Omeros Corporation

Good afternoon and welcome to today's earnings call for Omeris Corporation. At this time, all participants are in listen-only mode. After the company remarks, we will conduct a question-and-answer session. And 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 it over to Jennifer Williams, Investor Relations for Omeris. Please go ahead.

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 most recent annual report on Form 10-K 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 Omeros.

Greg Dimopoulos Thank you, Jennifer, and good afternoon, everyone. I'm joined today by Mike Jacobson, Nadia Dock, and Kathy Melfi, our respective heads of finance, commercial, and regulatory. along with Steve Whitaker, our VP of Clinical Development, and Andreas Grauer, who recently joined Omeros as Chief Medical Officer. Again, welcome, Andreas. We'll have a brief overview of our financial results for the third quarter, followed by a corporate update. Mike will then provide a more detailed financial summary before we open the call to questions. First, though, In the wake of our stopping the Artemis IGAN trial, I'd like to address our near- to mid-term high-level program strategy. To anyone paying attention to our programs and their development progress, it should be clear that our company is strong and well-positioned for success. Of course, we're conducting a deep dive into our Artemis IGAN trial data, and there's more work to be done there. to learn what specifically happened, why we see an outsized placebo effect, whether there are subgroups of patients who responded well to narsoplumab, and how we can make use of newly developing biomarkers to understand better the role of lectin pathway inhibition in IgA nephropathy and in kidney diseases more broadly. This examination will not only pay benefits to our MASP2 program, including OMS1029, but will also help us design and execute clinical trials in kidney diseases for OMS906, our MASP3 inhibitor. While we expect to resolve these and other questions that we have on the Artemis IGAN trial, our top priorities are focused on near-term value-driving catalysts. Specifically, one, achieving approval and successful market launch for narsoplumab in hematopoietic stem cell transplant-associated thrombotic microangiopathy, or TATMA, mid-next year. Two, driving to phase three clinical trials for our MASK3 inhibitor, OMS906, both in paroxysmal nocturnal hemoglobinuria, or PNH, and in C3 glomerulopathy, both Phase III programs targeted to initiate in the third quarter of next year. Three, moving OMS1029, our long-acting MASP2 inhibitor, into Phase II clinical trials by next summer in a larger market indication. And four, taking our current cash runway, projected to be well into 2025 and extend it well into 2026 or beyond without dilution to shareholders. We believe that each of these four strategic objectives can be achieved. In parallel, we remain laser focused on cost containment and are assessing a range of additional cost reduction measures for implementation while balancing them with ensuring that we invest the necessary resources to achieve our near-term value-driving objectives. As part of these cost containment efforts, the funds previously earmarked for the two-year continuation of the Artemis IGAN trial and related commercialization will be reallocated to extending runway and to our other later stage programs. with a good part of that reallocation going to accelerate and broaden development of OMS906, our alternative pathway targeting MASP3 inhibitor. To summarize, the bulk of our development expenditures in the near to midterm will be directed to approval and market launch of narsoplimab in TATMA, driving OMS906 towards successful completion of its phase three clinical programs, and proving the value of OMS-1029. Our PD-7 inhibitor, OMS-527, will continue advancing through its multiyear funding from the National Institute on Drug Abuse, or NIDA. In addition, we intend to move ahead with certain work advancing the seminal discoveries in our immuno-oncology program. Our spending on these programs has been relatively small to date. as the large majority of the efforts across our five novel I.O. platforms are conducted in-house by a relatively small but extremely effective group of scientists. We believe that a limited additional investment in these programs could catalyze significant asset value in the programs, potentially in the near term. Now let's turn to our financial results. Our net loss for the third quarter of 2023 was $37.8 million or $0.60 per share compared to a net loss of $37.3 million or $0.59 per share in the second quarter of this year. Cash burn for the third quarter of 2023 was $31 million. Omidria royalties for the third quarter were $10 million, and that's a $700,000 decrease over second quarter royalties. This is consistent with historically fewer cataract procedures performed during the summer months. As of September 30, 2023, we had $310.3 million of cash and investments on hand. Omeros has $95 million of convertible debt maturing November 15 of this year, which we plan to retire. Even after retiring the 2023 notes, our current available cash and investments should enable us to fund our operations and continue advancing our multiple programs well into 2025. And as I noted