OMEROS CORPORATION The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.
Overview
We are a commercial-stage biopharmaceutical company committed to discovering, developing and commercializing small-molecule and protein therapeutics for large-market as well as orphan indications targeting inflammation, complement-mediated diseases, disorders of the central nervous system, and immune-related diseases, including cancers.
Our drug product OMIDRIA® is marketed in
Impact of Global Pandemic
The COVID-19 pandemic had a significant impact on OMIDRIA revenues in 2020. In
The pandemic has also resulted in delays or disruptions in our clinical and
pre-clinical activities. It is not possible to estimate precisely the future
impact of the COVID-19 pandemic on our business, operations or financial results
due to the unknown magnitude, duration and outcome of the pandemic, especially
in light of the severity and transmissibility of virus variants and possible
local governmental responses across the
Commercial Product - OMIDRIA® (phenylephrine and ketorolac intraocular solution) 1%/0.3%
OMIDRIA is approved by FDA for use during cataract surgery or intraocular lens
replacement to maintain pupil size by preventing intraoperative miosis (pupil
constriction) and to reduce postoperative ocular pain. Outside the
OMIDRIA is a proprietary drug product containing two active pharmaceutical ingredients: ketorolac, an anti-inflammatory agent, and phenylephrine, a mydriatic, or pupil dilating, agent. Cataract and other lens replacement surgery involves replacement of the original lens of the eye with an artificial intraocular lens. OMIDRIA is added to standard irrigation solution used during cataract and lens replacement surgery and is delivered intracamerally, or within the
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anterior chamber of the eye, to the site of the surgical trauma throughout the procedure. Preventing pupil constriction is essential for these procedures and, if miosis occurs, the risk of damaging structures within the eye and other complications increases, as does the operating time required to perform the procedure.
We sell OMIDRIA primarily through wholesalers which, in turn, sell to ASCs and
hospitals. The
Clinical Development Programs
Our clinical stage development programs include:
MASP-2 - narsoplimab (OMS721) - Lectin Pathway Disorders. Narsoplimab, also
referred to as OMS721, is our lead fully human monoclonal antibody targeting
mannan-binding lectin-associated serine protease-2 ("MASP-2"), a novel
pro-inflammatory protein target involved in activation of the lectin pathway of
? complement. The lectin pathway plays an important role in the body's
inflammatory response and becomes activated as a result of tissue damage or
microbial pathogen invasion. Inappropriate or uncontrolled activation of the
lectin pathway can cause serious diseases and disorders. MASP-2 is the effector
enzyme of the lectin pathway, and the current development focus for narsoplimab
is diseases that are strongly associated with activation of the lectin pathway.
In
Narsoplimab has received multiple designations from FDA and from the EMA across three current indications. These include:
HSCT-TMA: In the
designation in patients who have persistent TMA despite modification of
? immunosuppressive therapy and (2) orphan drug designation for the treatment of
HSCT-TMA.
product for treatment in hematopoietic stem cell transplantation.
IgA nephropathy: In the
(1) breakthrough therapy designation for the treatment of IgA nephropathy and
? (2) orphan drug designation in IgA nephropathy. In the EU, narsoplimab has been
granted designation as an orphan medicinal product for the treatment of primary
IgA nephropathy.
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aHUS: In the
? designation for the treatment of patients with aHUS and (2) orphan drug
designation for the prevention (inhibition) of complement-mediated thrombotic
microangiopathies.
In the EU, the EMA has confirmed narsoplimab's eligibility for EMA's centralized review of a single marketing authorization application ("MAA") that, if approved, would authorize the product to be marketed in all EU member states and EEA countries. We are targeting to complete our MAA submission in 2021.
In our IgA nephropathy program, patient enrollment continues in the narsoplimab Phase 3 clinical trial, ARTEMIS-IGAN. The single Phase 3 trial design is a randomized, double-blind, placebo-controlled multicenter trial in patients at least 18 years of age with biopsy-confirmed IgA nephropathy and with 24-hour urine protein excretion greater than one gram per day at baseline on optimized renin-angiotensin system blockade. This trial includes a run-in period. Initially, patients are expected to receive an IV dose of study drug each week for 12 weeks; additional weekly dosing can be administered to achieve optimal response. The primary endpoint, which we believe could suffice for full or accelerated approval depending on the effect size, is reduction in proteinuria at 36 weeks after the start of dosing. The trial is designed to allow intra-trial adjustment in sample size. For the purposes of safety and efficacy assessments, the initial sample size for the proteinuria endpoint is estimated at 140 patients in each of the treatment and placebo groups. This will include a subset of patients (78 per arm) with high levels of proteinuria (i.e., equal to or greater than 2 g/day) at baseline, and a substantial improvement at 36 weeks in this subset of patients alone could potentially form the basis for approval. We believe that the trial design will allow assessment for either full or accelerated approval at 36 weeks based on proteinuria results either (1) across the general population of study patients or (2) in the high-proteinuria subset of patients.
