O M E R O S
C O R P O R A T I O N
2 (cid:1)0 (cid:1)2 (cid:1)(cid:20)
(cid:1) A N N U A (cid:45)
R E P O R T
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LET SCIENCE LEAD THE WAY ®
A p r i l 2 9 , 2 0 2 4
D e a r F e l l o w S h a r e h o l d e r s :
F o r O m e r o s , 2 0 2 3 w a s a y e a r o f s i g n i f i c a n t d e v e l o p m e n t p r o g r e s s a n d f i n a n c i a l
s t r e n g t h e n i n g m a r r e d b y a f a i l e d P h a s e 3 c l i n i c a l t r i a l i n I g A n e p h r o p a t h y .
D e s p i t e t h a t d i s a p p o i n t m e n t , O m e r o s i s s t r o n g e r t o d a y t h a n i t h a s e v e r b e e n .
T h e o u t c o m e o f o u r n a r s o p l i m a b P h a s e 3 c l i n i c a l t r i a l i n I g A N w a s a n u n w e l c o m e
s u r p r i s e . I n a d d i t i o n t o a l a r g e p l a c e b o e f f e c t , t h e d o s i n g r e g i m e n f o r a g o o d
n u m b e r o f t h e t r i a l ’ s p a t i e n t s a p p e a r s t o h a v e b e e n s u b o p t i m a l . T h e i n f o r m a t i o n
g a i n e d f r o m t h a t t r i a l b e t t e r i n f o r m s n o t o n l y o u r w o r k w i t h n a r s o p l i m a b b u t
a c r o s s a l l o u r M A S P - 2 / l e c t i n p a t h w a y ( L P ) i n h i b i t o r p r o g r a m s . O n t h e T A - T M A
f r o n t , a n a l y s i s o f 1 3 6 p a t i e n t s i n o u r n a r s o p l i m a b e x p a n d e d a c c e s s p r o g r a m
s h o w s s t r o n g o v e r a l l s u r v i v a l ( m e d i a n 4 6 1 d a y s f o l l o w i n g T M A d i a g n o s i s ) s i m i l a r
t o t h a t o f o u r p i v o t a l c l i n i c a l t r i a l . O f t h o s e 1 3 6 a d u l t a n d p e d i a t r i c p a t i e n t s ,
5 3 h a d f a i l e d o r s t o p p e d p r e v i o u s t r e a t m e n t r e g i m e n s w i t h o n e o r m o r e o f
e c u l i z u m a b , r a v u l i z u m a b , d e f i b r o t i d e a n d / o r p e g c e t a c o p l a n y e t , w i t h
n a r s o p l i m a b , 4 9 % a c h i e v e d 1 - y e a r s u r v i v a l f r o m d a t e o f T M A d i a g n o s i s a n d 6 4 %
r e a c h e d 1 - y e a r s u r v i v a l f r o m d a t e o f t r a n s p l a n t . T h e d r u g i s s a v i n g l i v e s . W i t h
o v e r 6 0 0 - s u b j e c t e x p o s u r e a n d n o o b s e r v e d s a f e t y s i g n a l o f c o n c e r n , t h e b e n e f i t -
r i s k p r o f i l e i s c l e a r l y f a v o r a b l e . I n t e r a c t i o n s w i t h F D A r e g a r d i n g r e s u b m i s s i o n o f
o u r B L A a r e o n g o i n g a n d w e r e m a i n c o m m i t t e d t o a c h i e v i n g a p p r o v a l o f
n a r s o p l i m a b i n T A - T M A .
W e c o n t i n u e m a k i n g t r e m e n d o u s p r o g r e s s w i t h O M S 9 0 6 , o u r l e a d a n t i b o d y
t a r g e t i n g M A S P - 3 a n d t h e a l t e r n a t i v e p a t h w a y ( A P ) o f c o m p l e m e n t , a n d t h e
s t e a d y s t r e a m o f d a t a a r e c o n s i s t e n t a n d i m p r e s s i v e . B a s e d o n o n g o i n g m a r k e t
r e s e a r c h f o c u s g r o u p s w i t h p r o v i d e r s , O M S 9 0 6 i s p l a n n e d f o r o n c e - e v e r y - 2 -
m o n t h s t o o n c e - q u a r t e r l y d o s i n g a n d o f f e r s a d i f f e r e n t i a t e d p r o f i l e f r o m o t h e r
A P i n h i b i t o r s . T w o O M S 9 0 6 P h a s e 2 c l i n i c a l t r i a l s i n P N H – o n e i n t r e a t m e n t - n a ï v e
p a t i e n t s a n d t h e o t h e r i n p a t i e n t s w i t h a s u b o p t i m a l r e s p o n s e t o r a v u l i z u m a b –
a r e f u l l y e n r o l l e d a n d e a c h h a s r e p o r t e d d a t a a t l e a s t a s s t r o n g a s a n y o t h e r A P -
t a r g e t i n g a g e n t o n t h e m a r k e t o r i n d e v e l o p m e n t . A l o n g - t e r m e x t e n s i o n s t u d y o f
O M S 9 0 6 i n P N H , p l a n n e d t o s u p p o r t a f u t u r e m a r k e t i n g a p p l i c a t i o n , i s u n d e r w a y .
A P h a s e 3 p r o g r a m i n P N H i s e x p e c t e d t o b e g i n l a t e t h i s y e a r a n d a P h a s e 3
p r o g r a m i n C 3 g l o m e r u l o p a t h y i s t a r g e t e d f o r e a r l y 2 0 2 5 . T h e c l i n i c a l e v i d e n c e
p o i n t s t o s i g n i f i c a n t p o t e n t i a l c o m p l i a n c e / e f f i c a c y a n d s a f e t y a d v a n t a g e s o f
O M S 9 0 6 o v e r o t h e r m a r k e t e d a n d d e v e l o p i n g A P i n h i b i t o r s . N o v a r t i s ’ i p t a c o p a n , a
t w i c e - d a i l y o r a l F a c t o r B i n h i b i t o r , c o n t i n u e s t o d i a g r a m t h e r o a d m a p o f
i n d i c a t i o n s ( i n c l u d i n g m o s t r e c e n t l y I g A N ) f o r u s t o f o l l o w w i t h w h a t w e b e l i e v e
i s a b e t t e r t a r g e t i n M A S P - 3 a n d a b e t t e r d r u g i n O M S 9 0 6 – a l l o f w h i c h
p r o g r e s s i v e l y a n d s u b s t a n t i a l l y i n u r e v a l u e t o o u r O M S 9 0 6 p r o g r a m .
O M S 1 0 2 9 , o u r l o n g - a c t i n g s e c o n d - g e n e r a t i o n M A S P - 2 a n t i b o d y , i s w r a p p i n g u p
P h a s e 1 d e v e l o p m e n t . W e l l - t o l e r a t e d w i t h o u t a n y s a f e t y s i g n a l o f c o n c e r n , t h e
p h a r m a c o k i n e t i c / p h a r m a c o d y n a m i c d a t a s u p p o r t l o w - v o l u m e o n c e - q u a r t e r l y
s u b c u t a n e o u s o r i n t r a v e n o u s d o s i n g . C o n v e n i e n t d o s i n g w i t h e f f e c t i v e l y c o m p l e t e
L P i n h i b i t i o n s h o u l d m a k e O M S 1 0 2 9 a n a t t r a c t i v e f i r s t - i n - c l a s s t h e r a p e u t i c f o r
L P - r e l a t e d l a r g e - m a r k e t c h r o n i c i n d i c a t i o n s , s e v e r a l o f w h i c h w e a r e e v a l u a t i n g
f o r P h a s e 2 d e v e l o p m e n t . O u r o r a l l y a v a i l a b l e M A S P - 2 s m a l l - m o l e c u l e a n d M A S P - 3
s m a l l - m o l e c u l e p r o g r a m s a r e a l s o r a p i d l y a d v a n c i n g .
B e y o n d o u r p r e m i e r c o m p l e m e n t f r a n c h i s e , w e h a v e m a d e s i g n i f i c a n t s t r i d e s
w i t h i n o u r p o r t f o l i o o f e a r l i e r - s t a g e d e v e l o p m e n t p r o g r a m s . I n A p r i l 2 0 2 3 , t h e
N a t i o n a l I n s t i t u t e o n D r u g A b u s e a w a r d e d u s a 3 - y e a r $ 6 . 7 m i l l i o n g r a n t t o
d e v e l o p O M S 5 2 7 , o u r l e a d o r a l l y a d m i n i s t e r e d p h o s p h o d i e s t e r a s e - 7 i n h i b i t o r , f o r
t r e a t m e n t o f c o c a i n e u s e d i s o r d e r . T h r o u g h t h i s i n i t i a l f u n d i n g , O M S 5 2 7 –
d e s i g n e d t o t r e a t t h e b r e a d t h o f s u b s t a n c e u s e d i s o r d e r s w i t h s i g n i f i c a n t a n d
w e l l - r e c o g n i z e d p o t e n t i a l a d v a n t a g e s o v e r o t h e r c u r r e n t a n t i - a d d i c t i v e t h e r a p i e s
– i s s l a t e d f o r e v a l u a t i o n i n a r a n d o m i z e d p l a c e b o - c o n t r o l l e d c l i n i c a l t r i a l
e v a l u a t i n g i t s s a f e t y a n d e f f e c t i v e n e s s i n p a t i e n t s w i t h c o c a i n e u s e d i s o r d e r .
O u r 5 n o v e l c e l l u l a r a n d b i o l o g i c i m m u n o - o n c o l o g y p l a t f o r m s a r e g e n e r a t i n g a
n e a r l y c o n s t a n t f l o w o f p o s i t i v e i n v i t r o , e x v i v o a n d a n i m a l d a t a , c o n t r i b u t i n g
t o o u r b r o a d a n d g r o w i n g i n t e l l e c t u a l p r o p e r t y e s t a t e . U n i q u e i n t h e i r c o l l e c t i v e
a p p r o a c h e s – t a r g e t i n g b o t h c e l l - s u r f a c e a n d i n t r a c e l l u l a r c a n c e r t a r g e t s f o r
b r o a d c a n c e r a p p l i c a b i l i t y , d e s i g n e d t o i n c r e a s e b o t h C D 4 a n d C D 8 l e v e l s t o
m i t i g a t e l o s s o f t r e a t m e n t e f f e c t s e e n w i t h o t h e r t h e r a p i e s l i k e c h e c k p o i n t
i n h i b i t o r s , n o n e e d f o r c o s t l y a n d t i m e - i n t e n s i v e c e l l u l a r m o d i f i c a t i o n o r
e n g i n e e r i n g , a n d c r e a t i o n o f i m m u n e m e m o r y a g a i n s t f u t u r e r e l a p s e – w e a n d
e x p e r t s i n t h e f i e l d a r e e x c i t e d b y w h a t w e a r e s e e i n g a n d b y o u r i m m u n o -
o n c o l o g y p r o g r a m ’ s p r o s p e c t s .
