Omeros Corporation

Good afternoon and welcome to today's earnings call for Omeros Corporation. At this time, all participants are in listen-only mode. After the company's remarks, we will conduct a question and answer session. Please be advised that this call is being recorded at the company's request and the replay will be made available on the company's website for one week from today. If you require operator assistance, please press star then zero. I'll turn the call over 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 10Q, which was filed today with the SEC, and the risk factor section of the company's annual report on Form 10K for a discussion of these risks and uncertainties. Now I would like to turn the call over to Dr. Greg Zimopoulos, Chairman and CEO of Omeros.

Thank you, Jennifer, and good afternoon, everyone. We appreciate you joining us for today's call. We'll start with a corporate update and an overview of our second quarter 2022 financial results, followed by a more detailed financial summary. Joining me on the call today are Mike Jacobson, Nadia Dock, Kathy Melfi, and Steve Whitaker, our respective heads of finance, commercial, regulatory, and clinical. We'll start with an update on our MASP2 program and specifically narsoplimab and stem cell transplant-associated thrombotic microangiopathy, or TATMA. In the first quarter of this year, we had a type A post-action meeting with the FDA review division for our biologics license application, or BLA. Following the receipt of the official minutes of that meeting, we decided in consultation with our regulatory and legal advisors to pursue formal dispute resolution. The dispute resolution process allows a sponsor to appeal a decision made at the division level to a higher deciding authority, which in our case is the Office of New Drugs, or OND. As previously reported, our dispute resolution request was submitted to FDA in June. The request comprised a detailed briefing document that we believe presents to OND a compelling case across all of the components, clinical data, regulatory history, regulatory precedent, and literature, that narsoplumab should be approved for use in TATMA based on our BLA as originally filed. Following the submission of that briefing package as part of FDA standard procedures for dispute resolution, We met with OND last month. The deciding official was well prepared and familiar with our BLA and with our briefing package. We were joined at the meeting by several leading experts in stem cell transplantation. At that meeting, FDA does not typically provide any indication of how the dispute resolution will be decided, and our meeting was no exception. We're currently awaiting a decision which, unless OND determines it requires additional time, should be rendered this month. Once received, we'll share FDA's decision publicly with our shareholders and the investor community. Let's turn now to narsoplimab for the treatment of IgA nephropathy. We continue to advance enrollment in our Phase III Artemis Igand trial, and the nine-month proteinuria data are scheduled to read out by mid-next year. We look forward to making those data publicly available. Our narsoplumab Phase III trial in atypical hemolytic uremic syndrome, or AHUS, is also ongoing, but as we've previously reported, it's prioritization, and as a result, its resource allocation is below those of our other complement programs. We're also evaluating narsoplumab as a potential therapeutic both for acute severe COVID-19 and for long COVID, also known as post-acute sequelae of SARS-CoV-2 infection, or PASC. As new variants of SARS-CoV-2 continue to emerge in vaccines and the current antivirals, are proving less effective than hoped, the need for better COVID-19 therapeutics remains and arguably continues to grow. Narsoplimab was part of the I-SPY COVID-19 platform trial sponsored by QuantumLeaf Healthcare Collaborative, which has evaluated now multiple agents as potential therapies for COVID-19. To date, no agent in the I-SPY trial has been publicly reported to show a benefit over standard of care. We continue to look forward to Quantum's disclosure of the narsoplamab results. The important role of complement and specifically the central role of the lectin pathway in both acute COVID and PASC is increasingly the focus of publications from leading research groups internationally. The OMEROS teams in the UK at the University of Cambridge and in Seattle recently added groundbreaking work to this effort, publishing manuscripts by Ali et al. in Frontiers in Immunology and by Lynch et al. in Clinical and Translational Medicine. Together, these publications describe our discoveries related to the pathophysiological mechanism of severe COVID-19, specifically that patients with severe COVID-19 early in disease show marked complement consumption, which is driven by lectin pathway hyperactivation. It's this hyperactivation of the lectin pathway that leads to secondary hypo complementemia and loss of complement mediated protection against infection. The result is increased risk of clinically severe infections, which are known to be a common cause of morbidity and death in COVID-19. So where does narsoplumab fit in? Well, narsupramab inhibits this complement consumption and restores complement function and bactericidal activity, thereby preventing risk of secondary infection. We've now evaluated longitudinal serum samples from over 400 acute severe COVID-19 patients from multiple UK government-funded consortia. At ICU admission, effectively, all sera of patients with severe COVID-19 showed elevated levels of MASP2C1 inhibitor complex, which is a marker of lectin pathway functional activity, low CH50 levels, a measure of overall