The Phase 3 clinical program in patients with aHUS, in which patient recruitment
is ongoing, consists of one Phase 3 clinical trial - a single-arm (i.e., no
control arm), open-label trial in patients with newly diagnosed or ongoing aHUS.
This trial is targeting approximately 40 patients for full approval in the EU
and accelerated approval in the
MASP-2 - narsoplimab (OMS721) - COVID-19. In
? request from physicians at the
we initiated a compassionate use program for narsoplimab to treat patients with
severe COVID-19 requiring mechanical ventilation.
The initial cohort treated under this compassionate use program included a total of six COVID-19 patients treated with narsoplimab, all with acute respiratory distress syndrome ("ARDS") and requiring continuous positive airway pressure ("CPAP") or intubation. At baseline, circulating endothelial cell ("CEC") counts and serum levels of interleukin-6 ("IL-6"), IL-8, C-reactive protein ("CRP"), LDH, D-dimer and aspartate aminotransferase ("AST") were markedly elevated. During the course of the compassionate use program, institutional guidelines at the treating hospital were updated to require that all COVID-19 patients in the hospital receive steroids. One patient treated with narsoplimab did not receive steroids. Of the five narsoplimab-treated patients who received steroids, two initiated them after already improving such that CPAP was no longer required or was discontinued the following day. The study evaluated CEC counts in a separate group of four patients receiving only steroids for a short duration, and the counts were found to be unaffected by steroid administration. This suggests that any beneficial effect of steroids on COVID-19-associated endothelial damage may be delayed and had little effect on the recovery course of the narsoplimab-treated patients who initiated steroid treatment after improving.
Narsoplimab treatment was associated with rapid and sustained reduction across all of the above-named markers of endothelial damage and inflammation. In addition, massive bilateral pulmonary thromboses, seen in two of the patients, resolved while on narsoplimab. All six narsoplimab-treated patients recovered, survived and were discharged. Narsoplimab was well tolerated and no adverse drug reactions were reported. Two control groups with similar baseline characteristics were used for retrospective comparison and showed substantial
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mortality rates of 32% and 53%. A manuscript detailing the results of the
initial cohort of
All six patients were evaluated five to six months after cessation of narsoplimab treatment. None of them showed any clinical or laboratory evidence of long-term effects of COVID-19, such as cognitive impairment or cardiac, pulmonary or other organ disorder, commonly seen following resolution of initial COVID-19 symptoms.
Following treatment of the initial six patients under the compassionate use
program in
Endothelial damage and resultant thromboses are significant to the pathophysiology of COVID-19, and we believe these data illustrate the importance of inhibiting the lectin pathway to treat critically ill COVID-19 patients. Endothelial damage activates the lectin pathway of complement. We believe the results observed following narsoplimab treatment in critically ill COVID-19 patients at Papa Giovanni were consistent with those seen in HSCT-TMA and underscore the pathophysiologic similarities between these two disorders. Narsoplimab has been shown to inhibit lectin pathway activation and to block the MASP-2-mediated conversion of prothrombin to thrombin, microvascular injury-associated thrombus formation and the activation of factor XII as well as the MASP-2-mediated activation of kallikrein. We believe that the anticoagulant effects of narsoplimab may provide therapeutic benefits in both HSCT-TMA and COVID-19.
