Omeros Corporation

Good afternoon, and welcome to today's earnings call from O'Meara's 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. 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 from one week from today. I'll turn the call over to Jennifer Williams, Investor Relations for O'Meara. You may begin.

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 annual report on Form 10-K, which was filed today with the SDC, including the risk factor section for a discussion of these risks and uncertainties. Now I would like to turn the call over to Dr. Greg Dimopoulos, Chairman and CEO of O'Meara.

Thank you, Jennifer, and good afternoon, everyone. We'll start with a corporate update and an overview of our fourth quarter and full year 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. Before diving into the details of our specific program updates and coming events, I'd like to spend just a few minutes on our financial strength that we expect will enable those events without the need for near-term shareholder dilutions. continuing to position Omeros for success. To provide some background, in December 2021, we completed the strategic sale of the cataract surgery product that we developed and commercialized, Omidria, to Rainer Surgical for an upfront payment of $125 million, $31 million of retained receivables, substantial ongoing royalties on Rainer's net sales of Omidria, and the potential to receive a $200 million milestone payment by securing for Omidria continuous separate payment of at least four years. The initial royalty rate on U.S. net sales of Omidria was 50%, which represented nearly 80% of the total operating profit. Last September, we sold a portion of our future Omidria royalty stream to DRI Healthcare and received $125 million in cash. Because DRI's annual royalties are capped, and as a result, Omeros receives any financial upside in the Omidria royalty stream. The royalty sale was recorded as debt on our balance sheet, and no income was recognized related to the sale. Then, three months later, in December 2022, Omeros achieved the Rainer milestone, receiving $200 million plus interest in early February. Under our agreement with Rainer, after achieving the milestone, the royalty rate that we now receive on Rainer's U.S. net sales decreased to 30%. which represents approximately 40% of total Omidria operating profits. Nearly half of all cataract procedures in the U.S. are performed on Medicare Part B patients, with surgical and facility fee payments administered by the Centers for Medicare and Medicaid Services, or CMS. Since Omidria's market launch in the second quarter of 2015 through multiple CMS-awarded and congressionally mandated pass-through periods, and then qualifying under the non-opioid pain management exclusion from packaging, Omidria has received continuous separate payment from CMS, interrupted over those eight years, for a total of only 11 months. nine months in 2018 following successful legislation extending pass-through, and two months in 2020 after qualifying for CMS's non-opioid packaging exclusion. But separate payment repeatedly needed to be won. So we, together with physicians and surgical facilities, could never rely on CMS providing separate payment for Omidria Despite this uncertainty, the drug to date has infused Omeris with effectively $1 billion in non-dilutive funding, fueling the development of our pipeline while minimizing both outstanding share count and shareholder dilution. Now let's look at our financial results for both the fourth quarter and the year. Our net income for the fourth quarter was $128.7 million or $2.05 per share, compared to $280.6 million or $4.49 per share for the fourth quarter of 2021. Both the current and the prior year quarters were significantly affected by Omidria transactions that I just recounted, namely the December 2021 strategic sale of Omidri and the December 22 achievement of the Rainier milestone. Looking only at continuing operations, our net loss for the fourth quarter of 2022 was 73 cents per share compared to 76 cents per share for the same quarter in 2021. Our cash burn for the fourth quarter of 2022 was $26 million. O'Meara's received $17.9 million in royalties from Rainer's Omidria fourth quarter net sales of $35.8 million, a new quarterly record. Our net income for the full year 2022 was $47.4 million, or 76 cents per share, compared to $194.2 million, or $3.12 per share. in 2021. Our full year loss from continuing operations in 2022 was $182 million or $2.90 per share compared to a loss of $191.5 million or $3.07 per share in 2021. As of December 31, 2022, we had $195 million of cash and investments and $213 million in receivables, inclusive of the $200 million milestone payment. All of those receivables have now been collected. So in total, we had $408 million in cash, investments, and receivables at December 31, 2022 to support ongoing operations and debt service. A good number of shareholders contacted us last week asking whether our corporate cash and investments were in any way exposed to Silicon Valley Bank. To be clear, we do not have any assets on deposit with Silicon Valley Bank, nor do we have any other financial relationship with SBB or its affiliates. The $408 million now in hand provides OMEROS the flexibility simply to pay off any or all of the $95 million of convertible debt that matures this November while continuing to fund operations and advancing our multiple development programs well into 2025. The recent signing into law of the Consolidated Appropriations Act of 2023, also known as the 2023 Omnibus Bill, mandates that CMS continue to pay separately for non-opioid pain management drugs like Omidrin in ambulatory surgery centers or ASCs until at least 2028. While the majority of cataract surgery is performed in ASCs, approximately 