OMER - NASDAQ

Good afternoon, and welcome to today's conference call for Omeros Corporation. At this time, all participants are in a listen-only mode. After the company's remarks, we will conduct a question-and-answer session. [Operator Instructions]. Please be advised that this call is being recorded at the company's request and a replay will be available on the company's website for one week from today. I will now turn the call to Jennifer Williams, Investor Relations for Omeros.

Good afternoon, and thank you for joining the call today. I'd like to remind you that some of the statements that will be made on the call today will be forward-looking. These statements are based on management's beliefs and expectations as of today only and are subject to change. All forward-looking statements involve risks and uncertainties that could cause the company's actual results to differ materially. Please refer to the special note regarding forward-looking statements in the company's quarterly report on Form 10-Q, which was filed today with the SEC, and the Risk Factors section of the company's most recent annual report on Form 10-K and its subsequently filed quarterly reports for a discussion of these risks and uncertainties. Now I would like to turn the call over to Dr. Greg Demopulos, Chairman and CEO of Omeros.

Thank you, Jennifer, and good afternoon, everyone. I'm joined on today's call by our Chief Accounting Officer, David Borges; and Nadia Dac, our Chief Commercial Officer; Andreas Grauer, our Chief Medical Officer; our Chief Regulatory Officer, Cathy Melfi; and our Vice President of Clinical, Steve Whitaker. We'll start today with an overview and discussion of our third quarter 2024 financial results, followed by an update on our ongoing development programs. David will then provide a more detailed financial summary before we open the call to questions. Now let's look at our financial results for the third quarter. Our net loss for the third quarter of 2024 were $32.2 million or $0.56 per share compared to a net loss of $56 million or $0.97 per share in the second quarter of this year. The $23.8 million quarter-over-quarter decrease in the net loss was primarily driven by $17.6 million of narsoplimab drug substance recorded as an expense in the second quarter. As of September 30, 2024, we had $123.2 million of cash and investments on hand, a decrease of $35.8 million from June 30, 2024. In addition, as relayed in earlier calls, our recent sale of OMIDRIA royalties to DRI Healthcare carries with it two sales contingent milestones payable by DRI to Omeros, each up to $27.5 million with payment dates in January 2026 and January 2028. Earlier this year, the Centers For Medicare and Medicaid Services issued their outpatient prospective payment system final rule confirming ongoing separate payment for OMIDRIA in ambulatory surgery centers and for the first time beginning on January 1, 2025 expanding separate payment to hospital outpatient departments or HOPDs. The initiation of HOPD sales in January is expected to grow OMIDRIA sales meaningfully in the U.S. Ex-U.S. sales should also begin next year with Omeros receiving 15% of those net revenues. Additionally, our term loan agreement from June 2024 includes a commitment by the lenders to fund a $25 million delayed drop facility upon our request prior to June 3, 2025, contingent on receipt of FDA approval of narsoplimab in TA-TMA within 30 days of the funding request. The additional term loan commitment provides Omeros with a ready source of capital to fuel the early commercialization of narsoplimab. With that, let's move on to an update on our development program starting with our complement franchise and narsoplimab, our first-in-class MASP-2 inhibitor, targeting the effector enzyme of the lectin pathway of complement. As described in previous updates, we have been working closely with FDA regarding the anticipated resubmission of our Biologics License Application, or BLA for narsoplimab in hematopoietic stem cell transplant associated thrombotic microangiopathy, or TA-TMA. Over the last several quarters, we have had a series of interactions with the agency focused on our proposed plan for resubmission. In September, we held a pre-submission meeting with FDA. The meeting was collaborative and as part of the meeting, we received additional minor feedback on our proposed statistical analysis plan for the primary endpoint that being patient survival in our pivotal narsoplimab trial compared to that in an external registry of patients with TA-TMA. FDA had previously reviewed the plan and all FDA comments had been incorporated. The additional feedback was limited to requesting a few more sensitivity analyses. We quickly incorporated additional sensitivity analyses into the plan and sent it back to the agency. We are awaiting FDA's reply and expect it to arrive imminently. We have no other pending information requests and are not aware of any other impediments to resubmitting our narsoplimab BLA. Once FDA's response is in hand and assuming general alignment on the revised analysis plan, our independent external statistics group will conduct the pre-specified analyses directed to the primary endpoint. In addition to the primary analyses, the external statistics group will perform supplementary analyses on the narsoplimab Expanded Access Program or EAP together with sensitivity analyses and descriptive statistics on both the narsoplimab pivotal trial results and the narsoplimab EAP data. The key statistical programs for these analyses are already written, so results from the analyses should be available in a matter of days after their initiation. Following completion of the analyses, we look forward to sharing the results publicly. To accelerate the timeline to resubmission, preparations including drafting and revising sections of the resubmission began months ago. Assuming overall favorable analysis results, we will dedicate the necessary internal and external resources to resubmit the BLA as quickly as possible. Our recent interactions with FDA are occurring against a backdrop of heightened awareness and focus within both the agency and Congress on the need for expanding treatments for rare diseases, including increasing regulatory flexibility and FDAs review and approval process for these treatments. This is evidenced by public statements and congressional testimony by FDA leadership, the Congressional Rare Disease Caucus' communications with FDA as well as published editorials authored by the caucuses' bipartisan chairs and significant stakeholder engagement among highly credible rare disease community organizations. Perhaps most impactful and widely noted is FDAs recent and well received establishment of its rare disease innovation hub. The hub, co led by the Directors of FDA's Centers for Drug and for Biologics Evaluation and Research is designed to provide drug sponsors and other stakeholders in the rare disease community with a single point of connection and engagement within the FDA. The objective is to ensure greater consistency in the review process and to overcome and mitigate the unique challenges associated with developing therapeutics for rare diseases. Separate from our interactions with FDA, we are preparing a European Marketing Authorization Application or MAA for narsoplimab in TA-TMA, which we expect to submit in the first half of 2025. In parallel with our efforts to submit both the narsoplimab BLA and MAA, panels of international experts are preparing two manuscripts for publication in top tier peer reviewed journals. The first in keeping with our primary endpoint for regulatory approval, we'll compare survival of patients in our pivotal TA-TMA trial with the same rigorous external control used for our BLA resubmission. The second details the survival data in nearly 140 narsoplimab treated adult and pediatric patients from our global expanded access program. As we have moved closer to resolving the status and direction of our narsoplimab program in TA-TMA, we have in parallel continued to advance rapidly toward the initiation of Phase 3 clinical programs for zaltenibart also known as OMS906, our first in class MASP-3 inhibitor targeting the key activator of the alternative pathway of complement. Let's turn now to an update on our progress across our zaltenibart development programs. Omeros' focus for zaltenibart has been on multiple Phase 2 studies assessing the drug as a potential treatment for two chronic rare disease indications, paroxysmal nocturnal hemoglobinuria, or PNH, a life threatening hematologic disorder and C3 Glomerulopathy, or C3G, a debilitating and potentially life threatening kidney disease. Let's first discuss our PNH program, which continues advancing rapidly and generating compelling data. Our Phase 2 switchover study evaluated zaltenibart in PNH patients with a suboptimal response to ravulizumab. As planned and on schedule, all patients have now completed the trial with the last patient visit having occurred in October. These completed study patients have rolled into the long-term open label extension study further building our safety database to be included in the planned BLA for zaltenibart in PNH. Patients in the switch-over study began by receiving both zaltenibart and ravulizumab, a C5 inhibitor, with those patients demonstrating a response to the combination therapy then switching to zaltenibart monotherapy. The trial evaluated two zaltenibart dose levels. Results from the adjunctive therapy portion of the trial were presented in June at the Annual Congress of the European Hematology Association. Patients receiving ravulizumab and zaltenibart combination therapy demonstrated a statistically significant improvement both in mean hemoglobin compared to baseline and in absolute reticulocyte count. Now data from the zaltenibart monotherapy stage of the trial will be presented next month in San Diego at the Annual Congress of the American Society of Hematology. We are pleased with the results.