U n d e r p i n n i n g a l l t h e s e p r o g r a m m a t i c a c c o m p l i s h m e n t s i s t h e s t r o n g f i n a n c i a l
f o u n d a t i o n t h a t O m e r o s c o n t i n u e s r e s o l u t e l y b u i l d i n g . S i n c e i t s D e c e m b e r 2 0 2 1
s t r a t e g i c d i v e s t i t u r e t o R a y n e r S u r g i c a l , O M I D R I A ® h a s p r o v i d e d u s w i t h n e a r l y
$ 7 0 0 m i l l i o n i n n o n - d i l u t i v e o p e r a t i n g c a p i t a l , i n c l u d i n g r e c e i p t i n 2 0 2 3 o f a
$ 2 0 0 m i l l i o n m i l e s t o n e p a y m e n t a l o n g w i t h m o r e t h a n $ 3 3 m i l l i o n i n r o y a l t i e s o n
O M I D R I A n e t s a l e s a n d , e a r l i e r t h i s y e a r , a n o t h e r $ 1 1 6 m i l l i o n u p f r o n t p a y m e n t
t i e d t o e x p a n s i o n o f o u r e x i s t i n g r o y a l t y m o n e t i z a t i o n a r r a n g e m e n t w i t h t h e
p o t e n t i a l t o e a r n a n a d d i t i o n a l $ 5 5 m i l l i o n i n m i l e s t o n e p a y m e n t s . F u r t h e r
e n h a n c i n g s h a r e h o l d e r v a l u e , w e r e d u c e d o u r o u t s t a n d i n g c o m m o n s h a r e c o u n t b y
8 p e r c e n t t h r o u g h s t o c k r e p u r c h a s e s . F o l l o w i n g r e t i r e m e n t o f t h e 2 0 2 3
c o n v e r t i b l e n o t e s ( $ 9 5 m i l l i o n i n f u l l ) , w i t h a p p r o x i m a t e l y $ 2 3 0 m i l l i o n i n c a s h
a n d i n v e s t m e n t s a t M a r c h 3 1 , 2 0 2 4 , o u r o p e r a t i n g r u n w a y n o w e x t e n d s i n t o 2 0 2 6 .
I h o p e t h a t t h e f o r e g o i n g p r o v i d e s a b e t t e r u n d e r s t a n d i n g o f o u r
a c c o m p l i s h m e n t s i n 2 0 2 3 . T a k e n t o g e t h e r , I b e l i e v e o u r p r o g r e s s l a s t y e a r
d e m o n s t r a t e s p o s s e s s i o n o f t h e f o r e s i g h t a n d r e s i l i e n c e n e e d e d t o n a v i g a t e
s e t b a c k s , t o d e l i v e r o n t h e p r o m i s e o f o u r s c i e n c e , t o g e n e r a t e v a l u e f o r o u r
s h a r e h o l d e r s a n d , a b o v e a l l , t o i m p r o v e t h e l i v e s o f t h e p a t i e n t s t o w h o m o u r
e f f o r t s a r e d e v o t e d .
O n b e h a l f o f o u r b o a r d o f d i r e c t o r s a n d e m p l o y e e s , I t h a n k y o u f o r y o u r
c o n t i n u e d s u p p o r t .
S i n c e r e l y ,
Gregory A. Demopulos, M.D.
Chairman & Chief Executive Officer
FORM 10-K(cid:1)
202(cid:20)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:20364) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
or
(cid:20362) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to
Commission file number: 001-34475
OMEROS CORPORATION
(Exact name of registrant as specified in its charter)
Washington
(State or other jurisdiction of
incorporation or organization)
91-1663741
(I.R.S. Employer
Identification Number)
201 Elliott Avenue West
Seattle, Washington 98119
(Address of principal executive offices and zip code)
(206) 676-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.01 per share
Trading Symbol
OMER
Name of each exchange on which registered
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:20362) No (cid:20364)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:20362) No (cid:20364)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes (cid:20364) No (cid:20362)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes (cid:20364) No (cid:20362)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer
Non-accelerated filer
(cid:20362)
(cid:20364)
Accelerated filer
Smaller reporting company
Emerging growth company
(cid:20362)
(cid:20364)
(cid:20362)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:20362)
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. (cid:20362)
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. (cid:20362)
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any
of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). (cid:20362)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:20362) No (cid:20364)
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of the last business day of the registrant’s most
recently completed second fiscal quarter was $328,153,747.
As of March 28, 2024, the number of outstanding shares of the registrant’s common stock, par value $0.01 per share, was 57,942,695.
Specified portions of the registrant’s proxy statement with respect to the 2024 Annual Meeting of Shareholders, which is to be filed pursuant to Regulation 14A
within 120 days after the end of the registrant’s fiscal year ended December 31, 2023, are incorporated by reference into Part III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and
Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), which are subject to the “safe harbor” created by those sections for such statements.
Forward-looking statements are based on our management’s beliefs and assumptions and on currently available information. All statements other than statements of
historical fact are “forward-looking statements.” Terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “intend,” “likely,” “may,” “plan,”
“possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” and similar expressions and variations thereof are intended to identify forward-looking
statements, but these terms are not the exclusive means of identifying such statements. Examples of these statements include, but are not limited to, statements
regarding:
● our estimates of future operating expenses and projections regarding how long our existing cash, cash equivalents and short-term investments will fund our
anticipated operating expenses, capital expenditures and debt service obligations;
● our ability to raise additional capital through the capital markets or one or more future equity offerings, debt financings, industry collaborations, licensing
arrangements, asset sales or other means;
● our expectations regarding amounts potentially payable to us based on sales of our former commercial ophthalmology product OMIDRIA®;
● our expectations regarding clinical plans and anticipated or potential paths to regulatory approval of narsoplimab by the U.S. Food and Drug Administration
(“FDA”) and the European Medicines Agency (“EMA”) in hematopoietic stem cell transplant-associated thrombotic microangiopathy (“TA-TMA”), COVID-19
or any other indication;
● whether and when our biologics license application (“BLA”) for narsoplimab in TA-TMA may be resubmitted to FDA, whether and when a marketing
authorization application (“MAA”) may be submitted to the EMA for narsoplimab in any indication, and whether and when the FDA, the EMA or any other
regulatory authority will grant approval for narsoplimab in any indication;
● our plans for the commercial launch of narsoplimab following any regulatory approval and our estimates and expectations regarding coverage and
reimbursement for any approved products;
● our expectation that our contract manufacturer will manufacture narsoplimab when needed to support any regulatory filing and, if approved, to support
commercial sale;
● our expectations regarding the clinical, therapeutic and competitive benefits and importance of our drug candidates;
● our ability to design, initiate and/or successfully complete clinical trials and other studies for our drug candidates and our plans and expectations regarding our
ongoing or planned clinical trials;
● our expectations regarding: our ability to recruit and enroll patients in any ongoing or planned clinical trial; whether we can capitalize on the financial and
regulatory incentives provided by orphan drug designations granted by the FDA, the European Commission (“EC”), or the EMA; and whether we can utilize
the opportunities for expedited development and review that may be provided by fast-track or breakthrough therapy designations granted by FDA;
● our expectations about the commercial competition that our drug candidates, if commercialized, face or may face;
● our involvement in existing or potential claims, legal proceedings and administrative actions, and the merits, potential outcomes and effects of both existing and
potential claims, legal proceedings and administrative actions, as well as regulatory determinations, on our business, prospects, financial condition and results
of operations;
● the extent of protection that our patents provide and that our pending patent applications will provide, if patents are issued from such applications, for our
technologies, programs, and drug candidates;
● the factors on which we base our estimates for accounting purposes and our expectations regarding the effect of changes in accounting guidance or standards
on our operating results; and
● our expected financial position, performance, revenues, growth, costs and expenses, magnitude of net losses and the availability of resources.
Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks, uncertainties and other
factors described in Item 1A of Part I of this Annual Report on Form 10-K under the heading “Risk Factors” and in Item 7 of Part II under the heading “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and in our other filings with the Securities and Exchange Commission (“SEC”). Given these
risks, uncertainties and other factors, actual results or anticipated developments may not be realized or, even if substantially realized, they may not have the expected
consequences to or effects on our company, business or operations. Accordingly, you should not place undue reliance on these forward-looking statements, which
represent our estimates and assumptions only as of the date of the filing of this Annual Report on Form 10-K. You should read this Annual Report on Form 10-K
completely and with the understanding that our actual results in subsequent periods may materially differ from current expectations. Except as required by applicable
law, including the securities laws of the United States and the rules and regulations of the SEC, we assume no obligation to update or revise any forward-looking
statements contained herein, whether as a result of any new information, future events or otherwise.
i
The risk factors described below are a summary of the principal risk factors associated with an investment in our company. These are not the only risks we face.
You should carefully consider the risk factors discussed in this summary, as well as the risk factors described in Item 1A. of this Annual Report on Form 10-K.
SUMMARY RISK FACTORS
Risks related to our drug candidates, programs and operations include, but are not limited to, the following:
● inability to raise capital when needed;
● that our drug candidates may not successfully complete clinical development or be suitable for successful commercialization or generation of revenue;
● failure to obtain and maintain regulatory approval for marketing of future commercial products in the U.S. or in foreign jurisdictions;
● lack of adequate coverage or reimbursement from government and/or private payers for OMIDRIA or any of our drug candidates that we commercialize in the
future;
● whether and to what extent future royalty and milestone payments that we are eligible to receive based on net sales of OMIDRIA by Rayner Surgical Inc.
(“Rayner”) will become payable;
● unpredictability of our operating results;
● any failure to comply with current or future government regulations;
● lack of internal manufacturing capacity and reliance on third parties;
● inability to acquire ingredients, excipients, test kits and other materials to manufacture our drug candidates on commercially reasonable terms;
● delays, suspensions or terminations of our clinical trials or clinical protocols;
● substantial costs as a result of commercial disputes, claims, litigation or other legal proceedings;
● inability to protect our intellectual property and proprietary technologies;
● our indebtedness and liabilities, which could limit the cash flow available for our operations;
● products developed by our competitors, which may diminish or eliminate the success of any products that we may commercialize;
● reliance on members of our management team and our ability to recruit and retain key personnel;
● reliance on third parties to conduct portions of our preclinical research and clinical trials; and
● the impact of our share repurchase program on our stock price.
General risks related to our business include the following:
● cyber-attacks or failures in telecommunications or other information technology systems;
● volatility of our stock price;
● dilution to our existing shareholders if we issue additional shares of our common stock or other securities that may be convertible into, or exercisable for, our
common stock;
● adverse effects of natural disasters or other events on us or the third parties on whom we rely; and
● the impact of anti-takeover provisions in our charter documents and under Washington law on potential acquisitions of our company.
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OMEROS CORPORATION
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2023
INDEX
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Cybersecurity
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspection
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
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This Annual Report on Form 10-K contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results
may differ materially from those discussed in these forward-looking statements due to a number of factors, including those set forth in the section entitled “Risk
Factors” and elsewhere in this Annual Report. Please refer to the special note regarding forward-looking statements at the beginning of this Annual Report on
Form 10-K for further information.
PART I
ITEM 1. BUSINESS
Overview
Omeros Corporation (“Omeros,” the “Company” or “we”) is a clinical-stage biopharmaceutical company committed to discovering, developing and commercializing
small-molecule and protein therapeutics for large-market as well as orphan indications targeting immunologic diseases, including complement-mediated diseases and
cancers related to dysfunction of the immune system, as well as addictive and compulsive disorders.
Complement-targeted Therapeutic Development Programs
We are advancing multiple development programs focused on diseases and disorders associated with the complement system, a group of specialized proteins that
protect against invasive pathogens as well as damaged cells inside the body and comprise an important part of the body’s immune system. When triggered, the various
components of complement cooperate to generate an immune response that fights infection and clears damaged or dead cells, maintaining healthy function of the
body’s systems. However, dysregulation of the complement system (i.e., over- or under-activation) can be harmful and is associated with increased vulnerability to
infections and non-infectious diseases, including autoimmune disorders, chronic inflammation, thrombotic microangiopathy, and cancer.
There are three distinct pathways of complement, each activated via one or more unique mechanisms:
● Classical pathway: activated by antigen-antibody complexes
●
● Alternative pathway: constitutively active and amplifies classical and lectin pathway activation
Lectin pathway: activated by lectin binding of carbohydrate patterns on the surfaces of damaged cells and microbes
Our complement-targeted therapeutic development programs are primarily focused on diseases and disorders associated with the lectin and/or alternative pathways
of complement. Our lectin pathway program includes inhibitors of mannan-binding lectin-associated serine protease 2 (“MASP-2”) and our alternative pathway program
includes inhibitors of mannan-binding lectin-associated serine protease 3 (“MASP-3”).