20% of those procedures occur in hospital outpatient departments, or HOPDs. Congress addressed this as well, directing CMS to pay separately for drugs like Omidria, not only in ASCs, but also in the HOPD setting, beginning no later than January 2025. The assurance of long-term separate payment in both the ASC and HOPD settings now provides physicians and surgical facility administrators the confidence that they can incorporate Omidria into their practices and plan on being adequately reimbursed for delivering best care to their patients. We expect this increased certainty in CMS payment to result in meaningful Omidria sales growth. Congressionally mandated long-term separate payment by CMS could also have a direct and positive effect on the other two major coverage systems for cataract surgery, Medicare Advantage and commercial insurance plans. driving expansion of separate payment across both of them, which would be good for ophthalmic surgeons and their patients. The fact that many MedAdvantage and commercial plans are administered by the same payers should accelerate this expansion. There are well over 4 million cataract procedures performed annually in the U.S. alone. As U.S. sales of Omidria continue to grow, Omeris will continue to receive 30% of those revenues as royalties. Potentially further adding to our royalty stream, Rainer is planning to begin selling Omidria outside of the U.S. later this year, resulting in 15% of any of those revenues also inuring to Omeris. Both the U.S. and international royalty rates paid to OMEROS should remain extant until the expiration of OMIDRIA patents, which are slated to be no sooner than 2033. So having laid out the current strength of our financial position, let's now turn to updates on OMEROS' programs, beginning with norsoplumab and stem cell transplant-associated thrombotic microangiopathy, or TATMA. following our appeal of FDA's complete response letter on our Biologic License Application, or BLA, for narsoprimab in TATMA. In late 2022, we received guidance from FDA's Office of New Drugs proposing a path forward to resubmit our BLA with additional analyses comparing response from our completed pivotal trial. to a threshold derived from an independent literature analysis. Also requested was evidence of increased survival in our completed trial compared to an appropriate historical control group. We have identified and now can access robust sources of independent and historical response rates and survival in PA-TMA patients not treated with narsopnumab. working with our regulatory and legal advisors led by Hyman Phelps McNamara toward a rapid resubmission of our BLA. We have requested a meeting with FDA's Division of Nonmalignant Hematology to discuss the details of our proposed analyses and to confirm the information required by FDA to support narsophthalmabs approval. This will be a Type B meeting. So we expect it to occur in the first half of the second quarter. For European approval, we have initiated clinical trials assessing narsoplimab in pediatric patients with TATMA to fulfill our pediatric investigation plan agreed with the European Medicines Agency, or EMA. We expect to complete the submission of our marketing authorization application to EMA after resubmission of our BLA. Since our last earnings call, we've seen continued and substantial activity in peer-reviewed publications and presentations directed to TATMA, the lectin pathway, and narsoplumab. An international group of leading transplanters recently published a systemic review of signs and symptoms of TATMA in transplantation and cellular therapy. And a second manuscript on PATMA diagnosis and treatment has been accepted for publication by the journal Bone Marrow Transplantation. Presentation at the recent annual meeting of the American Society of Hematology detailed our clinical trial of narsoplimab in pediatric patients with PATMA. And two additional abstracts on use of narsoplimab in PATMA have been accepted. for presentation at the upcoming European Society for Blood and Marrow Transplantation. Stem cell transplanters internationally are increasingly identifying TATMA in their transplant patients and recognizing it as an urgent and unmet medical need. National diagnostic and procedural billing codes now officially recognize TATMA as a complication of stem cell transplantation. This means that once there's an approved treatment for TATMA, off-label use, which occurs now with C5 inhibitors, should be greatly curtailed, further driving use of any approved treatment. We believe that narsopalimab deserves FDA approval for the treatment of TATMA, and we are committed to continuing to work with FDA to make that a reality. Also in our narsopalimab portfolio, our phase three clinical trial in patients with IgA nephropathy remains on track to read out nine-month proteinuria data in the third quarter of this year. This is expected to form the basis for our BLA to be submitted to FDA, and we expect for our submission to European regulators. Adding to a list of existing publications, a manuscript authored by a group of international experts on the role of the lectin pathway and the pathophysiology of IgA nephropathy has been submitted to a leading peer-reviewed journal. IgA nephropathy represents a multi, billion market opportunity. While FDA has recently approved for IgA patients both a steroid and a representative of a new class of agents that targets blood pressure, clinical experts do not see these as competitors, but rather as complementary to inhibitors of the complement system. There currently is no complement inhibitor approved for IgA nephropathy, and we aim to make narsoplamab the first. As we've discussed in previous calls, our Phase III program in atypical hemolytic uremic syndrome, or AHUS, remains a low priority. Enrollment has been