Narsoplimab is also the only complement inhibitor included in the I-SPY COVID-19
platform trial sponsored by Quantum Leap Healthcare Collaborative, which is
evaluating investigational therapies for the treatment of critically ill
COVID-19 patients. The trial utilizes
Discussions are ongoing regarding the use of narsoplimab in COVID-19 with
leaders across various government agencies, both in the
MASP-3 - OMS906 - Alternative Pathway Disorders. As part of our MASP program,
we have identified mannan-binding lectin-associated serine protease-3
("MASP-3"), which has been shown to be the key activator of the complement
system's alternative pathway ("APC"), and we believe that we are the first to
make this and related discoveries associated with the APC. The complement
system is part of the immune system's innate response, and the APC is
considered the amplification loop within the complement system. MASP-3 is
responsible for the conversion of pro-factor D to factor D; converted factor D
is necessary for the activation of the APC. Based on our alternative
pathway-related discoveries, we have expanded our intellectual property
position to protect our inventions stemming from these discoveries beyond
? MASP-2-associated inhibition of the lectin pathway to include inhibition of the
alternative pathway. Our current primary focus in this program is developing
MASP-3 inhibitors for the treatment of disorders related to the APC. We believe
that MASP-3 inhibitors have the potential to treat patients suffering from a
wide range of diseases and conditions, including: paroxysmal nocturnal
hemoglobinuria ("PNH"); multiple sclerosis; neuromyelitis optica; age-related
macular degeneration; Alzheimer's disease; systemic lupus erythematosus;
diabetic retinopathy; chronic obstructive pulmonary disease; antineutrophil
cytoplasmic antibody-associated vasculitis; anti-phospholipid syndrome;
atherosclerosis; myasthenia gravis and others. Our OMS906 monoclonal antibody
program has generated positive data in well-established animal models of PNH
and rheumatoid arthritis as well as strong pharmacodynamic activity in
non-human primates.
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In
PDE7 - OMS527. In our PDE7 program, we are developing proprietary compounds to
treat addiction and compulsive disorders as well as movement disorders. In
?
and multiple-ascending-dose clinical trial designed to assess safety,
tolerability and pharmacokinetics of our lead compound in healthy subjects.
In the double blind, randomized Phase 1 study, the study drug, referred to as
OMS182399, met the primary endpoints of safety and tolerability and showed a
favorable and dose-proportional pharmacokinetic profile supporting once-daily
dosing. There was no apparent food effect on plasma exposure to OMS182399. A
manuscript detailing the mechanism of action of PDE7 inhibition in nicotine
addiction was published in the peer-reviewed
Preclinical Development Programs and Platforms
Our preclinical programs and platforms include:
Other MASP Inhibitor Preclinical Programs. We have generated positive
preclinical data from MASP-2 inhibition in in vivo models of age-related
macular degeneration, myocardial infarction, diabetic neuropathy, stroke,
traumatic brain injury, ischemia-reperfusion injury, and other diseases and
? disorders. We are also developing a longer-acting second generation antibody
targeting MASP-2 for which we expect to initiate clinical trials in 2022. This
program is designated "OMS1029." Development efforts are also directed to a
small-molecule inhibitor of MASP-2 designed for oral administration as well as
to small-molecule inhibitors of MASP-3 and bispecific small- and large-molecule
inhibitors of MASP-2/-3.
GPR174 and GPCR Platform. We have developed a proprietary cellular
redistribution assay which we use in a high-throughput manner to identify
synthetic ligands, including antagonists, agonists and inverse agonists, that
bind to and affect the function of orphan GPCRs. We have screened Class A
orphan GPCRs against our small-molecule chemical libraries using the cellular
redistribution assay and have identified and confirmed compounds that interact
with 54 of the 81 Class A orphan GPCRs linked to a wide range of indications
including cancer as well as metabolic, cardiovascular, immunologic,
inflammatory and central nervous system disorders. One of our priorities in
this program is GPR174, which is involved in the modulation of the immune
system. In ex vivo human studies, our small-molecule inhibitors targeting
GPR174 upregulate the production of cytokines, block multiple checkpoints and
tumor promoters, and suppress regulatory T-cells. Based on our data, we believe
that GPR174 controls a major, previously unrecognized pathway in cancer and
modulation of the receptor could provide a seminal advance in immuno-oncologic
? treatments for a wide range of tumors. Our studies in mouse models of melanoma
and colon carcinoma found that GPR174-deficiency resulted in significantly
reduced tumor growth and improved survival of the animals versus normal mice.