Narsoplimab (OMS721), the lead candidate in our lectin pathway program, is a proprietary, patented human monoclonal antibody inhibitor of MASP-2, the key
effector enzyme of the lectin pathway. Clinical development of narsoplimab is currently focused primarily on hematopoietic stem cell transplant-associated thrombotic
microangiopathy (“TA-TMA”). We are also developing OMS1029, a long-acting, next-generation antibody and an orally administered small molecule targeting MASP-2
and the lectin pathway.
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The lead drug candidate in our development program focused on the alternative pathway of complement is OMS906, a proprietary, patented monoclonal antibody
targeting MASP-3. MASP-3 is the key activator of the alternative pathway of complement. We believe OMS906 has the potential to treat a wide range of alternative
pathway-related diseases and that its attributes favorably differentiate OMS906 from other marketed and in-development alternative pathway inhibitors. Clinical
development of OMS906 is currently ongoing in multiple alternative pathway-related disorders, including complement 3 glomerulopathy (“C3G”), a rare chronic kidney
disease, and paroxysmal nocturnal hemoglobinuria (“PNH”), a rare and life-threatening hemolytic blood disorder. An orally administered small molecule MASP-3
inhibitor is also in development.
Other Development Programs
Our development pipeline also includes OMS527, our phosphodiesterase 7 (“PDE7”) inhibitor program focused on addiction and movement disorders. We also
have a diverse group of preclinical programs, including five immuno-oncology platforms directed to development of novel adoptive T cell/CAR-T therapies,
immunomodulators, immunotoxins and cancer vaccines.
OMIDRIA Sale and Royalty Monetization Transactions
We previously developed and commercialized OMIDRIA® (phenylephrine and ketorolac intraocular solution) 1%/0.3%, which is approved for use during cataract
surgery or intraocular lens (“IOL”) replacement to maintain pupil size by preventing intraoperative miosis (pupil constriction) and to reduce postoperative ocular pain.
We marketed OMIDRIA in the United States (the “U.S.”) from the time of its commercial launch in 2015 until December 2021.
On December 23, 2021, we sold OMIDRIA and certain related assets, including inventory and prepaid expenses to Rayner Surgical Inc. (“Rayner”) pursuant to an
Asset Purchase Agreement, dated December 1, 2021 (the “Asset Purchase Agreement”). Under the Asset Purchase Agreement, Rayner paid us $126.0 million in cash at
the closing and we retained all outstanding accounts receivable, accounts payable, and accrued expenses as of the closing date. Rayner is also obligated under the
Asset Purchase Agreement to pay us royalties based on Rayner’s net sales of OMIDRIA for a term that extends for the life of the patents covering OMIDRIA in the
relevant jurisdiction. The latest expiration of a patent covering OMIDRIA in the United States is currently in 2035. Also pursuant to the Asset Purchase Agreement, we
were entitled to receive a milestone payment of $200.0 million (the “Milestone Payment”) within 30 days following an event (the “Milestone Event”) that establishes
separate payment for OMIDRIA for a continuous period of at least four years when furnished in the ambulatory surgery center (“ASC”) setting. The Milestone Event
occurred in December 2022 and we recorded a $200.0 million milestone receivable. We received the Milestone Payment together with accrued interest in February 2023.
On September 30, 2022, we entered into a Royalty Purchase Agreement (the “Original Agreement”) with DRI Healthcare Acquisitions LP (“DRI”) under which we
received $125.0 million in cash in exchange for a portion of our royalties on global net sales of OMIDRIA payable by Rayner between September 1, 2022 and December
31, 2030, subject to certain annual caps on the royalty amounts payable to DRI, with Omeros entitled to receive all royalties paid in excess of the applicable caps.
On February 1, 2024, we entered into an amended and restated royalty purchase agreement (the “Amendment”) with DRI to effect the sale to DRI of an expanded
interest in the OMIDRIA royalties. The Amendment eliminated the annual caps on royalty payments to which DRI is entitled and provides that DRI will now receive all
royalties on U.S. net sales of OMIDRIA payable between January 1, 2024 and December 31, 2031. We received $115.5 million in cash upon closing of the Amendment.
Additionally, we are eligible under the Amendment to receive two milestone payments of up to $27.5 million each, payable in January 2026 and January 2028,
respectively, based on achievement of certain thresholds for U.S. net sales of OMIDRIA. DRI is entitled to payment only to the extent of royalty payments that are
payable on U.S. net sales of OMIDRIA on or before December 31, 2031 and DRI has no recourse to our assets other than its interest in the OMIDRIA royalties. Omeros
retains the right to receive all royalties payable by Rayner on any net sales of OMIDRIA outside the U.S. payable from and after January 1, 2024, as well as all royalties
on global net sales of OMIDRIA payable from and after December 31, 2031.
As discussed above, the term for royalty payments under the Asset Purchase Agreement expires based on the last-expiring OMIDRIA-related patent in the relevant
country, which in the United States currently extends into 2035. The royalty rate payable by Rayner on net sales of OMIDRIA is currently 30% in the United States and
15% outside the U.S. These royalty rates are subject to reduction upon the occurrence of certain events described in the Asset Purchase Agreement. For example, the
applicable U.S. royalty rate would be reduced to 10% during any specific period in which OMIDRIA is no longer eligible for separate payment (i.e., included in the
packaged payment rate for the surgical procedure) under Medicare Part B. Pursuant to legislation enacted in late 2022, we expect separate payment for OMIDRIA under
Medicare Part B to extend until at least January 1, 2028.
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Our Drug Candidates and Development Programs
Our clinical drug candidates consist of the following:
Drug Candidate/Program
Targeted Disease(s)
Narsoplimab (MASP-2 / Lectin
Pathway)
Narsoplimab (MASP-2 / Lectin
Pathway)
Hematopoietic stem-cell transplant-
associated thrombotic
microangiopathy (TA-TMA)
Severe COVID-19, post-acute sequelae
of SARS-CoV-2 infection (PASC, i.e.,
long COVID) and other causes of
acute respiratory distress syndrome
(ARDS)
OMS1029 (MASP-2 / Lectin Pathway)
Long-acting second-generation
OMS906 (MASP-3 / Alternative
Pathway)
antibody targeting lectin pathway
disorders
Paroxysmal nocturnal hemoglobinuria
(PNH), complement 3 glomerulopathy
(C3G) and other alternative pathway
disorders
Development Status
Pivotal trial complete; CRL
received; working with FDA on
BLA resubmission
Phase 2 trial in severe COVID-19
completed
Phase 1 trial nearly complete
(dosing completed and follow-up
ongoing)
Phase 2
Next Expected Milestone
BLA resubmission
Continue development of narsoplimab
and diagnostic for lectin pathway
hyperactivation for COVID-19/ARDS and
related indications
Select indication for Phase 2 development
Complete Phase 2 trials with treated
patients moving to extension study of
long-term efficacy and finalize dose
selections; Initiate pivotal Phase 3 clinical
trials.
OMS527 (PDE7)
Addictions and compulsive
Phase 1
Continue NIDA-funded research through
disorders; movement
disorders
Our pipeline of preclinical development programs includes the following:
Preclinical Program
MASP-2: small-molecule inhibitors
Targeted Disease(s)
Lectin pathway disorders
Development Status
Preclinical
MASP-3: small-molecule inhibitors
Alternative pathway disorders
Preclinical
completion of a Phase 1 cocaine
interaction study and Phase 2 clinical trial
in patients with cocaine use
disorder; Determine whether and how
best to continue development of
OMS527 in levodopa-induced
dyskinesia (LID).
Next Expected Milestone
Continue IND-enabling studies of
current drug development candidate
Identify drug development candidate
for clinical trials
Adoptive T-Cell and Chimeric Antigen Receptor
(CAR) T-Cell Therapies
Immunomodulators/Immunotoxins/Cancer
Vaccines
Wide range of cancers
Preclinical
Complete preclinical proof of concept
studies and evaluate data
Wide range of cancers
Preclinical
Complete preclinical proof of concept
studies and evaluate data
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Complement Inhibitor Programs
The complement system plays a role in the body’s inflammatory response and becomes activated as a result of tissue damage or trauma or microbial pathogen
invasion. Inappropriate or uncontrolled activation of the complement system can cause diseases characterized by serious tissue injury. Three main pathways can
activate the complement system: classical, lectin, and alternative. Omeros is focused on development of therapeutics to treat diseases associated with the lectin and/or
alternative pathways of complement.
MASP-2 Program - Lectin Pathway Disorders
MASP-2, a novel pro-inflammatory protein target, is the effector enzyme of the lectin pathway and is required for the function of this pathway. Omeros is developing
antibodies and small-molecule inhibitors of MASP-2 as potential therapeutics for diseases in which the lectin pathway has been shown to contribute to significant tissue
injury and pathology. When not treated, these diseases are typically characterized by significant end-organ damage, such as kidney or central nervous system injury.
Importantly, inhibition of MASP-2 has been demonstrated not to interfere with the antibody-dependent classical complement activation pathway, a critical component of
the acquired immune response to infection. In addition to our clinical programs evaluating narsoplimab, we have generated positive preclinical data from MASP-2
inhibition in in vivo models of AMD, myocardial infarction, diabetic neuropathy, stroke, ischemia-reperfusion injury, and other diseases and disorders. We own or hold
worldwide exclusive licenses to rights related to MASP-2, the antibodies targeting MASP-2 and the therapeutic applications for those antibodies.
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Narsoplimab (OMS721)
The lead candidate in our MASP-2 inhibitor program is narsoplimab (OMS721), a proprietary, patented human monoclonal antibody targeting MASP-2. Narsoplimab
is in clinical development for several indications.
Hematopoietic stem-cell transplant-associated thrombotic microangiopathy (“TA-TMA”): We successfully completed a pivotal clinical trial for narsoplimab in TA-
TMA and previously submitted to the FDA a biologics license application (“BLA”) seeking marketing approval for narsoplimab in this indication. In late 2021, FDA
issued a complete response letter (“CRL”) with respect to the BLA in which the agency indicated that additional information would be needed to support regulatory
approval. We appealed FDA’s decision to issue the CRL through a formal dispute resolution process that concluded in late 2022. Although our appeal was denied, the
decision identified potential paths for resubmission of the BLA based on both response data and survival data from the completed pivotal trial versus a historical control
group, with or without an independent literature analysis or based on survival data alone. Consistent with subsequent interactions with FDA’s review division,
we submitted to FDA in the fall of 2023 an analysis plan to assess already existing clinical trial data, existing data from a historical control population available from an
external source, data from the narsoplimab expanded access program, and data directed to the mechanism of action of narsoplimab. We are having ongoing discussions
with the agency regarding the proposed analysis plan. As a result, we are currently unable to estimate when we will submit the BLA or, subsequently, FDA’s timing for a
decision regarding approval. There can be no guarantee that FDA's specific recommendations for resubmission will be acceptable to Omeros in terms of the time and/or
expenditure required or that any resubmission of the BLA will result in approval of narsoplimab for TA-TMA.
In the U.S., FDA has granted narsoplimab (1) breakthrough therapy designation in patients who have persistent TMA despite modification of immunosuppressive
therapy, (2) orphan drug designation for the prevention (inhibition) of complement-mediated TMAs, and (3) orphan drug designation for the treatment of TA-TMA. The
European Commission (the “EC”) also granted narsoplimab designation as an orphan medicinal product for treatment in hematopoietic stem cell transplantation.
In Europe, the European Medicines Agency (“EMA”) has confirmed narsoplimab’s eligibility for the EMA’s centralized review of a single marketing authorization
application (“MAA”) that, if approved, authorizes the product to be marketed in all EU member states and European Economic Area countries. We expect to complete
our MAA submission following the resubmission of our BLA to FDA.