just a few moments ago, we are evaluating options to extend that runway non-dilutably well into 2026 or beyond. Last week, CMS issued the final rule for its 2024 Hospital Outpatient Prospective Payment System. In that rule, CMS recommitted to separate payment for Omidria in ambulatory surgery centers or ASCs throughout 2024. Beginning January 1, 2025, as mandated by Congress in this year's Consolidated Appropriations Act, CMS will pay separately for OMIDRIA in both hospital outpatient departments and in ASCs until at least January 1, 2028. Historically, when OMIDRIA is separately paid in hospital outpatient departments, OMIDRIA sales in those facilities have represented an additional roughly 33% on top of sales in ASCs. Let's turn now to our program update, starting first with our family of agents targeting MASP2, the effector enzyme of the lectin pathway of complement. On October 16, we announced genuinely the surprising and disappointing preliminary results of the pre-specified interim analysis in our Phase III Artemis IGaN trial, evaluating narsoplumab for the treatment of IgA nephropathy. Top line results showed that narsoplumab did not reach statistically significant improvement over placebo on the primary endpoint of reduction in proteinuria assessed by 24-hour urine protein excretion at 36 weeks in the intent to treat population comprised of 180 IgA nephropathy patients, all of whom had baseline proteinuria levels above two grams per day, so severe IgA patients. Based on the absence of a statistically significant improvement on the proteinuria endpoint, and as agreed with FDA, the clinical trial has been discontinued. As we noted during our conference call on October 16, the proteinuria reduction observed in the placebo group was substantially greater than in phase three clinical trials on other agents in IgA nephropathy. Had the placebo effect in our trial been consistent with the placebo effect in those other trials, our trial would have met statistical significance. Our deep dive analysis of the IGA data from our trial is underway. As I mentioned a bit earlier, what we learned from that analysis should be applicable not only to our MASP2 lectin pathway programs, but also to our programs for our alternative pathway MASP3 inhibitor, OMS906. Remember that alternative pathway inhibition has now been clinically validated as an effective treatment for kidney diseases. and this bodes well for OMS906 and its expanding range of potential indications. So despite the outcome of Artemis IgAIN, the evidence supporting the role of the lectin pathway in kidney disease and the therapeutic potential of MASP2 inhibition remains strong. That said, any future development of a lectin pathway inhibitor for IgA nephropathy or other indications that similarly require long-term chronic dosing are better suited for OMS1029, our next generation long-acting MASP2 inhibitor. OMS1029 has successfully completed a phase one single ascending dose study in healthy subjects and the resultant pharmacokinetic and pharmacodynamic or PKPD data support dosing of OMS 1029 once quarterly, either subcutaneously or intravenously. A phase one multiple ascending dose study of OMS 1029 is ongoing, and we expect to initiate next summer a phase two program for OMS 1029. Another of our four near-term strategic objectives, the approval and successful market launch of narsoplumab for patients with TATMA is right now a key focus of our company. We've submitted to FDA a formal statistical analysis plan to compare survival from our narsoplumab pivotal clinical trial to that of an external control, specifically a large registry of TATMA patients. The statistical analysis plan was developed by a well-respected biostatistical group independent of OMEROS and without having examined the survival data to be used in the comparative analysis. Assuming FDA agrees with the plan, we expect the biostatistical group to conduct the analysis and if the results are supportive, we intend to resubmit the biologics license application or BLA for narsoplimab and TATMA soon thereafter, which should allow for an FDA decision on approval mid-next year. To minimize the time to an approval decision, we've already begun revising those modules of the BLA resubmission that require revision. That includes revising the CMC module of the BLA in accordance with the agreements reached during our meeting last month with FDA's CMC review team assigned to our BLA. We also intend to include in our BLA resubmission real-world data on over 120 TATMA patients treated with narsoplimab under our compassionate use program. For each of these adult and pediatric patients, we have provided narsoplumab at no charge. While not financially sustainable long-term, as compassionate use results show more and more evidence of strong survival outcomes, we feel an increasingly strong obligation to provide access to narsoplumab for high-risk TA, TMA patients while the drug continues to proceed through the regulatory process. The outcomes of a large number of compassionate use TATMA patients treated with narsoplimab have been reported in peer-reviewed journal and international congress publications. The patients have ranged in age from three months to over 70 years. The most recent publication and abstract to be presented at the upcoming annual meeting