Omeros Corporation

Good afternoon, and welcome to today's earnings call for Omeros Corporation. At this time, all participants are in a listen-only mode. After the company's remark, we will conduct a question-and-answer session. 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'll turn over 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 and the risk factors section in the company's annual report on Form 10-K, which was filed today with the SEC for a discussion of these risks and uncertainties. Today's call will include a discussion of certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to the corresponding GAAP measures is included with Omeris's earnings plus press release included, excuse me, issued earlier today, which is available on the investor relations page of our website and has been furnished with the form 8K we filed with the SEC earlier today. Now, I would like to turn the call over to Dr. Greg Dimopoulos. Omeris is the chairman and CEO.

Thank you, Jennifer, and good afternoon, everyone. We'll start with a corporate update and a high-level overview of our fourth quarter and year-end 2021 financial results, followed by a more detailed financial summary. With me today here are Mike Jacobson, Nadia Dock, Kathy Melfi, and Steve Whitaker, our respective heads of finance, commercial, regulatory, and clinical. As publicly announced on December 23rd, 2021, Omeros completed the strategic divestiture of its commercial ophthalmic product, Omidria, to Raynor Surgical. Raynor has a long heritage in ophthalmology and markets a portfolio of complementary ophthalmology products across more than 80 countries. At the transactions closing, OMEROS received $126 million in cash. In addition, during this first quarter of 2022, OMEROS is collecting all accounts receivable outstanding at the closing date, bringing the effective total cash received by OMEROS to $165 million. With cash on hand at year end, this brings our effective cash and accounts receivable at December 31, 2021 to $195 million. OMEROS will also receive a milestone payment of 200 million if before 2025. Separate payment for OMIDRIA is secured for a continuous period of at least four years. The immediate capital infusion of $165 million together with the ongoing royalty stream should provide sufficient capital for Omeros to run through late 2023. The $200 million milestone, if achieved, will substantially extend that run room. Beyond the upfront payment and milestone, Omeros retains significant upside in the future growth of Omidria through royalties on both U.S. and ex-U.S. net sales of Omidria. In the U.S., Omeros receives 50 percent of net sales, approximately 70 percent of the operating profit, from the closing date until the earlier of either January 1, 2025, or the payment of the $200 million milestone. Thereafter, Omeros will receive 30% of U.S. net sales, which equates to over 40% of operating profits until U.S. patent expiration, which at present is 2033, and given pending patent applications might well be later. Outside of the U.S., OMEROS will receive a royalty of 15% of net sales, again, with a long duration running until the expiration of all relevant regional or national patents. Let's turn to our fourth quarter financials. GAAP net income for the fourth quarter was $281 million, or $4.48 per share, which includes a $306 million gain on the sale of Omidria. As Mike will explain later, the asset sale of Omidria involved a mandatory restatement of our financials, which change the way we need to report our fourth quarter OMIDRIA and transaction-related revenues and expenditures. I'll provide you now with a high-level overview of some key metrics of our fourth quarter financial results adjusted to exclude the accounting impact of the sale. Overall, fourth quarter net sales of OMIDRIA totaled $32.9 million, a growth of 10 percent over the third quarter. This represents a new quarterly record for Omidria sales in ambulatory surgery centers and closely approaches an all-time record for quarterly sales in both ASCs and hospital outpatient departments, despite the absence currently of separate payment by CMS in HOPDs. Omeros recognized as revenue all but $1.1 million of that $32.9 million total, $30.8 million from direct product sales prior to the acquisition, and $1 million from our 50% royalty on Rainer's net sales in the remainder of Q4 following the acquisition. Absent the sale of Omidria, our fourth quarter loss would have equaled $23 million, or 37 cents per share, effectively unchanged from the prior quarter's loss and per share loss. Fourth quarter non-cash expenses were $6.3 million, or 10 cents per share. This, too, was effectively unchanged from the third quarter of 2021. As of year end, we had $157 million of cash, cash equivalents and short-term investments, and $38 million in accounts receivable. Now, this combination really brings our effective cash and accounts receivable at year end to $195 million. We also have a $50 million line of credit against our accounts receivable, which includes our royalty receivables from Raynor, And we also have a $150 million at-the-market sales agreement, which we have not used. We're pleased with Omidria's overall performance in the fourth quarter and expect Omidria sales to continue to grow throughout 2022. In the transaction for Omidria, Raynor acquired a grade ophthalmic product, which will help Raynor grow its ophthalmology franchise. Raynor now also has what we collectively believe is the premier surgical facility-focused sales force in ophthalmology. For Omeros, the transaction's economics are highly favorable, allowing monetization today of substantial downstream revenues, eliminating significant costs and reducing risk, while maintaining roughly 40 to 70% of future operating profits. Rayner plans to expand its U.S. and ex-U.S. sales forces and to capitalize on synergies between Omidria and their other ophthalmic products like intraocular lenses for cataract surgery, all of which should further accelerate sales of Omidria. Also, Rayner plans to launch Omidria in markets outside of the U.S. later this year which we expect will bring substantial royalty revenues to Omeros from previously untapped regions. Further, we remain