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COVID-19 and Acute Respiratory Distress Syndrome (“ARDS”): There is strong and increasingly well-established evidence of the central role of the lectin pathway
in COVID-19 and ARDS and we have developed both mechanistic and proof-of-concept clinical data indicating that narsoplimab may be an effective therapeutic for
COVID-19, ARDS and/or related indications. We also continue to explore the mounting evidence that MASP-2 and the lectin pathway are important drivers of post-
acute sequelae SARS-CoV-2 (“PASC”), commonly known as long COVID, as well as potential approaches to identify acute COVID-19 patients at high-risk for
hospitalization and mortality, to identify those PASC patients with hyperactive lectin pathway-driven disease, and to monitor response to treatment with MASP-2
inhibitors.
Narsoplimab has been administered under compassionate use to treat COVID-19 patients in Italy and in the U.S., achieving encouraging results. Additionally,
narsoplimab was the only complement inhibitor included in the I-SPY COVID-19 trial, a nationwide, late-stage adaptive platform trial sponsored by Quantum Leap
Healthcare Collaborative (“Quantum Leap”), that evaluated multiple agents as potential treatments for severe COVID-19 requiring mechanical ventilation. Results of the
I-SPY COVID-19 trial were reported in September 2022. The narsoplimab treatment arm was terminated prior to accrual of the maximum of 125 patients on the basis of
analysis in a pre-consented patient population in which substantial bias was detected. Although narsoplimab was not observed in this study to shorten the time to
recovery in critically ill patients with COVID-19, analysis in the randomized patient population showed that the addition of narsoplimab to treatment of critically ill
patients with COVID-19 reduces the mortality risk (hazard ratio [HR]=0.81, with probability [HR <1] equal to 0.77). In approximately half of the patients who died in the
narsoplimab group, narsoplimab was not given or was prematurely stopped, with those patients dying 9 to 35 days later. Neither the trial’s futility nor graduation criteria
had been met in the analysis of the randomized population at the time the narsoplimab arm was terminated. Narsoplimab demonstrated the greatest reported survival
benefit of all therapeutics evaluated in the I-SPY platform trial.
We have also developed an assay platform to identify hyperactivation of the lectin pathway. Lectin pathway hyperactivation is correlated with COVID-19-related-
ARDS and may be involved in the pathogenesis of other forms of ARDS and/or PASC. As such, the assay may be useful to identify patients who are at greatest risk of
hospitalization and/or mortality as well as those who are particularly amenable to lectin pathway inhibition therapy for the treatment of one or more of these conditions.
We continue to validate the clinical correlation of lectin pathway hyperactivation with COVID-19, ARDS and PASC. We continue to engage in discussions with potential
partners as well as with representatives of the U.S. government regarding potential opportunities to obtain funding and advance development of our potential diagnostic
and/or therapeutic product candidates for COVID-19, PASC or other infectious diseases.
IgA Nephropathy: In October 2023, we announced the results of a pre-specified interim analysis in ARTEMIS-IGAN, our Phase 3 clinical trial evaluating narsoplimab
for the treatment of immunoglobulin A (“IgA”) nephropathy. Topline results of the interim analysis showed that narsoplimab did not achieve statistical significance on
the primary endpoint of reduction in proteinuria from baseline compared to placebo. Based on the absence of statistical significance and as previously agreed with FDA,
we determined not to submit an application for approval of narsoplimab in this indication and the ARTEMIS-IGAN clinical trial has been discontinued.
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OMS1029
Our lectin pathway program also includes OMS1029, our long-acting antibody targeting MASP-2. This next-generation MASP-2 inhibitor is intended to be
complementary to narsoplimab, enabling us to pursue chronic indications in which dosing convenience would be of significant benefit to patients. Dosing of all cohorts
in a single-ascending dose Phase 1 clinical trial of OMS1029 was successfully completed in early 2023. Pharmacokinetic (“PK”) and pharmacodynamic (“PD”) data show
dose-proportional exposure and sustained lectin pathway inhibition, consistent with dosing of OMS1029 once quarterly, either intravenously or subcutaneously. Dosing
has also been completed in both of two planned cohorts of our ongoing Phase 1 multiple-ascending-dose study of OMS1029 in healthy volunteers and we expect the
study to conclude in mid-2024. OMS1029 has been well tolerated to date with no safety concerns identified. We continue to evaluate several potential indications for
Phase 2 clinical development for OMS1029.
MASP-3 Program - Alternative Pathway Disorders
As part of our program to develop complement-targeted therapeutics, we have identified MASP-3, which has been shown to be the key activator of the complement
system’s alternative pathway (“APC”), and we believe that we are the first to make this and related discoveries associated with the APC. The complement system is part
of the immune system’s innate response, and the APC is considered the amplification loop within the complement system. MASP-3 is responsible for the conversion of
pro-factor D to mature factor D; which is necessary for the activation of the APC.
We believe that MASP-3 inhibitors have the potential to treat patients suffering from a wide range of diseases and conditions including: PNH; C3G; multiple
sclerosis; neuromyelitis optica; age-related macular degeneration; Alzheimer’s disease; systemic lupus erythematosus; diabetic retinopathy; chronic obstructive
pulmonary disease; antineutrophil cytoplasmic antibody-associated vasculitis; anti-phospholipid syndrome; atherosclerosis; myasthenia gravis and others. Several of
these indications have been clinically validated by other agents targeting the APC. Our MASP-3 program has also generated positive data in a well-established animal
model of arthritis.
OMS906
The lead candidate in our MASP-3 inhibitor program is OMS906, a proprietary, patented human monoclonal antibody targeting MASP-3. Clinical development of
OMS906 is currently focused on rapidly advancing to Phase 3 clinical trials in multiple APC-related disorders, including PNH and C3G. OMS906 received designation
from FDA as an orphan drug for the treatment of PNH in July 2022.
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Paroxysmal nocturnal hemoglobinuria (“PNH”): We have three ongoing Phase 2 clinical trials evaluating OMS906 for PNH. One in PNH patients who have not
previously been treated with a complement inhibitor, and the second in PNH patients who have had an unsatisfactory response to ravulizumab, an inhibitor of
complement component 5 (“C5”). The third Phase 2 clinical trial is an open-label extension study to assess the long-term efficacy and safety of OMS906 in patients who
have completed either of the other two PNH Phase 2 clinical trials.
In December 2023, updated results from a pre-specified interim analysis of our ongoing Phase 2 clinical trial of OMS906 in complement-inhibitor-naïve adults with
PNH were featured in a podium presentation at the annual meeting of the American Society of Hematology. The interim analysis results showed statistically significant
and clinically meaningful improvements in all measured markers of hemolysis, including hemoglobin and lactate dehydrogenase. No patients were reported to have had a
clinical breakthrough of PNH or a thrombotic event, and none were reported to require a transfusion while receiving OMS906 treatment.
Enrollment is complete and dosing is ongoing in our Phase 2 trial evaluating OMS906 in PNH patients who have had an unsatisfactory response to the C5 inhibitor
ravulizumab. Utilizing a “switch-over” design, this study enrolls PNH patients receiving ravulizumab, adds OMS906 to provide combination therapy with ravulizumab for
24 weeks, and then, in those patients who demonstrate a hemoglobin response with the combination therapy, switches to OMS906 monotherapy. Data from a pre-
specified interim analysis showed that the addition of OMS906 therapy to ravulizumab treatment resulted in statistically significant and clinical meaningful
improvements in both mean hemoglobin levels and absolute reticulocyte counts by week 4 of combination therapy, with a sustained response demonstrated through
week 24 (the latest assessment prior to the interim analysis cutoff). Full details from the interim analysis are expected to be presented at a major hematology conference
in mid-2024. Interim analysis data from the monotherapy portion of the trial is expected to be available in late 2024.
We have initiated an open-label extension study to assess the long-term efficacy and safety of OMS906 in patients with PNH. In the extension study, PNH patients
who have completed a previous study evaluating OMS906 roll directly into the extension study without a break in OMS906 treatment. Data from this study will
contribute to a planned BLA for OMS906 in the treatment of PNH. Based on PK data from a successful Phase 1 single-ascending-dose study of OMS906 in healthy
subjects and interim data from our ongoing clinical trials in PNH patients, we are exploring two different dosing frequencies - once every eight weeks and once every 12
weeks - for the Phase 3 studies and commercialization.
In February 2024 we met with FDA to discuss our development program for OMS906 in PNH. We presented clinical and nonclinical data and requested input on
expectations for Phase 3 studies and BLA submission. FDA confirmed that the scope of our nonclinical program is sufficient to support Phase 3 clinical studies and
provided input on dosing and design of the proposed Phase 3 program to support a BLA in PNH. We expect to meet again with FDA later this year to discuss further
details of the design of our Phase 3 studies. Phase 3 clinical trials evaluating OMS906 in PNH are targeted to begin in late 2024.
Complement 3 glomerulopathy (“C3G”): We also have an ongoing Phase 2 clinical program evaluating OMS906 for the treatment of C3G, a rare and debilitating
renal disease driven by complement dysregulation. Notably, the relevance of the alternative pathway to C3G has been clinically validated in a Phase 3 trial with another
inhibitor of the alternative pathway that reported positive results in the treatment of C3G. Although a protocol amendment to modify the OMS906 dose based on
information learned from our PNH program delayed initiation of the study, sites are now open in multiple countries and patients are being screened for enrollment. We
are targeting to initiate Phase 3 development for C3G in the first part of 2025, after Phase 2 results are available and discussions occur with regulators.
Preclinical Complement Inhibitor Programs
We have also directed efforts to development of small-molecule inhibitors of MASP-2 and MASP-3 designed for oral administration. In our MASP-2 small molecule
inhibitor program we continue to advance testing to enable the filing of an investigational new drug application. Our MASP-3 small-molecule inhibitor is advancing
rapidly toward selection of a drug development candidate.
Other Clinical Programs
PDE7 Inhibitor Programs - OMS527
Our PDE7 inhibitor programs, which we refer to as OMS527, comprise multiple PDE7 inhibitor compounds and are based on our discoveries of previously unknown
links between PDE7 and any addiction or compulsive disorder, and between PDE7 and any movement disorders. PDE7 appears to modulate the dopaminergic system,
which plays a significant role in regulating both addiction and movement. We believe that PDE7 inhibitors could be effective therapeutics for the treatment of addictions
and compulsions as well as for movement disorders. Data generated in preclinical studies support the use of PDE7 inhibitors in both of these therapeutic areas.
Cocaine Use Disorder (“CUD”): In April 2023, we were awarded a grant from the National Institute on Drug Abuse, part of the National Institutes of Health, to
develop our lead orally administered PDE7 inhibitor compound, for which we have successfully completed a Phase 1 study, for the treatment of CUD. The grant amount,
a total of $6.69 million over three years, is intended to support preclinical cocaine interaction/toxicology studies to assess safety of the therapeutic candidate in the
presence of concomitant cocaine administration, as well as an in-patient, placebo-controlled clinical study evaluating the safety and effectiveness of OMS527 in adults
with CUD who receive concurrent intravenous cocaine. The preclinical study is intended to provide the toxicology data necessary to support the human study of
OMS527 in CUD. That study is underway and is expected to be completed in late 2024.
Levodopa-induced dyskinesia (“LID”): With investigators at Emory University, we are also evaluating OMS527 as a potential treatment for LID, which are
involuntary and often crippling movements in patients with Parkinson’s disease that are caused by prolonged treatment with levodopa, the most prescribed therapy for
Parkinson’s disease. More than 10 million patients are living with Parkinson’s disease worldwide. Reportedly 50 percent or more of levodopa-treated patients with
Parkinson’s disease suffer from LID.
We hold an exclusive license to certain PDE7 inhibitors claimed in patents and pending patent applications owned by Daiichi Sankyo Co., Ltd. (“Daiichi Sankyo”),
as successor-in-interest to Asubio Pharma Co., Ltd. for use in the treatment of movement, addiction and compulsive disorders as well as other specified indications. For
a more detailed description of our agreement with Daiichi Sankyo, see “License and Development Agreements” below.