of the American Society of Hematology details the clinical and survival benefits of narsoplumab in 15 adult and pediatric compassionate use patients, 14 of whom had high-risk TATMA. Seventy-three percent were deemed responders with 100-day survival achieved by 80% of all patients in the study and by 100% of the responders. As in all other studies, narsoplumab was generally well tolerated without any safety signals of concern. Our work with narsoplumab in COVID-19 and acute respiratory distress syndrome, or ARDS, presents another opportunity for continued development of narsoplimab in a group of indications centered around ARDS for which there is strong and widely published mechanistic evidence as well as proof of concept clinical data. Narsoplimab is particularly well suited for diseases like ARDS, acute indications requiring hospitalization. We continue making significant progress in further characterizing the lectin pathways central role in COVID-19 and ARDS. Two weeks ago, a manuscript was published in the Journal of Infectious Diseases describing the benefits of MASK2 blockade and lectin pathway inhibition on diseased lungs and brains, as well as on survival in a well-established animal model of COVID-19 related ARDS. Treatment of infected mice with a MASP2 inhibitor significantly reduced disease severity scores and improved survival rates compared to the control antibody. Specifically, MASP2 inhibition significantly reduced lung infiltrates, edema, and hebrage, while also significantly reducing and normalizing brain inflammation and associated hyperactivation of brain microglia. Discussions continue with US government agencies around both COVID-19 and ARDS. Multiple labs have recently identified lectin pathway hyperactivation as prominently present in patients with long COVID at both six and 12 months following resolution of their acute SARS-CoV-2 infection. Here again, The data suggests a potential role of narsopalimab and MASK2 inhibition in the treatment of not only acute, but also long COVID. To date, the challenges in assessing a therapeutic in long COVID are the lack of standardization in diagnostic criteria and in clinical endpoints. Progress is being made internationally on both fronts, and we are assessing next steps. In parallel, we've developed, published, and filed a broad patent internationally on an assay platform that can identify and discriminate between mild COVID-19 patients and those who have moderate or severe COVID-19 requiring hospitalization. The assay's novelty and core measurement is the MASP2 C1 inhibitor complex, a highly sensitive and specific marker of lectin pathway. hyperactivation. We believe that this assay has the potential to predict those patients who have a high likelihood of progressing to severe COVID and COVID-related ARDS. This would be a win-win for patients, physicians, and the payer system. We also believe that our assays utility could well expand beyond acute COVID to include both long COVID and other disease-related ARDS. To our knowledge, there's no commercially available assay that can similarly identify at-risk patients in acute COVID, long COVID, or ARDS. We're evaluating our options for completing development and commercialization of this assay. We've also made good progress in our orally administered MASP2 inhibitor program. Our objective across the MASP2 franchise is to control exclusively the full range of therapeutics for lectin pathway-related diseases, and that includes oral therapies. We've selected a drug development candidate as well as a backup candidate, both of these orally delivered. and testing to enable the filing of an investigational new drug application is underway. Okay, let's now focus on OMS906, our lead antibody targeting MAS3 and the alternative pathway of complement. Inhibition of the alternative pathway continues to be validated clinically by other alternative pathway inhibitors in a wide range of diseases. This growing set of indications inures to the value of OMS906. Recent examples of this are the clinical validation of alternative pathway inhibition in IgA nephropathy and in geographic atrophy. In our PNH program, we previously disclosed encouraging data from an interim analysis in our Phase II clinical trial, evaluating OMS906 in PNH patients who have not previously been treated with a complement inhibitor. An abstract with new and updated data from this study of treatment-naive PNH patients has been selected for oral presentation at the Annual Congress of the American Society of Hematology, or ASH, coming up this December. The presentation describes the clinically meaningful beneficial effects of OMS906 on hemoglobin, LDH, and red blood cell clone size in PNH patients. Eleven patients are enrolled in the study, all of whom had reached the four-week time point, and three of whom had reached the 24-week time point at the time of interim data capture. Following initiation of OMS 906 mean hemoglobin increased from baseline by 3.1 grams per deciliter at four weeks and by 9.5 grams per deciliter at the latest time point of 24 weeks. All but three of the patients achieved gender specific normalization of hemoglobin levels The remaining patients had concomitant diseases causing bone marrow suppression of red blood cell production unrelated to PNH, but preventing normalization