Thanks, Greg. Our net loss for the third quarter of 2024 was $32.2 million or $0.56 per share compared to a net loss of $56 million or $0.97 per share in the second quarter of 2024. As of September 30, 2024 we had $123.2 million of cash and investments on hand, a decrease of $35.8 million from June 30, 2024. Cost and expenses from continuing operations for the third quarter were $35.4 million which was a decrease of $23.8 million from the second quarter of this year. The decrease was primarily driven by $17.6 million of R&D expense related to the manufacture of narsoplimab drug substance lots that commenced in October 2023, and which were delivered and expensed in the second quarter of this year. Recall that our accounting policy is to expense all manufacturing costs related to drug candidates until regulatory approval is reasonably assured in either the U.S. or the European Union. Manufacturing costs for zaltenibart were lower by $3.7 million in the third quarter as a result of drug substance produced and expense in the second quarter. In addition, there were $1.9 million for term loan related transaction costs that were expensed in the second quarter of 2024. Interest expense for the third quarter was $4.1 million which was $5.2 million lower than the second quarter of this year. The primary drivers of interest expense are the 2026 notes, the DRI-OMIDRIA royalty obligation and the newly issued secured term loan entered into in June 2024. In the third quarter, we recorded a $3.4 million non-cash credit lowering interest expense reflecting changes made to the OMIDRIA royalty obligation. The remaining third quarter decrease was due to newly issued secured term loan agreement, which replaced a portion of our 26 notes. Interest and other income for the third quarter was $2.3 million. This is lower than the second quarter of this year due to lower cash balances to invest. And income from discontinued operations in the third quarter of this year was $4.9 million and includes two primary components. First, $4.2 million of interest earned on the OMIDRIA contract royalty asset and second $700,000 of remeasurement adjustments to the OMIDRIA contract royalty asset. As we have previously discussed, royalties earned are recorded as a reduction in the OMIDRIA contract royalty asset on our balance sheet and not in our income statement. OMIDRIA royalties for the third quarter were $9.3 million and OMIDRIA net sales of $31 million. This is compared to royalties of 10.9 million on second quarter net sales of $36.4 million a decrease of $1.6 million in OMIDRIA royalties or $5.4 million in net sales from the second quarter of 2024. And the Midway royalties decreased $700,000 or $2.3 million in net sales from the second quarter of 2023. As we discussed in prior earnings calls, in February 2024, we entered into an amended agreement with DRI by which they acquired the right to receive all U.S. OMIDRIA royalties payable by Rayner through December 31, 2031. We continue to hold all royalty rights to ex-U.S. sales of OMIDRIA and after December 31, 2031 all U.S. royalty rights returned to Omeros, resulting in all global royalty payments subsequently accruing to Omeros. Now let's look at our fourth quarter expected results. We expect overall operating costs from continuing operations in the fourth quarter to be similar to the third quarter. Interest income for the fourth quarter should be nearly $1.2 million and interest expense barring any adjustments related to the OMIDRIA royalty obligation should be approximately $7.2 million, which is a non-cash increase of $3.1 million from the third quarter reflecting the absence of any large non-cash adjustment related to the OMIDRIA royalty obligation. And as you may recall, the term loan transaction we completed in June of this year had an embedded gain of $29.8 million which was deferred and is being amortized as a reduction to interest expense. The amortization results in an effective interest rate of 1.5% or $400,000 on the term debt for financial statement purposes. And finally, income from discontinued operations should be in the $7 million to $8 million range. With that, I'll turn the conference over to Greg.