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PPARγ Program - OMS405
In our peroxisome proliferator-activated receptor gamma (“PPARγ”) program, we have engaged in development of proprietary compositions that include PPARγ
agonists for the treatment and prevention of addiction to substances of abuse, which may include opioids, nicotine and alcohol. We believe that Omeros is the first to
demonstrate a link between PPARγ and addiction disorders. Data from clinical studies and from animal models of addiction suggest that PPARγ agonists could be
efficacious in the treatment of a wide range of addictions.
Our collaborators at The New York State Psychiatric Institute have completed two Phase 2 clinical trials related to our PPARγ program. These studies evaluated a
PPARγ agonist, alone or in combination with other agents, for treatment of addiction to heroin and to nicotine. The published results of the heroin study demonstrated
that, although not altering the reinforcing or positive subjective effects of heroin, the PPARγ agonist significantly reduced heroin craving and overall anxiety. The
National Institute on Drug Abuse (“NIDA”) provided substantially all of the funding for these clinical trials and solely oversaw the conduct of these trials. We have the
right or expect to be able to reference the data obtained from these studies for any future FDA submission and continue to retain all other rights in connection with the
PPARγ program.
We have also reported positive results (i.e., decreased cravings and protection of brain white matter) from a Phase 2 clinical trial conducted by an independent
investigator evaluating the effects of a PPARγ agonist in patients with cocaine use disorder. An investigator-sponsored study evaluating the effects of a PPARγ agonist
on the prevention of relapse following treatment of cocaine use disorder is ongoing. The study is funded by NIDA.
We own patents, patent applications and other intellectual property rights related to our PPARγ program, as described under “Intellectual Property” below.
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Preclinical Programs and Platforms
Immuno-Oncology Platform
We have five immuno-oncology (I-O) platforms in preclinical development – adoptive T-cell therapy, CART-T, signaling-driven immunomodulators, antigen-driven
immunomodulators that function both as therapeutics and vaccines, and oncotoxins. To date, in vitro, ex vivo and animal studies using human cellular components
have been positive with high response rates. These data collectively reinforce the scientific basis for each platform, confirming our rationale for their design and
development. The data from our studies to date have demonstrated a number of potential advantages of our immuno-oncology franchise over other I-O approaches.
Our I-O franchise should be applicable to cancers broadly. Rather than targeting only cell-surface antigens, our I-O franchise is designed to target both cell-surface
and intracellular cancer targets, significantly broadening the range of indications. Unlike other therapeutic approaches that affect either CD4 or CD8 levels, we have
designed and demonstrated the ability of our technologies to increase levels of both CD4 and CD8 cells against a given cancer, both of which are necessary to kill
tumor cells. By increasing both the CD4 and CD8 cells, we should also be able to mitigate the “treatment exhaustion” – or the wearing-off of the treatment effect – seen
with many currently available therapies. This would allow repeated treatment, providing a sustained and better anti-tumor response.
Our cellular platforms do not require modification or engineering. Instead, cells from the patient are simply treated outside the body and administered back to the
patient. We expect this simplicity in process, if achieved, to represent a major advance over currently available T-cell therapies, greatly decreasing both preparation
time and cost. When injected into the body, our novel biologic molecules should result not only in elimination of tumor cells but, importantly, in immune memory
against future cancer relapse. Our core technology is also amenable potentially to cancer prevention broadly.
We believe that all five platforms are entirely novel and proprietary. We continue to confirm our results and to generate new data, all of which contribute to our
intellectual property position.
Sales and Marketing
We have retained all worldwide marketing and distribution rights to our drug candidates and our development programs. As such, we will be able to market any
drug candidate that is approved in the future independently, through arrangements with third parties, or via some combination of these approaches.
We maintained internal marketing and sales capabilities with respect to OMIDRIA until the completion of the divestiture of that product on December 23, 2021. As
part of the divestiture, substantially all of our OMIDRIA sales and marketing team members accepted employment with Rayner and were separated from their
employment at Omeros, effective as of December 31, 2021.
Manufacturing, Supply and Commercial Operations
We currently do not own or operate manufacturing facilities. We utilized contract manufacturers to produce, store and distribute OMIDRIA and currently rely on
third parties to produce sufficient quantities of our drug candidates for use in pre-clinical and clinical studies and for the manufacture of narsoplimab for commercial use
following potential regulatory approval.
OMIDRIA. We assigned or otherwise transitioned to Rayner our agreements with the third parties that produced, stored and distributed OMIDRIA. We required
manufacturers that produced active pharmaceutical ingredients (“APIs”) and finished drug products to operate in accordance with current Good Manufacturing
Practices (“cGMPs”) and all other applicable laws and regulations.
In the U.S., we sold OMIDRIA through a limited number of wholesalers that distributed the product to ASCs and hospitals. Title transferred upon delivery of
OMIDRIA to the wholesaler. For additional information, see Part II, Item 8, “Note 7 – Discontinued Operations – Sale of OMIDRIA” to our Consolidated Financial
Statements in this Annual Report on Form 10-K.
Drug Candidates. We have laboratories in-house for analytical method development, bioanalytical testing, formulation, stability testing and small-scale
compounding of laboratory supplies of drug candidates. We utilize contract manufacturers to produce sufficient quantities of drug candidates for use in preclinical and
clinical studies and to store and distribute our drug candidates. We require manufacturers that produce bulk drug substance and finished drug products for clinical use
to operate in accordance with cGMPs and all other applicable laws and regulations. We anticipate that we will rely on contract manufacturers to develop and
manufacture our drug candidates for commercial sale. We maintain agreements with potential and existing manufacturers that include confidentiality and intellectual
property provisions to protect our proprietary rights related to our drug candidates.
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In July 2019, we entered into a master services agreement with Lonza Biologics Tuas Pte. Ltd. (“Lonza”) for the commercial production of narsoplimab and for
certain regulatory support and related services to be provided by Lonza from time to time. Under the agreement Lonza will manufacture narsoplimab pursuant to
purchase orders issued in accordance with certain forecast and confirmation procedures specified in the contract. We will purchase narsoplimab that meets agreed
specifications in batches, with the price per batch varying according to the total number of batches ordered for serial production in a single manufacturing campaign.
We are obligated to purchase a minimum number of batches annually beginning on a specified anniversary of the first commercial sale of narsoplimab in either the U.S.
or EU. We may be obligated to pay certain fees to Lonza upon cancellation of purchase orders.
The initial term of the agreement expires five years after the first commercial sale of narsoplimab in either the U.S. or EU and is subject to automatic renewal for an
additional four-year term unless we provide notice of non-renewal at least three years prior to the end of the initial term. In addition, either party may terminate the
agreement, subject to applicable notice and cure periods under certain circumstances. Other than our agreement for commercial supply of narsoplimab, we have not yet
entered into a commercial supply agreement for any of our drug candidates.
If approved for commercial sale in the U.S., we expect to utilize one or more wholesalers for distribution of narsoplimab.
License and Development Agreements
MASP-3. In August 2020, we entered into a technology license agreement with Xencor, Inc., pursuant to which we received an exclusive license to apply Xencor’s
Xtend Fc technology to OMS906 and options to access exclusive licenses to apply Xtend Fc technology to additional antibodies (the “Xencor Agreement”). Exercise of
an option to access additional licenses would require payment of a $3.0 million upfront license fee. With respect to each antibody for which we license the Xencor
technology we are obligated to make milestone payments of up to $65.0 million, comprised of $15.0 million in development milestones, $25.0 million in regulatory
milestones and $25.0 million in sales milestones. In August 2023, we paid $5.0 million to Xencor in connection with the achievement of a development milestone in our
OMS906 program. We are obligated on a product-by-product and country-by-country basis to pay Xencor royalties in the mid-single digit percentage range on net sales
of any product covered by the license so long as there is a valid, subsisting and enforceable claim in any patents or patent applications covering the licensed
technology. Thereafter, the royalty rate is reduced to the low single-digit percentage range, if the applicable licensed product is covered by Xencor know-how, or to zero,
if the applicable licensed product is not covered by Xencor know-how. The term of the Xencor Agreement continues on a product-by-product basis until the later of (i)
expiration for the last-to-expire patent covering the licensed technology or (ii) five years from the date of first commercial sale of the applicable product.
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PDE7. Under an agreement with Daiichi Sankyo, we hold an exclusive worldwide license to PDE7 inhibitors claimed in certain patents and pending patent
applications owned by Daiichi Sankyo for use in the treatment of (1) movement disorders and other specified indications, (2) addiction and compulsive disorders and
(3) all other diseases except those related to dermatologic conditions. Under the agreement, we agreed to make milestone payments to Daiichi Sankyo of up to an
aggregate total of $33.5 million upon the achievement of certain events in each of these three fields; however, if only one of the three indications is advanced through
the milestones, the total milestone payments would be $23.5 million. The milestone payment events include successful completion of preclinical toxicology studies;
dosing of human subjects in Phase 1, 2 and 3 clinical trials; receipt of marketing approval of a PDE7 inhibitor drug candidate; and reaching specified sales milestones. In
addition, Daiichi Sankyo is entitled to receive from us a low single-digit percentage royalty of any net sales of a PDE7 inhibitor licensed under the agreement by us
and/or our sublicensee(s) provided that, if the sales are made by a sublicensee, then the amount payable by us to Daiichi Sankyo is capped at an amount equal to a low
double-digit percentage of all royalty and specified milestone payments received by us from the sublicensee.
The term of the agreement with Daiichi Sankyo continues so long as there is a valid, subsisting and enforceable claim in any patents covered by the agreement. The
agreement may be terminated sooner by us, with or without cause, upon 90 days advance written notice or by either party following a material breach of the agreement
by the other party that has not been cured within 90 days or immediately if the other party is insolvent or bankrupt. Daiichi Sankyo also has the right to terminate the
agreement if we and our sublicensee(s) cease to conduct all research, development and/or commercialization activities for a PDE7 inhibitor covered by the agreement for
a period of six consecutive months, in which case all rights held by us under Daiichi Sankyo’s patents will revert to Daiichi Sankyo.
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Competition
Overview. The pharmaceutical and biotechnology industry is highly competitive and characterized by a number of established, large pharmaceutical and
biotechnology companies as well as smaller companies like ours. We expect to compete with other pharmaceutical and biotechnology companies, and our competitors
may:
● develop and market products that are less expensive, more effective or safer than our future products;
● commercialize competing products before we can launch our products;
● operate larger research and development programs, possess greater manufacturing capabilities or have substantially greater financial resources than we do;
● initiate or withstand substantial price competition more successfully than we can;
● have greater success in recruiting skilled technical and scientific workers from the limited pool of available talent;
● more effectively negotiate third-party licenses and strategic relationships; and
● take advantage of acquisition or other opportunities more readily than we can.
We expect to compete for market share against large pharmaceutical and biotechnology companies, smaller companies that are collaborating with larger
pharmaceutical companies, new companies, academic institutions, government agencies and other public and private research organizations. In addition, the
pharmaceutical and biotechnology industry is characterized by rapid technological change. Because our research approach integrates many technologies, it may be
difficult for us to remain current with the rapid changes in each technology. Further, our competitors may render our technologies obsolete by advancing their existing
technological approaches or developing new or different approaches. If we fail to stay at the forefront of technological change, we may be unable to compete effectively.
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Drug Candidates, Development Programs and Platforms. There are a number of complement-targeted therapeutics that are in advanced stages of clinical
development, or which have been approved for commercial use. These include Soliris® (eculizumab), Ultomiris® (ravulizumab-cwvz), Empaveli® (pegcetacoplan),
Tavneos® (avocopan) and Fabhalta® (iptacopan). Narsoplimab, OMS1029 and/or OMS906 will face competition from one or more of these products if approved for any
indication(s) for which one or more of these potentially competitive products are also approved or for which a potentially competitive product is used off-label to treat a
relevant condition.