Our discoveries suggest a new approach to cancer immunotherapy that targets
inhibition of GPR174 and can be combined with and significantly improve the
tumor-killing effects of other oncologic agents, including radiation, adenosine
pathway inhibitors and checkpoint inhibitors. These discoveries include (1)
identification of cancer-immunity pathways controlled by GPR174, (2) the
identification of phosphatidylserine as a natural ligand for GPR174, (3) a
collection of novel small-molecule inhibitors of GPR174 and (4) a synergistic
enhancement of "tumor-fighting" cytokine production by T cells following the
combined inhibition of both GPR174 and the adenosine pathway, another key
metabolic pathway that regulates tumor immunity. We are developing both
small-molecule and antibody inhibitors of GPR174 with the objective of moving
compounds into human trials. We are also exploring several of our other GPCR
targets.
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Financial Summary
We recognized net losses of
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* Fiscal quarters with significantly reduced cataract procedures due to the
COVID-19 pandemic
** Pass-through reimbursement expired on October 1, 2020 . In December 2020 ,
separate payment was confirmed for OMIDRIA, effective retroactively as of
October 1, 2020 .
Pass-through reimbursement for OMIDRIA under Medicare Part B expired on
We expect our net losses will continue until such time as we derive sufficient revenues from sales of OMIDRIA and/or other sources, such as licensing, product sales and other revenues from our product candidates, that are sufficient to cover our operating expenses and debt service obligations.
Results of Operations
Revenue
Our revenue consists of OMIDRIA product sales to ASCs and hospitals in the
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
(In thousands)
Product sales, net $ 28,823 $ 13,530 $ 49,885 $ 37,067 During the three months and six months ended
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procedures, including cataract procedures, in the spring of 2020 followed by a progressive resumption in these procedures.
Gross-to-Net Deductions
We record OMIDRIA product sales net of estimated chargebacks, rebates,
distribution fees and product returns. These deductions are generally referred
to as gross-to-net deductions. Our total gross-to-net provision for the three
months ended
Our total gross-to-net provision for the six months ended
A summary of our gross-to-net related accruals for the six months endedJune 30, 2021 is as follows: Distribution Fees and Product Chargebacks Return and Rebates Allowances Total (In thousands) Balance as of December 31, 2020$ 3,740 $ 948$ 4,688 Provisions 18,756 2,541 21,297 Payments (14,671) (1,892) (16,563) Balance as of June 30, 2021$ 7,825 $ 1,597 $ 9,422 Chargebacks and Rebates
We record a provision for estimated chargebacks and rebates at the time we recognize OMIDRIA product sales revenue and reduce the accrual when payments are made or credits are granted. Our chargebacks are related to a pharmaceutical pricing agreement, a federal supply schedule agreement, a 340B prime vendor agreement, a Medicaid drug rebate agreement and an upfront discount to our ASC and hospital customers. We also record a provision for our OMIDRIAssure patient assistance and reimbursement program and for rebates under our purchase volume-discount programs.
Distribution Fees and Product Return Allowances
We pay our wholesalers a distribution fee for services they perform for us based on the dollar value of their purchases of OMIDRIA. We record a provision for these charges as a reduction to revenue at the time of sale to the wholesaler and make payments to our wholesalers based on contractual terms.
We allow for the return of product up to 12 months past its expiration date or for product that is damaged or not used by our customers. We record a provision for returns upon sale of OMIDRIA to our wholesaler. When a return or claim is received, we issue a credit memo to the wholesaler against its outstanding receivable to us or we reimburse the customer.
Research and Development Expenses
Our research and development expenses can be divided into three categories: direct external expenses, which include clinical research and development, preclinical research and development activities; internal, overhead and other
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expenses; and stock-based compensation expense. The following table illustrates our expenses associated with these activities:
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
(In thousands)
Direct external expenses:
Clinical research and development:
MASP-2 program - OMS721 (narsoplimab) $ 9,564 $ 9,720 $ 26,595 $ 22,935
MASP-3 program - OMS906 1,390 - 3,161 -
OMIDRIA - Ophthalmology 620 433 1,186 884
PDE7 - OMS527 121 259 263 1,596
Total clinical research and development 11,695 10,412 31,205 25,415 Preclinical research and development
5,382 3,144 8,093 6,834
Total direct external expenses 17,077 13,556 39,298 32,249
Internal, overhead and other expenses 12,450 8,945 22,121 17,716 Stock-based compensation expense
1,410 1,631 2,890 3,078
Total research and development expenses
Clinical research and development expenses increased
The
The
The increases in internal, overhead and other expenses are primarily due to additional employee-related costs and additional leased laboratory facilities to support our research and development activities.