Thank you, David. Operator, now let's please open the call to questions.

Thank you. [Operator Instructions]. Our first question is going to come from the line of Steve Brozak with WBB. Your line is open. Please go ahead.

Yes. Hi and thank you for taking questions. I only have one. From what I've read and from what you've just stated, given the brevity of the requests from FDA of narsoplimab and given the fact that I'm sure you're going to turn to very quickly on the resubmission of the BLA, I would assume it's reasonable to say that you're going to be selling commercially on narsoplimab in 2025. Can you comment on that, please?

Well, I think that's certainly the hope and expectation, Steve. I think 2025, we'd actually be not looking into the latter part of it. We'd be looking for turning the BLA around quickly, again assuming alignment on really what's left to discuss on the SAP. And as I think we noted in the initial comments and as you just referenced, the request was really for additional sensitivity analyses only. So we would expect alignment, but we're waiting to receive comments on the SAP. Once we have those, we will quickly run the analyses or I should say our external consultants, the biostatistics group will run those, share those results with us, assuming those look good. And we would certainly expect that looking at the data that are available to us. We would then move quickly to resubmit the BLA. So yes, I think 2025 is certainly where we are targeting.

Got it. Okay. Thank you. Let me hop back in the queue.

Thank you. One moment for our next question. Our next question comes from the line from Olivia Brayer with Cantor. Your line is open. Please go ahead.

Hi, good afternoon. Thank you for the question. For your MASP-3 inhibitor, Greg, what more can you tell us at this point about the Phase 3 trial designs for both indications? I know you made a few comments on PNH, but any additional color would be helpful or anything that you can tell us around FDA or EMA's feedback on those trials -- on that trial design specifically, I guess for PNH. Also wanted to ask about specific patient segments that you're planning to enroll or if there's anything that you can do to enrich the populations in those trials?