Intellectual Property
We have retained control of all worldwide manufacturing, marketing and distribution rights for each of our drug candidates and programs. Some of our drug
candidates and programs are based on inventions and other intellectual property rights that we acquired through assignments, exclusive licenses or acquisitions
described in further detail under “License and Development Agreements” above.
As of February 15, 2024, we owned or held worldwide exclusive licenses to a total of 78 issued patents and 60 pending patent applications in the U.S. and
1,334 issued patents and 580 pending patent applications in foreign markets directed to therapeutic compositions and methods and other technologies related to our
research and development programs. For each program, our decision to seek patent protection in specific foreign markets, in addition to the U.S., is based on many
factors, including one or more of the following: our available resources, the size of the commercial market, the presence of a potential competitor or a contract
manufacturer in the market and whether the legal authorities in the market effectively enforce patent rights.
● MASP-2 Program - Narsoplimab (OMS721) and OMS1029. We own and hold worldwide exclusive licenses to rights in connection with MASP-2, antibodies
targeting MASP-2, small-molecule MASP-2 inhibitors, and related therapeutic applications. As of February 15, 2024, we exclusively controlled 38 issued
patents and 32 pending patent applications in the U.S., and 793 issued patents and 435 pending patent applications in foreign markets, related to our MASP-2
program, including narsoplimab and our second-generation MASP-2 antibody OMS1029. Our MASP-2-related patents have terms that will expire as late as 2038
and, if currently pending patent applications are issued, as late as 2043.
● MASP-3 Program - OMS906. We own and exclusively control rights in connection with MASP-3, antibodies targeting MASP-3 and related therapeutic
applications. We also hold an exclusive license from Xencor, Inc. for the application of certain antibody technology to OMS906, as well as the option to obtain
additional licenses to such technology for exclusive application to additional antibodies that we may select. As of February 15, 2024, we exclusively controlled
four issued patents and eight pending patent applications in the U.S. and 188 issued and 104 pending patent applications in foreign markets that are related to
our MASP-3 program. Our MASP-3-related patents have terms that will expire as late as 2037 and, if currently pending patent applications are issued, as late as
2043.
● PPARγ Program - OMS405. As of February 15, 2024, we owned three issued patents and one pending patent application in the U.S., and 37 issued patents and
two pending patent applications in foreign markets, directed to our discoveries linking PPARγ and addictive disorders. Our PPARγ-related patents have terms
that will expire as late as 2030.
● PDE7 Program - OMS527. As of February 15, 2024, we owned two issued patents and two pending patent application in the U.S., and 61 issued patents and
two pending patent applications in foreign markets directed to our discoveries linking PDE7 to movement disorders, as well as three issued patent and two
pending patent applications in the U.S., and 54 issued patents and three pending patent applications in foreign markets directed to the link between PDE7 and
addiction and compulsive disorders. Additionally, under a license from Daiichi Sankyo, we exclusively control rights to two issued U.S. patents and 53 issued
patents in foreign markets that are directed to proprietary PDE7 inhibitors. Our PDE7-related patents have terms that will expire as late as 2031 and, if currently
pending patent applications are issued, as late as 2043. For a more detailed description of our agreement with Daiichi Sankyo, see “License and Development
Agreements” below.
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● Immuno-oncology Program. Our Immuno-oncology program includes five proprietary platforms relating to potential therapies for cancer. As of February 15,
2024, we owned two pending patent applications in foreign markets directed to potential cancer therapies.
All of our employees enter into our standard employee proprietary information and inventions agreement, which includes confidentiality provisions and provides
us ownership of all inventions and other intellectual property made by our employees that pertain to our business or that relate to our employees’ work for us or that
result from the use of our resources. Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of the use,
formulation and structure of our drug candidates and the methods used to manufacture them, as well as on our ability to defend successfully these patents against
third-party challenges. Our ability to protect our drug candidates from unauthorized making, using, selling, offering to sell or importing by third parties is dependent on
the extent to which we have rights under valid and enforceable patents that cover these activities.
The patent positions of pharmaceutical, biotechnology and other life sciences companies can be highly uncertain and involve complex legal and factual questions
for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date in
the U.S., and tests used for determining the patentability of patent claims in all technologies are in flux. The pharmaceutical, biotechnology and other life sciences patent
situation outside the U.S. is even more uncertain. Changes in either the patent laws or in interpretations of patent laws in the U.S. and other countries may diminish the
value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in the patents that we own or have licensed or in
third-party patents.
We have registered, and intend to maintain, the trademark “OMEROS” within the U.S. Patent and Trademark Office in connection with the products and services we
offer. We are not aware of any material claims of infringement or other challenges to our right to use the “OMEROS” trademark in the U.S.
Government Regulation
Government authorities in the U.S., the EU and other countries extensively regulate the research, development, testing, manufacture, labeling, promotion,
advertising, distribution, marketing, and export and import of drug and biologic products including the drug candidates that we are developing. Failure to comply with
applicable requirements, both before and after receipt of regulatory approval, may subject us, our third-party manufacturers, and other partners to administrative and
judicial sanctions, such as warning letters, product recalls, product seizures, a delay in approving or refusal to approve pending applications, civil and other monetary
penalties, total or partial suspension of production or distribution, injunctions, and/or criminal prosecutions.
In the U.S., our drug candidates are regulated by FDA as drugs or biologics under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and implementing
regulations and under the Public Health Service Act (“PHSA”). In the EU, our drug candidates are regulated by the EMA and national medicines regulators under the
rules governing medicinal products in the EU as well as national regulations in individual countries. Our drug candidates are in various stages of testing and none of our
drug candidates has received marketing approval from FDA or the applicable regulatory authorities in the EU.
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The steps required before a product may be approved for marketing by FDA, or the applicable regulatory authorities outside of the U.S., typically include the
following:
● formulation development and manufacturing process development;
● preclinical laboratory and animal testing;
● submission to FDA of an Investigational New Drug application (“IND”) for human clinical testing, which must become effective before human clinical trials may
begin; and in countries outside the U.S., a Clinical Trial Application (“CTA”), is filed according to the country’s local regulations;
● adequate and well-controlled human clinical trials to establish the efficacy and safety of the product for each indication for which approval is sought;
● adequate assessment of drug product stability to determine shelf life/expiry dating;
● in the U.S., submission to FDA of a New Drug Application (“NDA”), in the case of a drug product, or a BLA in the case of a biologic product and, in Europe,
submission to the EMA or a national regulatory authority of an MAA;
● satisfactory completion of inspections of one or more clinical sites at which clinical trials with the product were carried out and of the manufacturing facility or
facilities at which the product is produced to assess compliance with Good Clinical Practices (“GCPs”), and cGMPs; and
● FDA review and approval of an NDA or BLA, or review and approval of an MAA by the applicable regulatory authorities in the EU.
Manufacturing. Manufacturing of drug products for use in clinical trials must be conducted according to relevant national and international guidelines, for example,
cGMP. Process and formulation development are undertaken to design suitable routes to manufacture the drug substance and the drug product for administration to
animals or humans. Analytical development is undertaken to obtain methods to quantify the potency, purity and stability of the drug substance and drug product as
well as to measure the amount of the drug substance and its metabolites in biological fluids, such as blood.
Preclinical Tests. Preclinical tests include laboratory evaluations and animal studies to assess efficacy, toxicity and pharmacokinetics. The results of the preclinical
tests, together with manufacturing information, analytical data, clinical development plan, and other available information are submitted as part of an IND or CTA.
The IND/CTA Process. An IND or CTA must become effective before human clinical trials may begin. INDs are extensive submissions including, among other
things, the results of the preclinical tests, together with manufacturing information and analytical data. In addition to including the results of the preclinical studies, the
IND will also include one or more protocols for proposed clinical trials detailing, among other things, the objectives of the clinical trial, the parameters to be used in
monitoring safety and the effectiveness criteria to be evaluated. An IND will become effective 30 days after receipt by FDA unless, before that time, FDA raises
concerns or questions and imposes a clinical hold. In that event, the IND sponsor and FDA must resolve any outstanding FDA concerns or questions before the clinical
hold is lifted and clinical trials can proceed. Similarly, a CTA must be cleared by the local independent ethics committee and competent authority prior to conducting a
clinical trial in the country in which it was submitted. There can be no assurance that submission of an IND or CTA will result in authorization to commence clinical trials.
Once an IND or CTA is in effect, there are certain reporting requirements.
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Clinical Trials. Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified personnel and must be
conducted in accordance with local regulations and GCPs. Clinical trials are conducted under protocols detailing, for example, the parameters to be used in monitoring
patient safety and the efficacy criteria, or endpoints, to be evaluated. Each trial must be reviewed and approved by an independent institutional review board or ethics
committee for each clinical site at which the trial will be conducted before it can begin. Clinical trials are typically conducted in three defined phases, but the phases may
overlap or be combined:
● Phase 1 usually involves the initial administration of the investigational product to human subjects, who may or may not have the disease or condition for
which the product is being developed, to evaluate the safety, dosage tolerance, pharmacodynamics and, if possible, to gain an early indication of the
effectiveness of the product.
● Phase 2 usually involves trials in a limited patient population with the disease or condition for which the product is being developed to evaluate appropriate
dosage, to identify possible adverse side effects and safety risks, and to evaluate preliminarily the effectiveness of the product for specific indications.
● Phase 3 clinical trials usually further evaluate and confirm effectiveness and test further for safety by administering the product in its final form in an expanded
patient population.
We, our product development partners, institutional review boards or ethics committees, FDA or other regulatory authorities may suspend or terminate clinical trials
at any time on various grounds, including a belief that the subjects are being exposed to an unacceptable health risk.
Disclosure of Clinical Trial Information. Sponsors of clinical trials of certain FDA-regulated products, including prescription drugs, are required to register and
disclose certain clinical trial information on a public website maintained by the U.S. National Institutes of Health. Information related to the product, patient population,
phase of investigation, study sites and investigator, and other aspects of the clinical trial is made public as part of the registration. Sponsors are also obligated to
disclose the results of these trials after completion. Disclosure of the results of these trials can be delayed for up to two years if the sponsor certifies that it is seeking
approval of an unapproved product or that it will file an application for approval of a new indication for an approved product within one year. Clinical trials conducted in
European countries are required to be registered at a similar public database maintained and overseen by European health authorities. Competitors may use this publicly
available information to gain knowledge regarding the design and progress of our development programs.
The Application Process. If the necessary clinical trials are successfully completed, the results of the preclinical trials and the clinical trials, together with other
detailed information, including information on the manufacture and composition of the product, are submitted to FDA in the form of an NDA or a BLA, as applicable, and
to the EMA or national regulators in the form of an MAA, requesting approval to market the product for a specified indication. In the EU, an MAA may be submitted to
the EMA for review and, if the EMA gives a positive opinion, the EC may grant a marketing authorization that is valid across the EU (centralized procedure).
Alternatively, an MAA may be submitted to one or more national regulators in the EU according to one of several national or decentralized procedures. The type of
submission in Europe depends on various factors and must be cleared by the appropriate authority prior to submission. For most of our drug candidates, the centralized
procedure will be either mandatory or available as an option.