We expect overall research and development costs in the third quarter of 2021 to increase over the second quarter of 2021 due to increased costs associated with the expected launch of narsoplimab as well as increased preclinical activities.
At this time, we are unable to estimate with certainty the longer-term costs we will incur in the continued development of our product candidates due to the inherently unpredictable nature of our preclinical and clinical development activities as well as to the potential impacts of the COVID-19 pandemic. Clinical development timelines, the probability of success and development costs can differ materially from expectations as new data become available or unforeseen difficulties emerge. Our future research and development expenses will depend, in part, on the preclinical or clinical success of each product candidate as well as on ongoing assessments of each program's commercial potential. In addition, we cannot forecast with precision which product candidates, if any, may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
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We are required to expend substantial resources in the development of our product candidates due to the lengthy process of completing clinical trials and seeking regulatory approval. Any failure or delay in completing clinical trials, or in obtaining regulatory approvals, could delay our generation of product revenue and increase our research and development expenses.
Selling, General and Administrative Expenses
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
(In thousands)
Selling, general and administrative
expenses, excluding stock-based
compensation expense $ 19,853 $ 14,740 $ 36,100 $ 30,747
Stock-based compensation expense 1,707 2,191 3,498 4,220
Total selling, general and
administrative expenses $ 21,560 $ 16,931 $ 39,598 $ 34,967 Total selling, general and administrative expenses increased by
We expect that our selling, general and administrative expenses will increase during the third and fourth quarters of 2021 due to increased pre-commercialization and expected commercialization activities for narsoplimab.
Interest Expense
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
(In thousands)
Interest expense $ 4,910 $ 5,978 $ 9,808 $ 11,880 Interest expense is comprised of contractual interest and amortization of debt
issuance and debt discount related to our 2023 and 2026 Notes as well as
interest on our finance leases. Interest expense decreased
Financial Condition - Liquidity and Capital Resources
As of
The PDUFA action date for our BLA in HSCT-TMA is
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spending, such as for field sales hiring, providing for flexibility in the timing of costs incurred should the approval of narsoplimab be delayed. If approved, we cannot fully predict the timing or the magnitude of narsoplimab revenues.
We plan to fund our operations for the next twelve months with our cash and
investments on hand from sales of OMIDRIA and, if FDA approval is granted, from
sales of narsoplimab for HSCT-TMA. In addition, we may utilize funds available
under our line of credit, which allows us to borrow up to 85% of our available
accounts receivable borrowing base, less certain reserves, or
Cash Flow Data
Six Months Ended June 30,
2021 2020
(In thousands)
Selected cash flow data
Cash provided by (used in):
Operating activities $ (67,846) $ (46,738)
Investing activities $ 63,396 $ 43,370
Financing activities $ 6,651 $ 2,248 Operating Activities. Net cash used in operating activities for the six months
ended
Investing Activities. Cash flows from investing activities primarily reflect cash used to purchase short-term investments and proceeds from the sale of short-term investments, thus causing a shift between our cash and cash equivalents and short-term investment balances. Because we manage our cash usage with respect to our total cash, cash equivalents and short-term investments, we do not consider fluctuations in cash flows from investing activities to be important to the understanding of our liquidity and capital resources.
Net cash provided by investing activities during the six months ended
Financing Activities. Net cash provided by financing activities during the
six months ended
At the Market Sales Agreement. On
Line of Credit Agreement. Our Line of Credit Agreement with
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of
Contractual Obligations and Commitments
Our future minimum contractual commitments and obligations were reported in our
Annual Report on Form 10-K for the year ended
Lease Agreements
Our lease for our office and laboratory space ends in
Goods and Services
We have certain other non-cancelable obligations under various agreements that
relate to goods and services. As of
We may be required, in connection with in-licensing or asset acquisition agreements, to make certain royalty and milestone payments and we cannot, at this time, determine when or if the related milestones will be achieved or whether the events triggering the commencement of payment obligations will occur. Therefore, such payments are not included in the amounts described above.
Critical Accounting Policies and Significant Judgments and Estimates
On
Other than the adoption of ASU 2020-06, there have not been any material changes
in our critical accounting policies and significant judgments and estimates as
disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in our Annual Report on Form 10-K
for the year ended
Off-Balance Sheet Arrangements
We have not engaged in any off-balance sheet arrangements.
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