Yes. Let me answer generally and then I'll turn that over to our clinical team that's here as well to our representatives. But with respect to the Phase 3 trial design, they will be what we discussed in the opening comments. We're going to have one trial, which is a switch-over trial, where patients are treated with ravulizumab. Those patients not responding to ravulizumab or not optimally responding to ravulizumab, the C5 inhibitor, they go on combination therapy and then those that do respond to combination are rolled into monotherapy with zaltenibart alone. The second is again patients who have not been exposed or not being treated with complement inhibitors. The designs I think more specifically I'll let Andreas and Steve address, I'll just make one more comment on the FDA and the meetings with European regulators. Those meetings went very well. I think the response to our data and frankly to the drug in both of those settings was quite positive. And I think collaborative in that we're all working toward the same thing, which is moving zaltenibart through Phase 3 studies effectively and making it available to patients. That was certainly my takeaway from both of those meetings. With respect to population enrichment, again, let me turn this over first to Andreas and then Steve you as well.

Yes. So just with regard to the design, the design of the switch-over trial is really following established precedent, very similar to the successful trial of Iptacopan. As Greg was pointing out, patients that are having an insufficient or unsatisfactory response to either IQ will then be available to be randomized to receive either zaltenibart or continue on their previous treatment. Second trial is a trial in a population of patients not currently treated with C5 inhibitor, either totally naive or with a long hiatus since there any kind of previous C5 inhibitor treatment so that they're functionally naive. And that trial, we're planning also a randomized trial where we're randomizing these patients to receive either zaltenibart or a C5 inhibitor. With regard to enrichment, the population that we're going to include in both trials are patients that do not -- that need treatment, i.e. that have a hemoglobin that is not satisfactory, specifically devoted to the transmitter and obviously are very confident that we're going to improve that.

Okay, great. That's helpful. And then assuming that you guys do ultimately get awarded a priority review voucher for pediatric C3G. Can you just talk through what your strategy might be and whether selling the voucher is something that you're really considering?

It's a good question. I think at this point, Olivia, it's premature to discuss what our strategy would be. I think we would have to assess the landscape out there, what is the interest in the voucher, which historically is high. But I mean, we may well have reason and the good reason to keep it for ourselves as well. I mean, I think it all depends on how the studies play out, how our programs move forward and what the landscape looks like at that time.

Okay, great. Very helpful. Thank you.

Thank you.

Thank you. And one moment for our next question. Our next question is going to come from the line of Serge Belanger with Needham. Your line is open. Please go ahead.

Hi, good afternoon. I guess a question on the OMS906 Phase 3 program. Can you just give us a sense of the potential size and cost estimate of this program and whether your current cash balance provides you with the bandwidth to move it forward or you would seek a partner to complete that Phase 3 program? Thanks.

Thank you, Serge. Again, I'll answer at a high level and then turn it to clinical to address the specific sizes of the studies. Certainly, we're looking to move the programs forward ahead independently. We are confident that we can do that. Data look really good and the safety profile of the drug, as I mentioned, really quite compelling. So we think we have significant differentiators between zaltenibart and other alternative pathway inhibitors on the market or in development. Now having said that, certainly we always have ongoing partnering discussions. We don't speak specifically to those. But as one might expect with a Phase 3 asset that looks like zaltenibart looks, there would be expected significant interest. So let me stop there and turn to, I don't know Andreas or Steve, who would like to address the size of these studies?

The size of the study is we're planning and both of these studies will be effectively randomized and we're expecting the studies to be in the size of slightly below 100 patients per trial.

So these are relatively small studies and readily managed. Steve, anything you want to add to that?

Well, I want to put just a little more color around it. We saw really good efficacy in the earlier studies that we did at PNH. So that really helps us with our power and so we don't have to get large at all. And I think another issue here as we look at the duration of the studies and we've already been finding pockets of patients. So we're we should be, we should hit the ground running in many places and be able to get this enrolled in a reasonably quick period of time.

That's great, Steve. Thank you. And thank you, Andreas. And just to underscore what you're saying then, the sort of the fixed monthly costs of running a drug trial we expect will be affected positively by the enrollment that we foresee for both of these studies and frankly the groundwork that the clinical operations team has done in identifying those patients, lining up those patients and our ability to enroll them and run them through the trial quickly. Is that a fair statement?

Absolutely. They've done a great job.

Okay. All right. Thank you. Thanks, Serge.

Thank you. And I would now like to hand the conference back over to Dr. Demopulos for closing remarks.

Thank you, operator. So in closing, we'd like to thank all of you for joining the call. Obviously, we are encouraged by our recent meeting with FDA and expect that our to date lengthy engagement with the agency is nearing its conclusion, which should result in the resubmission of our BLA and that we have the additional evidence and analyses to support approval. We will of course keep you updated as we proceed. Again, all of us at Omeros appreciate your continued interest and your continued support. Have a good afternoon.