If the regulatory authority determines that the application is not acceptable, it may refuse to accept the application for filing and review, outlining the deficiencies in
the application and specifying additional information needed to file the application. Notwithstanding the submission of any requested additional testing or information,
the regulatory authority ultimately may decide that the proposed product is not safe or effective, or that the application does not otherwise satisfy the criteria for
approval. In the U.S., to support an approval an NDA must demonstrate, among other things, that the proposed drug product is safe and effective, has a favorable
benefit-risk profile, is manufactured in a way that preserves its identity, strength, purity and potency, and that its labeling is adequate and not false or misleading. A
similar standard exists for BLAs. Before approving an NDA or BLA, or an MAA, FDA or the EMA, respectively, may inspect one or more of the clinical sites at which
the clinical studies were conducted to ensure that GCPs were followed and may inspect facilities at which the product is manufactured to ensure satisfactory compliance
with cGMP. The FDA may refer the NDA or BLA to an advisory committee for review and recommendation as to whether the application should be approved and under
what conditions. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendation. In addition, even if a drug
candidate satisfied its endpoints with statistical significance during clinical trials, FDA could determine that the overall balance of risks and benefits for the drug
candidate is not adequate to support approval, or only justifies approval for a narrow set of clinical uses and/or subject to restricted distribution or other burdensome
post-approval requirements or limitations. If approval is obtained changes to the approved product such as adding new indications, manufacturing changes, or
additional labeling claims will require submission of a supplemental application, referred to as a variation in the EU, or, in some instances, a new application, for further
review and approval. The testing and approval process requires substantial time, effort, and financial resources, and we cannot be sure that any future approval will be
granted on a timely basis, if at all.
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Some of our drug candidates, such as those from our MASP-2 and MASP-3 programs, are considered biologics because they are derived from natural sources as
opposed to being chemically synthesized. The added complexity associated with manufacturing biologics may result in additional monitoring of the manufacturing
process and product changes.
In addition, we, our suppliers and our contract manufacturers are required to comply with extensive regulatory requirements both before and after approval. For
example, we must establish a pharmacovigilance system and are required to report adverse reactions and production problems, if any, to the regulatory authorities. If any
of our drug candidates are approved, we will be required to also comply with certain requirements concerning advertising and promotion for our products. The
regulatory authorities may impose specific obligations as a condition of the marketing authorization, such as additional safety monitoring, or the conduct of additional
clinical trials or post-marketing safety studies, or the imposition of a Risk Evaluation and Mitigation Strategy (“REMS”), which could include significant restrictions on
distribution or use of the product. Also, quality control and manufacturing procedures must continue to conform to cGMPs after approval. Accordingly, manufacturers
must continue to expend time, money, and effort in all areas of regulatory compliance, including production and quality control to comply with cGMPs. In addition,
discovery of problems such as safety issues may result in changes in labeling or restrictions on a product manufacturer or marketing authorization holder, including
removal of the product from the market.
Fast-Track and Priority Review Designations. Section 506(b) of the FDCA provides for the designation of a drug as a fast-track product if it is intended, whether
alone or in combination with one or more other drugs, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address
unmet medical needs for such a disease or condition. A program with fast-track status is afforded greater access to FDA for the purpose of expediting the product’s
development, review and potential approval. Many products that receive fast-track designation are also considered appropriate to receive priority review, and their
respective applications may be accepted by FDA as a rolling submission in which portions of an NDA or BLA are reviewed before the complete application is submitted.
Together, these may reduce time of development and FDA review time. In Europe, products that are considered to be of major public health interest are eligible for
accelerated assessment, which shortens the review period. The grant of fast-track status, priority review or accelerated assessment does not alter the standard
regulatory requirements for obtaining marketing approval.
Breakthrough Therapy Designation. In 2012, Congress enacted the Food and Drug Administration Safety and Innovation Act. This law established a regulatory
process allowing for increased interactions with FDA with the goal of expediting development and review of products designated as “breakthrough therapies.” A
product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other products, to treat a serious or life-
threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or
more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to
breakthrough therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding
development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to
design the clinical trials in an efficient manner.
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Accelerated Approval. The FDA may grant accelerated approval to a product for a serious or life-threatening condition that provides a meaningful therapeutic
advantage to patients over existing treatments based upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict
clinical benefit. The FDA may also grant accelerated approval for such a condition when the product has an effect on an intermediate clinical endpoint that can be
measured earlier than an effect on irreversible morbidity or mortality and that is reasonably likely to predict an effect on irreversible morbidity or mortality or other
clinical benefit. In both cases, FDA must take into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Studies
that are conducted to demonstrate a drug’s effect on a surrogate or intermediate clinical endpoint for accelerated approval must be adequate and well-controlled as
required by the FDCA.
Following accelerated approval, FDA requires that the company provide confirmatory evidence, which may include certain adequate and well-controlled post-
marketing clinical studies to verify the clinical benefit of the product, and FDA may impose restrictions on distribution to assure safe use. Pursuant to new statutory
authority under the Food and Drug Omnibus Reform Act of 2022, FDA can require confirmatory studies to be underway at the time of the accelerated approval. If the
required confirmatory studies fail to verify the clinical benefit of the drug, or if the applicant fails to perform the required confirmatory studies with due diligence, FDA
may withdraw approval of the drug under streamlined procedures in accordance with FDA’s regulations. FDA may also withdraw approval of a drug if, among other
things, other evidence demonstrates that the drug product is not shown to be safe or effective under its conditions of use.
The EU also has accelerated approval programs. In the EU, a marketing authorization may be granted on the basis of less complete data than are normally required
in certain “exceptional circumstances,” such as when the product’s indication is encountered so rarely that the applicant cannot reasonably be expected to provide
comprehensive data. Alternatively, a conditional marketing authorization may be granted prior to obtaining the comprehensive clinical data required for a full MAA if a
product fulfills an unmet medical need and the benefit to public health of the product’s immediate availability outweighs the risk inherent in the incomplete data.
Orphan Drug Designation. Under the Orphan Drug Act (“ODA”), FDA may grant orphan drug designation to drugs or biologics intended to treat a rare disease or
condition that affects fewer than 200,000 individuals in the U.S. or more than 200,000 individuals in the U.S. for which the cost of developing and making the product
available in the U.S. for this type of disease or condition is not likely to be recovered from U.S. sales for that product. The granting of orphan designation does not alter
the standard regulatory requirements (other than payment of certain fees and the applicability of certain pediatric assessment requirements), nor does it alter the
standards or process for obtaining marketing approval. The sponsor of a product that has an orphan drug designation qualifies for various development incentives
specified in the ODA, including a tax credit of up to 25% of expenditures on qualified clinical testing for the orphan drug. Furthermore, if the orphan designated product
subsequently receives the first FDA approval for the orphan indication, the product is entitled to an orphan drug exclusivity period, which means that FDA may not
grant approval to any other application to market the same drug for the same indication for a period of seven years except in limited circumstances, such as a showing of
clinical superiority to the product with orphan drug exclusivity for the protected indication. Orphan drug exclusivity does not prevent FDA from approving a different
drug for the same disease or condition, or the same drug for a different disease or condition. The EU has a similar Orphan Drug program to that of the U.S., and it is
administered through the EMA’s Committee for Orphan Medicinal Products.
Pediatric Testing and Exclusivity. In the U.S., NDAs and BLAs are subject to both mandatory pediatric testing requirements and voluntary pediatric testing
incentives in the form of exclusivity. An additional six months of exclusivity in the U.S. may be granted to a sponsor of an NDA or BLA if the sponsor conducts certain
pediatric studies, which studies are conducted pursuant to a written request from FDA. This process is initiated when FDA issues a Written Request for pediatric
studies to determine if the drug or biologic could have meaningful pediatric health benefits. If FDA determines that the sponsor has conducted the requested pediatric
studies in accordance with the written request, then an additional six months of exclusivity may attach in the case of a drug to any other regulatory exclusivity or patent
protection applicable to the drug and, in the case of a biologic, to any other regulatory exclusivity applicable to the biologic. The EU has a similar requirement and
incentive for the conduct of pediatric studies according to the pediatric investigation plan, which must be adopted by the EMA before an MAA may be submitted.
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Expanded Access. “Expanded access” refers to the use of an investigational drug where the primary purpose is to diagnose, monitor, or treat a patient’s disease or
condition rather than to collect information about the safety or effectiveness of a drug. There are three FDA-recognized categories of expanded access trials: expanded
access for individual patients, including for emergency use; expanded access for intermediate-size patient populations; and expanded access for large patient
populations under a treatment IND or treatment protocol. For all types of expanded access, FDA must determine prior to authorizing expanded access that: (1) the
patient or patients to be treated have a serious or life-threatening disease or condition and there is no comparable or satisfactory alternative therapy; (2) the potential
patient benefit justifies the potential risks of use and that the potential risks are not unreasonable in the context of the disease or condition to be treated; and
(3) granting the expanded access will not interfere with the initiation, conduct, or completion of clinical studies in support of the drug’s approval. Only a licensed
physician or the drug’s manufacturer may apply for expanded access. Manufacturers are not required to supply the investigational product for expanded access. The
FDA has established streamlined processes for physicians to request individual patient expanded access whereby physicians can submit a single patient IND. In cases
of individual patient emergency expanded access, physicians can receive FDA approval for access by phone and follow up with the abbreviated form. In addition, the
sponsor of an expanded access IND must submit IND safety reports and, in the cases of protocols continuing for one year or longer, annual reports to FDA.
U.S. Labeling, Marketing and Promotion. The FDA closely regulates the labeling, marketing and promotion of drugs. In general, our labeling and promotion must
not be false or misleading in any particular, and claims that we make must be adequately substantiated. In addition, our approved labeling must include adequate
directions to physicians for each intended use of our products. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective
advertising, injunctions and potential civil and criminal penalties.
In addition to regulation by FDA, the research, manufacturing, distribution, sale and promotion of drug products in the U.S. are subject to regulation by various
federal, state and local authorities, including CMS, other divisions of the U.S. Department of Health and Human Services (e.g., the Office of Inspector General), the U.S.
Department of Justice, state Attorneys General, and other state and local government agencies. All of these activities are also potentially subject to federal and state
consumer protection and unfair competition laws. Violations of these laws are punishable by prison sentences, criminal fines, administrative civil money penalties, and
exclusion from participation in federal healthcare programs.
There are also an increasing number of state laws that require manufacturers to make reports to states on pricing and marketing information or impose other special
requirements for the sale and marketing of drug products. Many of these laws contain ambiguities as to what is required to comply with the laws. In addition, federal and
state “transparency laws” require manufacturers to track and report certain payments made to health care providers and, under some state laws, other information
concerning our products. These laws may affect our sales, marketing and other promotional activities by imposing administrative and compliance burdens on us. In
addition, our reporting actions could be subject to the penalty provisions of the pertinent state and federal authorities.
Drug Supply Chain Security Act. Title II (the Drug Supply Chain Security Act (the “DSCSA”)), of the Drug Quality and Security Act imposes on manufacturers of
certain pharmaceutical products new obligations related to product tracking and tracing, among others, which began a several-year phase-in process in 2015. Among the
requirements of this legislation, manufacturers subject to the DSCSA are required to provide certain documentation regarding the drug product to trading partners to
which product ownership is transferred, label drug product with a product identifier (i.e., serialize), respond to verification requests from trading partners, provide
transaction documentation upon request by federal or state government entities, and keep certain records regarding the drug product. The transfer of information to
subsequent product owners by manufacturers must be done electronically. For products and transactions falling within DSCSA’s scope, manufacturers are required to
verify that purchasers of the manufacturers’ products are appropriately licensed. Further, under the DSCSA, covered manufacturers have drug product investigation,
quarantine, disposition, and notification responsibilities for product that is reasonably believed or that credible evidence shows to be counterfeit, diverted, stolen,
intentionally adulterated such that the product would result in serious adverse health consequences or death, the subject of fraudulent transactions or otherwise unfit
for distribution such that they would be reasonably likely to result in serious health consequences or death. Anti-counterfeiting and serialization requirements similar to
those under the DSCSA have also been adopted in the EU and became effective in February 2019.
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Foreign Regulatory Requirements. Outside of the U.S., our ability to conduct clinical trials or market our products will also depend on receiving the requisite
authorizations from the appropriate regulatory authorities. The foreign regulatory approval processes include similar requirements and many of the risks associated with
FDA and/or the EU approval process described above, although the precise requirements may vary from country to country.
