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Omeros Corporation (OMER) Loses a Bull Who Fears “Limited Upside Potential” for the Stock

Liana Moussatos is cautious on OMER's "unclear" finances despite Wall Street's enthusiasm for Omidria's prospective two-year reimbursement extension.


There is always room for a party pooper- and though Omeros Corporation (NASDAQ:OMER) shares soared just under 35% yesterday, one bull is fleeing the rally.

Though Congress may be passing a pill that offers a two-year Medicare reimbursement extension to cataract surgery asset Omidria, Wedbush analyst Liana Moussatos sees the bigger picture- and regarding the biotech player’s finances, the picture is looking blurry.

Keep in mind, the mega value driver on the table could very well be OMS721, which is in pivotal trials in indications of IgA Nephropathy, Stem Cell Transplant TMA, and aHUS. Yet, Moussatos poses a question that lingers: does OMER have the financial power to fuel progress for this prospective lead asset?

Citing “unclear finances and OMS721 Phase 3 progress,” the analyst downgrades from an Outperform to a Neutral rating on OMER stock while slashing the price target from $47 to $19. All the same, Moussatos’ target expectations still imply a close to 23% upside from current levels. (To watch Moussatos’ track record, click here)

“We view OMIDRIA sales as a nondilutive means to fund development of OMS721 and cover other operating expenses. However, loss of pass through reimbursement at the end of 2017 resulted in OMIDRIA sales no longer being able to fund the company. We are downgrading our rating for OMER to NEUTRAL from OUTPERFORM as lack of clarity for the financial status with disruption in OMIDRIA sales and inability to fund progress with their top potential value driver OMS721. Even with possible extension of OMIDRIA pass-through reimbursement for two additional years starting in October 2018, sales are unlikely to fund the pipeline in 2018 and 2019,” explains Moussatos.

The analyst notes that between a debt load weighing roughly $80 million worth and over $100 million due in yearly operating expenses, skepticism arises as to whether the company has “the ability to continue.”

Additionally, the company’s fourth quarter financial performance came up short of the analyst’s expectations, with Moussatos pointing to the “anticipated loss of pass-through reimbursement in January” as the culprit.

Bottom line, “Despite the potential for pass-through reimbursement to be reinstated in October 2018, the damage is done for 2018-2019 in our view,” concludes the analyst, who notes that until she sees a “definitive reinstatement of pass-through reimbursement,” financing gets a bit clearer for this year through the next, visibility on the company’s prospective value driver OMS721 Phase 3 enrollment status shines, and top-line data from the 3 Phase 3 trials evaluating the drug are posted, upside prospects are “limited.”

TipRanks points to a cautious, albeit positive sentiment circling OMER shares. Out of 5 analysts polled in the last 3 months, 2 rate a Buy on the biotech stock with 3 maintaining a Hold. However, consider that the 12-month average price target stands tall at $24.25, marking healthy upside potential of nearly 54% from where the stock is currently trading.