challenging, and due to what we and others see as a contracting condition, commercial market for AHUS because of the increasing number of C5 biosimilars. We've diverted resources to other clinical programs within our complement franchise. At our labs in the University of Cambridge, collaborative work with multiple UK consortia in acute severe and long COVID is advancing. Dialogue is ongoing with relative branches of the U.S. government and with the resurgence of COVID and related diseases. There's continued interest from these agencies in accessing their supplement and funding their supplement-related activities. A manuscript directed to lectin pathway inhibition and well-established in vitro and animal models of both COVID and influenza-related acute respiratory distress syndrome or ARDS is being prepared for submission. The evidence supporting the central role of the lectin pathway and the utility of narsopalimab in these diseases is only increasing. This is being further highlighted within government agencies as the utility of vaccines under increasing scrutiny becomes more questionable. And the need for therapeutics that directly target the central pathophysiology of COVID and other causes of ARDS moves to the forefront. Now let's look at OMS 1029, our long-acting next-generation antibody targeting MASK2 and the lectin pathway. OMS 1029 is complementary to NIRSOPLIMAT. Whereas narsoplumab is generally administered intravenously once weekly, ideal for acute or episodic treatment, long-acting OMS1029 is designed for chronic use. Our strategy of developing OMS1029 as a long-acting follow-on to narsoplumab is to enable Omeros to control first-line therapies for the large majority of lectin pathway-related disorders. In January of this year, we completed dosing of all cohorts in the OMS-1029 single ascending dose phase one clinical trial. As predicted, given our experience with narsoplumab, OMS-1029 was well tolerated with no safety concerns identified. The trial did deliver excitement, though, in that the pharmacokinetic and pharmacodynamic data demonstrate that OMS 1029 effectively ablates lectin pathway activity and should do so even with markedly protracted dosing intervals of once quarterly administration. Detailed results from the single ascending dose study of OMS 1029 are planned for presentation at an upcoming scientific congress. Dosing in the OMS 1029 multiple ascending dose study in healthy subjects is scheduled to start this summer. Wrapping up our lectin pathway portfolio, we believe that we are very close to selecting a lead drug development candidate from our small molecule, orally active MAST2 inhibitor program. Recent pharmacokinetic and pharmacodynamic data are compelling. and safety data generated to date are clean. Together with our external advisors, including former heads of chemistry, pharmacokinetics, and drug metabolism at GlaxoSmithKline and Merck, we are enthusiastic about these molecules and hope to select a lead compound next quarter. A successful orally dosed small molecule inhibitor of MAST2 together with nirzhoplamab and OMS-1029 should enable OMEROS to control the gamut of diseases and disorders caused by dysregulation of the lectin pathway. We'll now complete the updates on our complement franchise with OMS-906, our antibody targeting MASC-3. MASC-3 is the key activator of the alternative pathway of complement. As previously announced, we successfully completed a single ascending dose phase one study of OMS906, evaluating both intravenous and subcutaneous administration in healthy subjects. The drug was well tolerated and there were no safety signals of concern. Detailed clinical data from that study were presented in December at the annual meeting of the American Society of Hematology. Based on clinical data to date, we expect that we will be able to achieve once-quarterly dosing with OMS 906, either intravenously or subcutaneously. This, along with the other potential differentiating benefits of OMS 906, should serve us very well in the competitive marketplace of alternative pathway inhibitors. Our clinical development strategy is to obtain rapid proof of concept data on the efficacy of OMS906 in multiple validated alternative pathway-related disorders, including paroxysmal nocturnal hemoglobinuria, or PNH, and complement 3 glomerulopathy, or C3G. On schedule. Last December, we began enrolling treatment-naive PNH patients in one of our Phase 1B clinical trials evaluating OMS 906, and dosing began early this year. Our second Phase 1B clinical trial, this one in PNH patients who have had an unsatisfactory response to the C5 inhibitor, Rabulizumab, is also enrolling. We're scheduled to begin the first dosing of OMS-906 in this study later this month once the rabulizumab monotherapy period has ended. The current development plan for OMS-906 and PNH involves a pivotal program consisting of two trials, one in treatment-naive patients and one in patients who don't respond well to approve PNH therapy, both with relatively small numbers of patients, similar to the numbers enrolled for Novartis' iptacopan and Apellis' pegcetacoplan programs. We've also initiated a Phase 1B clinical trial evaluating OMS906 in patients with C3G. Enrollment here is expected to commence next month, with data available in the third quarter of this year. Here again, we're planning for relatively small study populations, similar to the number of C3G patients being enrolled by Novartis or of Tacopin. Regulatory interactions in the U.S. and Europe are ongoing for OMS906 in both PNH and C3G. As discussed earlier, there is good evidence that MASK3 and 906 could prove to be the premier target and drug respectively in the alternative pathway. The potential advantages of OMS 906 over other alternative pathway inhibitors on the market or in development include