optimistic that Omeros will receive the 200 million milestone payment. We're immensely proud to have conceived of, developed, and successfully commercialized Omidra, a drug that improves outcomes in cataract surgery and already has been used safely in more than 2 million cataract surgery procedures. I'm also tremendously proud of the Omidria sales force that came together as a cohesive unit, launched a first-of-kind drug in ophthalmology, and grew Omidria to a $125 million a year product. I know that under Rayner's leadership, that team will continue working hard to bring Omidria to more and more patients who need it. We believe the product is in very good hands with Raynor, and we look forward to Omidria's continued expanding utilization and our ongoing economic participation in that growth worldwide. Before leaving Omidria today, I'd like to give you a brief update on the No Pain Act, a legislative effort led nationally by Voices for Non-Opioid Choices and endorsed now by more than 80 major medical societies, patient advocacy groups, and prevention and recovery organizations across the country. The No Pain Act, if passed, will provide long-term separate payment for non-opioid pain management drugs like Omidria in ambulatory surgery centers as well as in hospital outpatient departments. The No Pain Act now counts 44 senators and 93 representatives as co-sponsors and is truly bipartisan. Momentum around the bill is growing, and new co-sponsors continue to sign on. Sponsors are now focused on identifying the appropriate legislative vehicle to carry in the near term. The No Pain Act across the finish line. The divestiture of OMIDRIA marks a significant transition for OMEROS as an organization as well. OMIDRIA is a unique specialty pharmaceutical product. Now, OMEROS is a pure biotech, leading scientific advancement across a portfolio of product candidates and development assets in immunology, focused on the complement system and on immuno-oncology, and in addiction. Here's an update on some of our programs. Let's start with narsoplumab, our fully human monoclonal antibody targeting MASP2, the effector enzyme of the lectin pathway of complement. On October 18, 2021, we announced receipt from FDA of a complete response letter regarding our biologics license application, or BLA, for the treatment of hematopoietic stem cell transplant-associated thrombotic microangiopathy, or TATMA. As we've previously disclosed, FDA, in its CRL, expressed difficulty interpreting narsoplimab's treatment effect, given the complexity and severity of both the disease and patient populations. indicating that additional information would be necessary to support approval. There were no safety or CMC issues cited, so there's no bleed over to other indications in which narsoplimab is being evaluated. In January, after discussion with and input from our regulatory consultants, including former FDA office and division directors, we submitted a comprehensive response addressing in detail all of FDA's critiques in the CRL. Accompanying that response was a request for a Type A meeting to discuss our responses to the CRL. The Type A meeting was granted and held last month during which Omeros responded to each of FDA's issues in the CRL. We believe that the meeting was constructive. We currently are awaiting feedback from FDA and will provide further updates as we have more information and clarity. We continue to believe that our BLA, as submitted, merits approval and that the data meet or exceed the threshold for substantial evidence of effectiveness. Narsoplumab delivered a highly statistically significant outcome compared to the pre-specified efficacy threshold. All secondary endpoints were also favorable, several reaching statistical significance, and the benefit-risk balance heavily favors benefit. We worked closely with FDA throughout the clinical development process, followed FDA's guidance on the design and conduct of our pivotal single-arm trial, as well as on the appropriate registration path, and collaborated with FDA to create the novel primary endpoint. The regulatory history, including agreements with FDA, are well documented in meeting minutes and official communications. TATMA is an orphan indication with no approved treatment, and our goal is to bring narsoplimab to stem cell transplant patients for whom TATMA is a too often lethal complication. During our ongoing interactions with FDA, we have continued to sharpen our launch plans and invest in TATMA disease education. We're confident that we'll be launch ready once narsoplumab is approved. Also, more publications and presentations from international experts continue to accumulate. The manuscript detailing the findings from the pivotal trial and authored by a consortium of the trial's investigators is in the final stage of review by a peer-reviewed journal. A manuscript elucidating the role of the lectin pathway in MASP2 and TATMA was recently published in the peer-reviewed journal Experimental Hematology and Oncology. In November, a detailed summary of the successful treatment with narsoplimab in a 60-year-old with TATMA was published in Blood. And there will be three presentations at the upcoming annual meeting of the European Society for Blood and Marrow Transplantation later this month. The first details the findings of an international working group of experts in stem cell transplantation, establishing the first broad-based diagnostic criteria for TATMA, which will be important in helping identify TATMA in a greater number of patients early in the disease process. describes a systematic literature review of the natural history of TATM in adults, which makes clear that the beneficial effects seen with narsoplumab are substantially better than would be expected in untreated patients, or otherwise stated, in the natural history of the disease. And the third describes resolution of severe TATMA with narsoplumab treatment in a nine-month-old girl at Emory University who had failed treatment with eculizumab. Narsoplimab is also being evaluated in three other indications, immunoglobulin A or IgA nephropathy, atypical hemolytic uremic syndrome, or AHUS, and COVID-19. Our phase three Artemis IGAN trial is enrolling