of the Phase 2 trial. As previously reported, all four patients demonstrated a substantial reduction in proteinuria during the clinical trial. In the extended (up to one year) follow-up after completion, proteinuria reduction was maintained in three of the four patients. Specifically, those three patients maintained partial remission relative to baseline (76 percent to 86 percent decrease in albumin/creatinine ratios (uACRs)) during extended follow-up. After a substantial drop in uACR during the trial, the fourth patient’s uACR returned to 88 percent of baseline at four months post-treatment. eGFR improved in three of the four patients during the extended follow-up, with increases ranging from 7 to 17 mL/min/1.73 m2 (up to 57 percent improvement) relative to baseline. The fourth patient demonstrated stable eGFR relative to baseline. OMS721 was well-tolerated.
  • In August, Omeros sold 3.0 million shares of common stock in a public offering with a price to the public of $22.75 per share, receiving net proceeds of $63.6 million.
  • In October, Omeros extended the borrowing capacity under its existing credit facility allowing the company to borrow, at its sole discretion, up to $45.0 million through March 21, 2018 subject only to customary closing conditions.

Financial Results

For the quarter ended September 30, 2017, total revenues were $21.7 million, all from sales of OMIDRIA. This compares to OMIDRIA revenues of $11.3 million for the same period in 2016. On a sequential quarter-over-quarter basis, OMIDRIA revenue grew $4.5 million, or 26 percent, and grew 92 percent year-over-year. The quarter-over-quarter increases in OMIDRIA revenue and units sold are due to both an increase in the number of customers purchasing OMIDRIA and increased penetration into existing customer accounts.

Total costs and expenses for the three months ended September 30, 2017 were $26.8 million compared to $23.3 million for the same period in 2016. The increase in the current year quarter was primarily due to increased third-party manufacturing scale-up costs associated with OMS721, increased preclinical and development costs as Omeros continues to advance drug candidates toward the clinic and increased legal costs associated with the Par lawsuit, which settled in October 2017 on favorable terms to Omeros.

Interest expense for the three months ended June 30, 2017 was $2.8 million as compared to $2.1 million in the prior year third quarter. The increase is due to incremental funds borrowed by the company in November 2016.

For the three months ended September 30, 2017, Omeros reported a net loss of $7.5 million, or $0.16 per share, which included non-cash expenses of $4.2 million ($0.09 per share). This compares to the prior year’s third quarter where Omeros reported a net loss of $14.0 million, or $0.34 per share, which included non-cash expenses of $3.1 million ($0.08 per share).

As of September 30, 2017, the company had $86.8 million of cash and cash equivalents available for operations and $5.8 million in restricted cash. The company has the ability, at its sole discretion, to borrow up to an additional $45.0 million from its existing lenders through March 21, 2018 subject only to customary closing conditions.

Commentary

“OMIDRIA revenues sustained their strong growth in the third quarter and this momentum continues into the current quarter,” said Gregory A. Demopulos, M.D., chairman and chief executive officer of Omeros. “We have also made substantial progress across our OMS721 programs – in addition to our Phase 3 aHUS program, we have a clear roadmap for the Phase 3 IgA nephropathy trial, including FDA confirmation of proteinuria as the primary efficacy endpoint, and compelling data to support our advancing to a Phase 3 program in stem cell transplant-associated TMA. Further adding to our clinical pipeline, OMS527, our PDE7 inhibitor for the treatment of addictions and compulsive disorders, is on track to enter Phase 1 in the first half of next year.”

Analyst Ratings

On the ratings front, Omeros stock has been the subject of a number of recent research reports. In a report released yesterday, H.C. Wainwright analyst Ram Selvaraju initiated coverage with a Buy rating on OMER and a price target of $30, which implies an upside of 112% from current levels. On November 6, Maxim’s Jason Kolbert assigned a Buy rating to the stock and has a price target of $24.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Ram Selvaraju and Jason Kolbert have a yearly average loss of -11.3% and -9.4% respectively. Selvaraju has a success rate of 32% and is ranked #4646 out of 4707 analysts, while Kolbert has a success rate of 33% and is ranked #4639.

Overall, one research analyst has assigned a Hold rating and 3 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $27.33 which is 92.9% above where the stock opened today.

Omeros operates as a biopharmaceutical company committed to discovering, developing, and commercializing small-molecule and protein therapeutics for large market as well as orphan indications targeting inflammation, coagulopathies and disorders of the central nervous system.