complement functional activity, and residual elevated levels of the anaphylatoxins C3A, and C5A. A subset of these patients had very low antibody levels at ICU admission, meaning that complement activation and consumption in acute COVID-19 are antibody independent. Collectively, these data indicate that the lectin pathway is the key driver of complement hyperactivation in acute COVID-19. Based on these data, we're developing a multiplex high throughput assay platform as a commercially available tool for hospitals and physicians to reduce morbidity and mortality by identifying COVID-19 patients at risk for becoming severely ill. The clear implication is that these identified patients would then benefit from treatment with narsoplumab as soon as the consumptive biomarker profile is seen. Let's now discuss more broadly our MASK2 program, which as of this week has two molecules in clinical trials, narsoplumab and OMS1029, our long-acting second-generation MASK2 antibody. The first two subjects have now been dosed in our phase one trial evaluating OMS1029. Dosing for OMS1029 is expected to be once monthly to once quarterly, delivered subcutaneously or intravenously. Designed to be complementary to narsoplimab, OMS1029 should enable us to pursue lectin pathway-driven indications for which longer duration dosing would be a particular advantage. We're also making good progress on our small molecule MASP2 inhibitors. These will be orally administered and we're working to add an oral MASP2 inhibitor to our clinical portfolio as soon as possible. Now let's turn to Omidria and a high level overview of our financial results for the quarter. As previously discussed, last December, O'Meara's completed the strategic divestiture of its commercial ophthalmic drug, Omidria, to Rainer Surgical. The transaction with Rainer required us to reclassify all historical Omidria revenue and expenses as discontinued operations and to record the royalties earned as a reduction from the Omidria contract royalty asset on our balance sheet. Our royalty rate for U.S. net sales of Omidria is currently 50 percent, which equates to more than 70 percent of the operating profit. For the second quarter, Raynor reported Omidria net sales of $34.5 million, a new all-time high. This eclipses our previous high of $34.2 million for quarterly Omidria revenues and represents a 25% increase over Rainer's net sales of Omidria for the first quarter of 2022. Our 50% royalty on Rainer net sales for the quarter was $17.2 million. Given the required reclassification of Omidria revenues and expenses, our revenues for the second quarter were reported as zero And our net loss from continuing operations was $41.7 million compared to $50.2 million in the prior year quarter. Our overall loss for the current quarter was $30.8 million or 49 cents per share compared to $28.6 million or 46 cents per share in the second quarter of last year. Our non-cash expenses were $3.7 million or $0.06 per share for the current quarter and $3.9 million or $0.06 per share for the prior year quarter. As of June 30, 2022, we had $122.6 million in cash and investments on hand available to support ongoing operations. So in total, our change in cash and investments from the end of the first quarter to the second quarter is a decrease of $19.7 million. In addition, we have an additional $14.5 million of receivables representing primarily royalties to be paid to Omeros by Rainer for Omidria sales for May and June. Omidria royalties are received monthly by Omeros within 60 days of being earned. We also have $150 million at the market sales agreement, which we have not used. During the quarter, we continued to work closely with Raynor to ensure a smooth transition of the product, the teams, and all operations with minimal disruption to customers. The transition has gone well and we expect to complete it this quarter. We're encouraged by the quarter-over-quarter growth in OMIDRIA sales. We expect that the positive momentum will be further boosted by the proposed 2023 rule governing the outpatient prospective payment systems issued by CMS last month and reconfirming that OMIDRIA qualifies for separate payment under the non-opioid pain management exclusion when used in ambulatory surgical centers or ASCs. We appreciate CMS's commitment to continue providing access to Omidria for Medicare patients and their physicians. We're also pleased that as part of the proposed rule, CMS solicited public comment on potentially expanding the exclusion beyond the ASC setting to pay separately for non-opioid surgical drugs in hospital outpatient departments or HOPDs. We support this expansion as approximately 20% of cataract procedures are performed in HOPDs and cataract surgery patients deserve access to Omidria regardless. of whether they undergo surgery in an ASC or in an HOPD. Under the terms of the Raynor transaction, Omeros is also eligible to receive a $200 million milestone should, before 2025, separate payment be secured for Omidria for a continuous period of at least four years. Congressional passage of the Non-Opioids Prevents Addiction in the Nation Act, or the No Pain Act, would trigger this milestone payment for Omeros. The No Pain Act would provide separate payment for non-opioid pain management drugs like Omidria in both the ASC and HOPD settings. Leading the charge, Voices for Non-Opioid Choices continues to advance the No Pain Act and has assembled an impressive coalition of major medical societies, patient advocacy groups, and prevention and recovery organizations across the country in support of the legislation. The bill has strong bipartisan and bicameral support with sponsors and co-sponsors now numbering 49 in the Senate and 113 in the House of