Omeros(OMER) - 2022 Q3 - Quarterly Report

Part I — Financial Information Financial Statements The unaudited condensed consolidated financial statements detail the company's financial position, operations, equity, and cash flows Condensed Consolidated Balance Sheets Total assets grew to $457.6 million while a new royalty obligation increased total liabilities, resulting in a shareholders' deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $145,533 | $100,808 | | OMIDRIA contract royalty asset (Total) | $191,385 | $184,570 | | Total Assets | $457,551 | $419,268 | | Liabilities & Equity | | | | Unsecured convertible senior notes, net | $314,819 | $313,458 | | OMIDRIA royalty obligation | $125,000 | $0 | | Total Liabilities | $503,865 | $395,488 | | Total Shareholders' Equity (Deficit) | ($46,314) | $23,780 | Condensed Consolidated Statements of Operations and Comprehensive Loss The Q3 2022 net loss improved to $17.5 million, as income from discontinued operations offset a wider loss from continuing operations Q3 2022 vs Q3 2021 Statement of Operations (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Research and development | $38,568 | $25,818 | | Selling, general and administrative | $12,198 | $14,010 | | Loss from continuing operations | ($50,766) | ($39,828) | | Net income from discontinued operations | $37,336 | $21,575 | | Net loss | ($17,456) | ($22,703) | | Net loss per share | ($0.28) | ($0.36) | Condensed Consolidated Statements of Cash Flows Net cash increased by $44.7 million in the first nine months of 2022, driven by a $124.9 million inflow from financing activities Nine Months Ended Sep 30 Cash Flow Summary (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($61,101) | ($91,507) | | Net cash (used in) provided by investing activities | ($19,073) | $81,292 | | Net cash provided by financing activities | $124,899 | $7,129 | | Net increase (decrease) in cash | $44,725 | ($3,086) | | Cash and cash equivalents at end of period | $145,533 | $7,415 | Notes to Condensed Consolidated Financial Statements Notes detail key accounting policies, the OMIDRIA sale and royalty transactions, and the regulatory status of narsoplimab - The company is a clinical-stage biopharmaceutical firm whose lead candidate, narsoplimab, received a Complete Response Letter (CRL) from the FDA for HSCT-TMA, and an appeal was denied[24][25] - On December 23, 2021, Omeros sold its commercial product OMIDRIA to Rayner Surgical Inc. for $126.0 million upfront, with results now reported as discontinued operations[28][29] - On September 30, 2022, the company sold a portion of its future OMIDRIA royalty receipts to DRI Healthcare for $125.0 million in cash, recorded as a liability[39][40] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses its clinical pipeline, the financial impact of the OMIDRIA divestiture, and its capital sufficiency for future operations Overview The overview covers the regulatory status of narsoplimab and details financial transactions related to the OMIDRIA sale and royalty monetization - The FDA's Office of New Drugs (OND) denied the company's appeal regarding the narsoplimab BLA for HSCT-TMA but proposed a resubmission path based on survival data[95] - On December 23, 2021, Omeros sold OMIDRIA to Rayner for $126.0 million upfront, retaining rights to significant royalties and a potential $200.0 million milestone payment[99] - On September 30, 2022, Omeros received $125.0 million in cash from DRI Healthcare in exchange for a portion of future OMIDRIA royalty receipts[100] Clinical Development Programs The clinical pipeline is led by narsoplimab (MASP-2 inhibitor) and includes other key programs like OMS1029, OMS906, and OMS527 - Narsoplimab (MASP-2): The ARTEMIS-IGAN Phase 3 trial for IgA nephropathy continues enrollment, with 9-month proteinuria data anticipated by mid-2023[106] - OMS1029 (long-acting MASP-2): A Phase 1 clinical trial began dosing in August 2022 for this once-monthly to once-quarterly drug[114] - OMS906 (MASP-3): Following a successful Phase 1 trial, a Phase 1b trial is being initiated in PNH patients, with program expansion planned for other indications[118][119] Results of Operations R&D expenses rose to $38.6 million in Q3 2022 due to narsoplimab manufacturing, while SG&A expenses decreased to $12.2 million Research and Development Expenses (in thousands) | Category | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | MASP-2 program - OMS721 (narsoplimab) | $23,097 | $10,057 | | Total clinical research and development | $26,785 | $11,839 | | Preclinical research and development | $1,125 | $1,998 | | Total R&D Expenses | $38,568 | $25,818 | Selling, General and Administrative Expenses (in thousands) | Category | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | SG&A (excl. stock-based comp) | $9,998 | $11,104 | | Stock-based compensation | $2,200 | $2,906 | | Total SG&A Expenses | $12,198 | $14,010 | Net Income from Discontinued Operations (in thousands) | Category | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Product sales, net | $0 | $30,004 | | Royalty interest income and other | $8,229 | $0 | | Remeasurement adjustments | $29,043 | $0 | | Net income from discontinued ops | $37,336 | $21,575 | Financial Condition - Liquidity and Capital Resources The company ended Q3 2022 with $221.0 million in cash and investments, deemed sufficient to fund operations through at least November 2023 - The company ended Q3 2022 with $221.0 million in cash, cash equivalents, and short-term investments[145] - The third quarter cash burn, excluding the $125.0 million from the DRI transaction, was $26.6 million[145] - The company has $95.0 million of 2023 Convertible Senior Notes that mature and become due in November 2023[146] Quantitative and Qualitative Disclosures About Market Risk Market risk is primarily limited to the investment portfolio, which is managed to preserve capital through high-quality, short-term securities - Market risk is primarily confined to the company's investment portfolio of $221.0 million in cash, cash equivalents, and short-term investments[160] - The investment policy is to invest in highly liquid, investment-grade securities with short-term maturities to preserve capital and minimize risk[160] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal controls - The principal executive officer and principal financial officer concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective[161] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[162] Part II — Other Information Legal Proceedings The company reports that it was not involved in any material legal proceedings as of the filing date - Omeros Corporation was not involved in any material legal proceedings as of the filing date of this Form 10-Q[165] Risk Factors This section refers investors to the risk factors disclosed in the company's 2021 Annual Report on Form 10-K - The company refers to the risk factors described in its Annual Report on Form 10-K for the year ended December 31, 2021, indicating no material changes during the quarter[166] Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period Default Upon Senior Securities This item is not applicable for the reporting period Mine Safety Disclosures This item is not applicable for the reporting period Other Information This item is not applicable for the reporting period Exhibits This section lists exhibits filed with the Form 10-Q, including the Royalty Purchase Agreement and officer certifications - Key exhibits filed include the Royalty Purchase Agreement with DRI Healthcare Acquisitions LP, and certifications from the Principal Executive Officer and Principal Financial Officer[171]