of hemoglobin levels. No patients required transfusion following OMS 906 treatment. Mean LDH levels decreased from baseline by approximately 1,500 units per liter at four weeks. and by nearly 2,000 units per liter at 24 weeks. Mean PNH RBC clone size increased by up to 39% versus baseline. A second OMS 906 abstract was also accepted for presentation at ASH. This one is directed to in vitro and in vivo mechanistic support. for the clinical efficacy of OMS906 in PNH patients. Our second phase two study in PNH patients, our switch over study, is now fully enrolled. As designed, this study enrolls PNH patients receiving the C5 inhibitor raviolizumab, adds OMS906 to provide combination therapy with raviolizumab for 24 weeks, and then in those patients who demonstrate a hemoglobin response with the combination therapy switches to OMS906 monotherapy. We anticipate sharing data publicly from this study later this year or early next. As part of our strategy to move as rapidly as possible through clinical development of OMS906 in this indication, we have now initiated an extension study designed to assess the long-term efficacy and safety of OMS906 in PNH patients. The study will enroll patients who have completed either of the two Phase II studies that I've just described, which both evaluate OMS906 for the treatment of PNH. Patients will roll from either of those trials directly into the extension study without a break in OMS 906 treatment. Data from this study will contribute to the planned BLA for OMS 906 in the treatment of PNH. In addition to our clinical work in PNH, we have an OMS 906 Phase II clinical program ongoing in C3G, a rare and debilitating kidney disease. Enrollment for this trial is slated to begin next month. Consistent with our prioritized objectives, we are targeting to begin enrollment in our Phase III PNH trial and in our Phase III C3G trial in the third quarter of next year. The latest OMS906 data now made public by ASH in advance of the presentation at the Society's Annual Congress in December add to the compelling case that MASP3 might well be the premier alternative pathway target and OMS906 the premier alternative pathway drug. We previously have detailed that we see as the major differentiators between MAS-3 and OMS-906 versus other alternative pathway targets and therapeutics on the market or in development. I won't repeat those detailed explanations of their advantages. They can be found in transcripts of earlier calls and in a slide presentation on our website. Instead, I'll simply summarize the highlights and they are as follows. One, MAS3 blockers do not inhibit the infection-fighting function of the classical pathway of complement. By contrast, both C3 and C5 inhibitors block the classical pathway's adaptive immune response, thereby increasing infection risk. Two, MAS3 is known not to be an acute phase reactant, and has very low native circulating levels relative to other alternative pathway targets. In contrast, factor B, C3, and the terminal factor C5 are all acute phase reactants. This means that the concentrations of factor B, C3, and C5 increase in the setting of inflammation such as infection or any other inflammatory condition. As a result, OMS 906 should maintain more consistent pathway inhibition than drugs targeting factor B, C3, or C5, providing better protection against potentially life-threatening breakthrough of a patient's underlying disease. And three, OMS 906 should deliver better patient convenience and compliance than the competition by allowing once quarterly intravenous and subcutaneous administration. While we expect these three major advantages to provide significant differentiation over our competitors, those competitors also help us. They help us by continuing to validate indications clinically providing a de-risked roadmap for us to follow with what we expect is a better target, MASP3, and a better drug, OMS906. So the data around OMS906 continue to strengthen, and the breadth of potential indications continues to expand. As a result, the value story for the entirety of the 906 program continues to to improve. Our objective remains unchanged to make OMS 906 the first line standard of care for the treatment of PNH and a host of other alternative pathway diseases and disorders. Let's now move on to OMS 527, our PD7 inhibitor program targeting treatment of addictions and compulsive disorders. PDE7 inhibition has been shown in animal models to block both craving and relapse across multiple substances of abuse, including opioids, cocaine, nicotine, and alcohol. Importantly, PDE7 inhibition, unlike other anti-addiction agents on the market, does not appear to depress the reward system. Depression of the reward system results in diminished enjoyment of other life activities, food, socialization, sex, sports, and is a major cause of noncompliance with currently marketed anti-addiction agents. The ability of PDE7 inhibitors to avoid this side effect represents a significant advance in the treatment of substance use disorders. The potential indications for PDE inhibitors are not limited to substance use disorders, but extend to compulsive disorders with clear efficacy data in a well-established animal model of binge eating. The development of our PDE7 inhibitor program for addiction is currently fully funded