internationally. Despite the challenge of COVID-19 at hospital investigational sites, enrollment has continued to progress and has even accelerated. An investigational new drug application is under review by the Chinese FDA. Omeros has identified and is working with over 15 Chinese investigational centers so that enrollment can begin as soon as possible after IND clearance. IgA nephropathy accounts for about 45% of primary glomerular disease in China, and the magnitude of its prevalence in that country will meaningfully accelerate further enrollment in the trial. Multiple sites in other European, South American, and Asian countries are also coming online. Proteinuria data are expected in the first part of next year. As reported in our last earnings call and in our press release last November, results of nearly three-year follow-up in IgA nephropathy patients treated with narsoplamab demonstrate unprecedented effects on proteinuria reduction as well as EGFR stabilization and improvement. These data were presented by international renal experts at both the annual meeting of the American Society of Nephrology and at the World Congress of Nephrology, which took place just last week. We look forward to seeing the Phase III data. Our Phase III narsopalimab trial in patients with AHUS remains open. As previously reported, for commercial reasons, we've deprioritized that program. in favor of other MASP2 and MASP3 inhibitor programs. Narsoplumab is also being evaluated for the treatment of severe COVID-19 in the I-SPY COVID-19 platform trial sponsored by Quantum Lead Healthcare Collaborative. The narsoplumab treatment arm of the trial has now concluded. Once all data are available, they will be analyzed. We look forward to a readout of the data once that analysis is completed. Two manuscripts from Omeros's laboratories at the University of Cambridge have been submitted for peer reviewed publication and detail some of our recent discoveries in the pathophysiology of COVID-19. The first covers the discovery of a profile of complement markers of broad complement dysfunction seen in all patients examined during the acute phase of severe COVID-19. The dysfunction appears to be driven by hyperactivation of the lectin pathway. Narcoplumab restores complement function in these severe COVID-19 patients, while in patients not treated with narcoplumab, the broad complement dysfunction persists throughout hospitalization or until death. The second manuscript demonstrates that the complement dysfunction in severe COVID-19 patients reported in the first manuscript results in impairment of the adaptive immune response necessary to fight infection, leading to an increased risk of life-threatening secondary infection. Here again, treatment with narsoplamab normalizes the adaptive immune response. which should restore the body's ability to prevent or fight secondary infection and reduce COVID-19 mortality. We look forward to both manuscripts being made available soon. We expect that they will spur important discussion and future research. Our MAST2 lifecycle management programs beyond narsoplumab are also moving ahead quickly. OMS 1029 is our second-generation and long-acting MASP2 antibody. A clinical trial application is planned for submission next quarter, and OMS 1029 remains on track to begin enrolling its Phase I trial this summer. We expect that OMS 1029 will be able to be dosed subcutaneously or intravenously at a frequency of once monthly and perhaps even once quarterly. We expect that OMS 1029 will allow us to pursue different and complementary sets of indications for this molecule than are planned for narsoplamab. In addition to OMS 1029 for subcutaneous delivery, our small molecule MAS2 inhibitors continue to progress. Designed for once daily oral administration, we look forward to moving a lead candidate when ready into the clinic. Turning now to OMS 906, which is our antibody targeting MASP3. Our phase one clinical work in healthy subjects is now complete and shows high level suppression of alternative pathway activity, favorable pharmacokinetics, and a good safety profile to date. We're moving ahead with a phase 1B trial on patients with paroxysmal nocturnal hemoglobinuria, or PNH, who have an unsatisfactory response to the C5 inhibitor, ravulizumab. A successful meeting was held between OMEROS and the Medicines and Healthcare Products Regulatory Agency, or MHRA, to discuss the design and conduct of the Phase 1b trial and enrollment is expected to begin this summer. We expect that OMS906, unlike C5 inhibitors, will address both intravascular and extravascular hemolysis in PNH and will have significant advantages over agents either on the market or in development to treat PNH. In our phosphodiesterase 7 or PDE7 inhibitor program, OMS527, work is ongoing. OMS527 completed its phase 1 program in humans without a safety signal. Given resource constraints, we had been limiting clinical activities. However, discussions are underway with an external funding source to accelerate clinical work. If successful in accessing external financial support for the program, we do plan to advance OMS 527 through additional clinical trials. Finally, let's turn to our immuno-oncology portfolio. Part of our recent efforts have really revolved around methods to improve the potency and durability of adoptive T-cell therapies. Our novel approach, which enforces memory phenotypes in cultured T cells through a previously unexplored pathway, has demonstrated marked tumor regression following transfer of expanded mouse T cells in an aggressive solid tumor model. We continue to explore the universality of our approach in human CAR T and adoptive T cell therapy systems, and we believe our platform has the potential to improve markedly response rates for patients receiving either engineered or native T cell therapies for liquid or solid tumors. Furthermore, we continue to explore the effects of GPR174 inhibitors and other novel biologics in promoting anti-tumor immune responses and overcoming the immunosuppressive tumor microenvironment. With that, I'll turn the call over to Mike Jacobson, our Chief Accounting Officer, for a more detailed discussion of our fourth quarter and year-end financial results.