Representatives, roughly equally split between Democrats and Republicans. These senators and representatives include chairpersons and key members of relevant committees representing a diverse group of congressional caucuses. Passing the No Pain Act is the right thing for patients and for the country, and we expect that given the bill's broad-based and bipartisan support in both chambers. The No Pain Act has a good likelihood of becoming law in this Congress, or early in the next. Looking at the sales trajectory for Omidrea, we expect that the drug will continue to provide us with meaningful cash flow from royalties in both the near and long term. The non-dilutive Omidrea revenue stream helps to defray significantly. the costs of developing our pipeline programs, including our complement franchise of MASP2 and MASP3 inhibitors. Just as we have done for MASP2, we continue to build a dominant intellectual property position around MASP3, the key activator of the complement system's alternative pathway. Let's now turn to OMS906, our lead MASP3 inhibitor. Having successfully completed a Phase I study in healthy subjects, we're preparing to initiate enrollment in a trial evaluating OMS906 in patients with paroxysmal nocturnal hemoglobinuria, or PNH, who have an unsatisfactory response to the C5 inhibitor, rabulizumab. In late July, OMS906 received orphan drug designation from FDA for the treatment of TNH, the benefits of which include seven years of market exclusivity following marketing approval, tax credits on U.S. clinical trials, eligibility for orphan drug grants, and waiver of certain administrative fees. Awareness of our OMS 906 program is growing within the scientific community. We'll be presenting preclinical data on OMS 906 at the European meeting on complement and human disease later this month in Bern, Switzerland. And the results of our phase one trial have been submitted for presentation at a major congress later this year. We expect that OMS 906 could hold significant advantages over other agents approved. or in development for alternative pathway-related disorders. These advantages are expected to include decreased infection risk and a convenient dosing profile, with administration as infrequently as once monthly to once quarterly. Importantly, unlike other targets in the alternative pathway, MASP3 does not appear to be an acute phase reactant. An acute phase reactant increases in circulating concentration in response to inflammation in the body. That inflammation can be as simple and common as the flu. And the result is that dosing of a drug targeting an acute phase reactant might no longer be effective, resulting in breakthrough disease. Because MAS3 is not an acute phase reactant, background inflammation has no effect on its concentration or on the dosing of OMS906, greatly mitigating that risk of disease breakthrough. Given these expected advantages, we're focused on obtaining efficacy data with OMS906 as quickly as possible. So in addition to initiating our Phase 1b study of OMS906 in PNH patients who have had an unsatisfactory response to ravulizumab, we're expanding our OMS906 program to include trials evaluating OMS906 in treatment-naive PNH patients and in C3 glomerulopathy patients, as well as in one or more related indications. We're making good headway on this and are targeting data that demonstrate efficacy of OMS906 in these diseases by early 2023. The importance of alternative pathway inhibition is well understood, as is the commercial viability of agents successfully inhibiting the alternative pathway. If we demonstrate efficacy of OMS906 and alternative pathway diseases like PNH and like C3G and the safety dosing and or biological advantages that I just described prove to be accurate, which we expect they will, the value created around OMS906 should be compelling. Although we continue to prioritize our complement clinical programs over those of our phosphodiesterase or PDE7 inhibitor program, OMS527, discussions are ongoing to access third-party funding to continue development of OMS527 for addictive disorders. In addition to our work in addiction, Researchers at Emory University are evaluating in clinically predictive primate models the potential of our PDE7 inhibitors to improve L-DOPA induced dyskinesias. More than 50% of Parkinson's patients develop dyskinesias following prolonged L-DOPA treatment. Our existing patents broadly cover this indication and we look forward to seeing the final dyskinesia data early next year. If positive, we expect that we would have another viable and large commercial opportunity for OMS527. I'll close the update today with our immuno-oncology programs in which we're evaluating a number of novel molecules to treat cancers. To date, immuno-oncology primarily has been focused on cell surface checkpoints. We're taking a different approach, developing intracellular target inhibitors that optimize T-cell conditioning to yield both potent tumor killing and a more sustained antitumor response. Our technology involves a combination of inhibitors of GPR174, adenosine receptors, and other targets to limit the negative impact of certain pathways on T cell function. We believe that our novel approach has the potential to improve response rates for patients receiving either engineered or native T cell therapies for liquid and solid tumors. And we're continuing to explore the application of this technology to improve human CAR T cell therapies. Across these landscapes of both therapeutics and adoptive T-cell therapies, we're building broad patent protection. With that, I'll hand the call over to Mike Jacobson, our Chief Accounting Officer, for a more detailed description of our second quarter financial results. Mike?