Omeros: An Upbeat Prognosis

| About: Omeros Corporation (OMER)

Summary

Small-cap biotech concern Omeros just reported quarterly results.

The company made progress increasing sales of its one approved drug "Omidria" as well as advancing its potential blockbuster compound "OMS721" in trial development.

What investors should know about this attractive Tier 3 stock going into the second quarter.

"A good plan violently executed now is better than a perfect plan executed at some indefinite time in the future." ― George S. Patton Jr.

Omeros (NASDAQ:OMER) reported quarterly earnings after the bell on Thursday. The company saw sales of "Omidria" rise nicely and it continued to advance its potential blockbuster compound "OMS721" in development. Below we outline three key things investors should know about this attractive "Tier 3" biotech stock after these quarterly results.

Earnings Highlights:

The company posted a loss of 45 cents a share during the quarter, about a dime a share better than expected. Revenues came at $12.9 million, also above the consensus.

Sales of Omidria accounted for all overall revenues during the quarter. Omidria is approved for use during cataract surgery or intraocular lens replacement as it prevents pupil constriction during surgery and reduces postoperative ocular pain.

This was up 94% on a year-over-year basis and 14% on a sequential count. Omidria units sold increased 22% from the third quarter. Omeros also saw a positive outcome of post-marketing clinical trial of Omidria in pediatric patients undergoing cataract surgery. This is expected to result in an additional six months of regulatory exclusivity. The company will also submit a SNDA to expand Omidria's label to cover individuals of all ages. Changes the company made late last year seem to be resulting in a ramp up of Omidria sales which is a positive.

OMS721:

This is the company's potential blockbuster in its pipeline. This compound targets MASP-2, the effector enzyme of the lectin pathway of the complement system, which is a key component of immune response. It has the potential for five rare disease indications.

During the quarter, Omeros opened enrollment for Phase 3 clinical trial of OMS721 in patients with atypical hemolytic uremic syndrome {aHUS} and also saw encouraging data from Phase 2 clinical trials of OMS721 in both renal disorders and hematopoietic stem cell transplant-associated thrombotic microangiopathy (HSCT-TMA). OMS721 has received FDA's orphan drug designation for TMA's. Fastrack status for aHUS has also been already granted by the FDA. The company has met with the FDA and believes this one Phase III study should be enough, if successful, to result in a NDA for this indication. Soliris by Alexion Pharmaceuticals (ALXN) is currently approved for this indication. That compound should do north of $3 billion in annual revenues this year.

In October the company released statistically significant positive data on IgA patients treated with OMS721. There is no current treatment for IgA nephropathy. Omeros plans to submit a full application for breakthrough designation. This could result in accelerated approval and a significantly shortened timeline to full approval.

Balance Sheet:

In October Omeros entered into a six year $125 million secured debt facility with CRG. The facility is interest only through year end 2020 and incurs interest at a rate of 12.25%. Omeros has borrowed the first tranche of $80 million and used most of the proceeds to retire previously existing debt. The company also has the ability to borrow an additional $25 million through September 19th of 2017 if they achieve at least $18 million of Omidria product revenue during any consecutive three month period prior to June 30, 2017 or achieve an average market cap of $700 million during any consecutive three months prior to the June 30, 2017.

Omeros can also borrow an additional $20 million through March 21 of 2018 assuming they produce Omidria product revenue of at least $25 million during any consecutive three month period or have an average market cap of $1 billion during any consecutive three month period prior to December 31, 2017. The company has a current approximate market cap of $500 million. Omeros ended the quarter with just over $45 million in cash & marketable securities on the balance sheet.

All in all, more than a solid quarter and one that deserves at least a 'B+'. Both Maxim Group and Cantor Fitzgerald reiterated Buy ratings with price targets in the low $20s Friday - double the current price of the stock. Given the progress of Omidria and the potential of OMS721, I don't think they will be the last analyst firms to do so after these quarterly results. BUY.

Author's note: To get these types of articles and Instablogs on attractive biotech and pharma stocks as soon as they are published, just click on my profile and hit the big orange "Follow" button and choose the real-time alerts option.

Thank you and happy hunting.

Bret Jensen

Founder, Biotech Forum

Disclosure: I am/we are long OMER.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Tagged: , Drug Manufacturers - Major, Earnings
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