by a grant from the National Institute on Drug Abuse, $6.7 million over three years. NIDA requested that we first develop OMS 527 for the treatment of adults with cocaine use disorder. The grant supports both preclinical and clinical work, including a randomized double-blind inpatient clinical trial. In addition to the treatment of addictions and compulsions, OMEROS controls broad patents surrounding PDE7 inhibition and movement disorders. Our clinical focus in movement disorders is the potential treatment of levodopa-induced dyskinesias, or LIDs. LID is a nearly universal and debilitating side effect of long-term treatment with L-DOPA in patients with Parkinson's disease, causing crippling and involuntary movements in L-DOPA-treated patients. LID is estimated to affect millions of Parkinson's patients worldwide, representing both a large unmet patient need and market opportunity. The only approved drug for LID has marginal efficacy and is fraught with significant adverse side effects. A more effective and safer treatment is needed. Primate studies assessing OMS527 and LID have been conducted at Emory University, and we are discussing next steps with our Emory colleagues. We'll end today's corporate review with our immuno-oncology programs. Our broad IO franchise consists of two cellular platforms and three molecular platforms. Our two cellular platforms are CAR T and adoptive T cell therapy. Our three molecular platforms are immunomodulators, immunotoxins, and cancer vaccines. All of these five platforms are entirely novel. and based on substantial in vitro and in vivo data, all look to be viable. During our last quarterly call, I described each of these five programs. In the interest of time, I'll focus on only two, our adoptive cell therapy and our cancer vaccine platforms, specifically what we believe will prove out to be their respective major advantages over competitive programs. Our adoptive cell therapy platform or ACT like our CAR-T platform is based on the novel identification of specific T cell signaling pathways which once inhibited significantly and preferentially potentiate and enhance the expansion of tumor specific memory T cells. Tumor-specific memory T cells distinctively recognize and efficiently kill tumor cells. The potential advantages of our ACT platform over other cellular approaches are, one, rather than targeting just cell surface antigens, our ACT platform is designed to target both cell surface and intracellular cancer antigens, significantly broadening its range of indications. Two, instead of increasing predominantly either CD4 or CD8 T cells, both of which are needed to successfully kill the tumor, our ACT technology markedly increases levels of both CD4 and CD8 cancer-specific T cells. This should lead to more effective antitumor responses. In addition, the increase in memory cells is expected to mitigate the treatment exhaustion or the wearing off of the treatment effect seen with many currently available cellular therapies. This would result in the ability to treat the tumor repeatedly and prevent relapses. Unlike existing CAR T therapies, our ACT technology does not require cellular engineering. Instead, cells from the patient are simply treated outside the body and administered to the patient. This would represent a major advance over currently available T cell therapies, markedly decreasing both cost and preparation time. Together with enhanced efficacy by enabling multiple repetitive administrations, the expected result is better and sustained any tumor response. As with our other molecular IO platforms, immunomodulators and immunotoxins, we're excited about the potential of our cancer vaccine platform as well. And the potential for that platform to have a significant impact on the survival of cancer patients. Though widely pursued, successful development of therapeutic cancer vaccines remains difficult to achieve. Current approaches induce only transient and ineffective immune responses. We believe that we've discovered a way to overcome this challenge generating novel molecules that combine tumor antigens with a potent adjuvant. These biologic molecules activate antigen-presenting cells. This ultimately leads to efficient killing of tumor cells by both T-cell and antibody-mediated activities. The vaccine also promotes long-lasting immune response through the generation of memory T and B cells. The major advantages of our platform over other vaccine approaches are one, our platform should be applicable to all or nearly all tumors. And two, when injected into the body, our novel biologic molecule should result not only in elimination of tumor cells, but importantly, in immune memory. against future cancer relapse. If needed, this immune memory could be further enhanced with subsequent vaccine boosters. As I noted earlier today, the large majority of the efforts across our five novel cellular and molecular platforms are conducted in-house by a relatively small but highly effective group of scientists. We believe that the moderate investment required to continue advancing our I.O. program could create opportunities for meaningful, non-dilutive funding. So I'll now turn the call over to Mike Jacobson, our Chief Accounting Officer, to go through a more detailed discussion of our third quarter financial results. Mike?