safety through meaningfully decreased infection risk by not blocking the adaptive immune response, compliance and convenience with significantly better dosing profile at once quarterly intravenous or subcutaneous administration, and efficacy through greatly decreased risk of breakthrough of the underlying disease given that MASK3 first is not an acute phase reactant and that OMS906 has a long half-life, allowing MASK3 to be blocked consistently and effectively. These advantages are well recognized by scientific and clinical experts across both academia and industry. The question that remains is whether MATH3 inhibition, and specifically OMS906, can demonstrate efficacy in any alternative pathway disorder. If it does, then the widely held expectation is that OMS906 will be efficacious across the full scope of alternative pathway associated diseases and disorders. This is particularly true if we demonstrate efficacy in PNH, which, because of the severity of the disease, sets a very high bar for alternative pathway inhibition. But efficacy in any alternative pathway disorder should readily allow a value calculation of the OMS 906 program based on predicate Alternative pathway drugs and programs such as c3 factor B and even c5 inhibitors should OMS 906 demonstrate efficacy We're confident that the safety compliance and convenience and efficacy advantages that I described just a minute ago would significantly differentiate OMS 906 from those predicate alternative pathway inhibitors and others in development Again, based on the science and evidence to date, we believe that NASP3 is the premier target. And by extension, and because of its attributes, OMS906 has the potential to be the premier drug in the alternative pathway market. So we look forward to sharing publicly clinical data from our OMS906 program. Turning now to OMS 527, our PD7 inhibitor program, discussions continue regarding third-party funding for continued development of OMS 527 as a treatment for addictive disorders. As has been widely and frequently broadcast, addiction is an enormous and worsening problem in the U.S. and worldwide. In the U.S. alone, in 2019, tangible measured costs of substance abuse were half a trillion dollars, with intangible costs such as loss of life, injury, reduced quality of life, all of those estimated at a staggering $3.2 trillion annually. With the Centers for Disease Control and Prevention reporting that one in seven Americans 12 years of age or older have experienced a substance use disorder. A therapeutic that could treat the cause of abuse could change the lives of tens of millions of patients just in the U.S. We look forward to securing external funding and moving ahead with further clinical development of OMS 527. In addition to the wide field of addiction and compulsion disorders, AmeriHouse also controls broad intellectual property directed to PD7 inhibition for the treatment of movement disorders. With collaborators at Emory University, we're evaluating OMS 527 as potential treatment for L-DOPA induced dyskinesias or LID. These dyskinesias are crippling involuntary movements in Parkinson's patients caused in part and ironically by prolonged treatment with L-DOPA, the most prescribed and most effective therapy for Parkinson's. More than 10 million patients are living with Parkinson's worldwide, and reportedly 50% or more of those treated with L-DOPA suffer from LID. Only one drug, extended release amantadine, is approved for the treatment of LID, and it has limited efficacy with multiple significant adverse side effects. Here again, LID represents a large unmet patient need and a substantial market opportunity. Data to date in a clinically predictive primate model of LID have been encouraging. We await data from one additional primate, which took longer to develop LID than anticipated by our Emory collaborators. Treatment with our PD-7 inhibitor is underway, and data are expected next month. We'll close the update today with our immuno-oncology programs. These are platform programs for both cellular and molecular therapies for cancer. All are derivatives of our work on GPR174, our proprietary target in cancer immunity. For cellular therapies, we've developed and are evaluating novel approaches for both CAR T and adoptive T cell therapies. We've identified specific T cell signaling pathways which, once inhibited, significantly and preferentially enhance the expansion of memory T cells that distinctively recognize and efficiently kill tumor cells. Our team is validating these novel approaches and establishing a broad position. We believe that these proprietary cellular technologies could markedly improve response rates for cancer patients receiving either engineered or native T cell therapies for both liquid and solid tumors. On the molecular front, we've developed novel biologic platforms to target specifically and kill cancer cells. We expect that some of these biologics will function as therapeutic vaccines against a broad range of tumors. Successful development of therapeutic cancer vaccines, though widely pursued, have proven difficult to achieve, with the current industry approaches inducing only transient and ineffective immune responses. We believe that we've overcome this challenge, having now engineered novel molecules that combine tumor antigens with a potent adjuvant. These combinations show high levels of killing in cancer cells, and demonstrate the potential to transform the treatment of both solid tumors and hematological cancers. Here again, we're constructing a broad intellectual property estate around these multiple immunotherapy platforms. With that, I'll turn the call over now to Mike Jacobson, our Chief Accounting Officer, who will go through a more detailed discussion of the financial results for the fourth quarter of the year. Mike?