Hatch-Waxman Act. In seeking approval for a drug through an NDA, applicants are required to list with FDA each patent with claims that cover the applicant’s drug
or an approved method of use of the drug. Upon approval of a drug, each of the patents listed in the application for the drug is then published in FDA’s Approved Drug
Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential
competitors in support of approval of an Abbreviated New Drug Application (“ANDA”) or a 505(b)(2) application. In this case the original NDA, i.e., the pioneer drug, is
known as the “listed” drug or “reference-listed” drug. An ANDA provides for marketing of a drug that has the same active ingredients and, in some cases, also the same
inactive ingredients, in the same strengths, route of administration and dosage form as the listed drug and has been shown through testing to be bioequivalent to the
listed drug or receives a waiver from bioequivalence testing. ANDA applicants are generally not required to conduct or submit results of preclinical or clinical tests to
prove the safety or effectiveness of their drug, other than the requirement for bioequivalence testing. Drugs approved in this way are considered therapeutically
equivalent, and are commonly referred to as “generic equivalents” to the listed drug. These drugs then generally can be substituted by pharmacists under prescriptions
written for the original listed drug.
The ANDA or 505(b)(2) applicant is required to certify to FDA concerning any patents listed for the referenced approved drug in FDA’s Orange Book. Specifically,
for each listed patent, the applicant must certify that: (1) the required patent information has not been filed; (2) the listed patent has expired; (3) the listed patent has not
expired but will expire on a particular date and approval is sought after patent expiration; or (4) the listed patent is invalid, unenforceable or will not be infringed by the
new drug. A certification that the new drug will not infringe the already approved drug’s listed patents or that such patents are invalid or unenforceable is called a
Paragraph IV certification. If the ANDA or 505(b)(2) applicant does not include a Paragraph IV certification, the ANDA or 505(b)(2) application will not be approved until
all of the listed patents claiming the referenced drug have expired, except for any listed patents that only apply to uses of the drug not being sought by the ANDA or
505(b)(2) applicant.
If the ANDA or 505(b)(2) applicant has made a Paragraph IV certification, the applicant must also send a Paragraph IV Notice Letter to the NDA and patent holders
once the ANDA or 505(b)(2) application has been accepted for filing by FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to
the Paragraph IV Notice Letter. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV Notice Letter automatically prevents FDA from
approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, modification by a court or a decision in the infringement case that
is favorable to the ANDA or 505(b)(2) applicant.
The ANDA or 505(b)(2) application also will not be approved until any applicable non-patent exclusivity, such as exclusivity for obtaining approval of a new
chemical entity, listed in the Orange Book for the reference-listed drug has expired. The U.S. Drug Price Competition and Patent Term Restoration Act of 1984, more
commonly known as the Hatch-Waxman Act, provides a period of five years following approval of a drug containing no previously approved active moiety, during
which ANDAs for generic versions of those drugs and 505(b)(2) applications referencing those drugs cannot be submitted unless the submission contains a Paragraph
IV challenge to a listed patent, in which case the submission may be made four years following the original drug approval. The Hatch-Waxman Act also provides for a
period of three years of exclusivity following approval of a listed drug that contains previously approved active ingredients but is approved in a new dosage form, route
of administration or combination, or for a new use, the approval of which was supported by new clinical trials other than bioavailability studies that were essential to the
approval and conducted by or for the sponsor. During those three years of exclusivity, FDA cannot grant approval of an ANDA or 505(b)(2) application for the
protected dosage form, route of administration or combination, or use of that listed drug.
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In December 2019, the Creating and Restoring Equal Access to Equivalent Samples Act of 2019 (“CREATES Act”) was signed into law. The legislation is intended to
address the concern that some brand manufacturers have improperly denied generic and biosimilar product developers access to samples of brand products. The
CREATES Act establishes a private cause of action that permits a generic or biosimilar product developer to sue the brand manufacturer to compel it to furnish the
necessary samples on commercially reasonable, market-based terms. If the developer prevails, the court may grant the developer a monetary award up to the brand
product’s revenue for the period of delay in providing samples.
Biosimilars. The enactment of federal healthcare reform legislation in March 2010 provided a new pathway for approval of follow-on biologics (i.e., biosimilars)
under the PHSA. FDA licensure of a biosimilar is dependent upon many factors, including a showing that the proposed biosimilar is “highly similar” to the reference
product, notwithstanding minor differences in clinically inactive components, and has no clinically meaningful differences from the reference product in terms of safety,
purity, and potency. The types of data ordinarily required in a biosimilar application to show high similarity include analytical data, animal studies (including toxicity
studies), and clinical studies (including immunogenicity and pharmacokinetic/pharmacodynamic studies). A biosimilar must seek licensure for a condition of use for
which the reference-listed product is licensed.
Furthermore, the PHSA provides that for a biosimilar to be considered “interchangeable” (i.e., the biological product may be substituted for the reference product
without the intervention of the health care provider who prescribed the reference product), the applicant must make an additional showing that the biosimilar can be
expected to produce the same clinical result as the reference product in any given patient, and if the product is administered more than once to a patient, that risks in
terms of safety or diminished efficacy of alternating or switching between the biological product and the reference product is no greater than the risk of using the
reference product without switching. Although FDA has provided guidance on what information and data an applicant should submit to enable an interchangeability
determination, thus far FDA has not licensed any biologic as being interchangeable with its reference product.
The PHSA also provides a period of exclusivity for pioneer biologics. Specifically, FDA may not accept a biosimilar application referencing data from a pioneer
biologic (i.e., one approved through a full BLA) until four years have elapsed from the date of first licensure of the pioneer biologic. FDA may not approve a biosimilar
application referencing data from a pioneer biologic until 12 years have elapsed since the date of first licensure of the pioneer biologic. There are certain restrictions and
limitations on the types of BLAs that are eligible for biologics exclusivity as well as what constitutes the date of first licensure for a pioneer biologic.
In the EU, a pathway for the approval of biosimilars has existed since 2005.
Healthcare compliance laws. In the U.S., commercialization of our drug candidates, if approved, is subject to regulation and enforcement under a number of federal
and state healthcare compliance laws administered and enforced by various agencies. These include, but are not limited to, the following:
● the federal Anti-Kickback Statute, which prohibits offering or paying anything of value to a person or entity to induce or reward referrals for goods or services
reimbursed by a federal healthcare program such as Medicare or Medicaid;
● the federal False Claims Act, which prohibits presenting or causing to be presented a false claim for payment by a federal healthcare program, and which has
been interpreted to also include claims caused by improper drug-manufacturer product promotion or the payment of kickbacks;
● a variety of governmental pricing, price reporting, and rebate requirements, including those under Medicaid and the Veterans Health Care Act; and
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● the so-called Sunshine Act and certain provisions of the Affordable Care Act, which require that we report to the federal government information on certain
financial payments and other transfers of value made to certain health care providers and institutions, as well as certain information regarding our distribution
of drug samples.
In addition to these federal law requirements, several U.S. states have enacted similar laws requiring periodic reporting and/or disclosure related to our marketing,
sales and other activities, or regulating certain sales and marketing activities, such as provision of meals to certain health care providers. We may also be subject to
federal or state privacy laws if we receive protected patient health information.
Similar requirements apply to our operations outside of the U.S. Laws in the U.S. such as the Foreign Corrupt Practices Act prohibit the offering or payment of
bribes or inducements to foreign public officials for business, including physicians or other medical professionals who are employees of public healthcare entities. In
addition, many non-U.S. jurisdictions in which we operate, or may operate in the future, have their own laws similar to the healthcare compliance laws that exist in the
U.S.
Pharmaceutical Pricing and Reimbursement
Overview. In both U.S. and foreign markets, our ability to commercialize our drug candidates successfully, and to attract commercialization partners for our drug
candidates, depends in significant part on the availability of adequate financial coverage and reimbursement from third-party payers including, in the U.S., managed care
organizations and other private health insurers as well as governmental payers such as the Medicare and Medicaid programs. Reimbursement by a third-party payer may
depend on a number of factors, including the payer’s determination that use of a product is:
● a covered benefit under its health plan;
● safe, effective and medically necessary;
● appropriate for the specific patient;
● cost-effective; and
● neither experimental nor investigational.
Reimbursement by government payers is based on statutory authorizations and complex regulations that may change with annual or more frequent rulemaking, as
well as legislative reform measures.
Third-party private and governmental payers are increasingly challenging the prices charged for medicines and examining their cost-effectiveness in addition to
their safety and efficacy. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the cost effectiveness of our products or drug
candidates. Even with the availability of such studies, third-party private and/or governmental payers may not provide coverage and reimbursement for our drug
candidates, in whole or in part.
United States. Political, economic and regulatory influences are subjecting the healthcare industry in the U.S. to fundamental changes. There have been, and we
expect there will continue to be, legislative and regulatory proposals to change the healthcare system in ways that could significantly affect our business. For example,
the 2010 Affordable Care Act (the “ACA”), is intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies
against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and
impose additional health policy reforms. Other legislative changes included a two percent across-the-board reduction to Medicare payments to providers, effective
April 1, 2013, which, due to subsequent legislative amendments, will begin to increase gradually starting in April 2030, reaching 4 percent in April 2031 and continuing
until the reduction ends in October 2031, unless additional congressional action is taken. The American Taxpayer Relief Act of 2012, among other things, reduced
Medicare payments to several providers, and increased the period for the government to recover overpayments to providers from three to five years. In December 2017,
portions of the ACA dealing with the individual mandate insurance requirement were effectively repealed by the Tax Cuts and Jobs Act of 2017.
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Containment of healthcare costs has been a priority of federal, state, and foreign governments, and the prices of drug products have been a focus of this effort.
Governments have shown significant interest in implementing cost-containment programs. This interest has resulted in significant proposed and enacted reform
measures affecting healthcare reimbursement and drug pricing, including the enactment in August 2022 of significant changes to potential Medicare drug product
reimbursement through government negotiation of certain drug prices, as well as manufacturer discount and inflation rebate obligations under the Inflation Reduction
Act (the “IRA”).
We are unable to predict what additional legislation, regulations, policies or court orders, if any, relating to the healthcare industry or coverage and reimbursement
may be enacted or imposed in the future or what effect such legislation, regulations, policies or court orders would have on our business. Any cost-containment
measures, including those listed above, or other healthcare system reforms that are adopted could have a material adverse effect on our business prospects and
financial operations.
Europe. Governments in the various member states of the EU influence or control the price of medicinal products in their countries through their pricing and
reimbursement rules and control of national healthcare systems that fund a large part of the cost of those products to consumers. To obtain reimbursement or pricing
approval, some of these countries may require the completion of clinical trials or pharmacoeconomic studies that assess the cost-effectiveness of a product or drug
candidate relative to currently available therapies or relative to a specified standard. The downward pressure on healthcare costs in general, and prescription medicines
in particular, has become very intense and is creating increasingly high barriers to the entry of new products in these markets.
Research and Development
We have built a research and development organization that includes expertise in discovery research, preclinical development, product formulation, analytical and
medicinal chemistry, manufacturing, clinical development and regulatory and quality assurance. We operate cross-functionally and are led by an experienced
management team. We strive to make disciplined strategic decisions regarding our research and development programs and to limit the risk profile of our product
pipeline. We also access relevant market information and key opinion leaders in creating target product profiles and, when appropriate, as we advance our programs to
commercialization. We engage third parties on a limited basis to conduct portions of our preclinical research; however, we are not substantially dependent on any third
parties for our preclinical research nor do any of these third parties conduct a major portion of our preclinical research. We also engage multiple clinical sites to conduct
our clinical trials and rely on third-party contract research organizations (“CROs”) to coordinate and execute aspects of clinical trial operations. None of these CROs or
clinical sites are responsible for the major portion of our clinical trials and we are not substantially dependent on any one of them.
Employees
As of December 31, 2023, we had 198 full-time employees, 132 of whom are in research and development, 19 of whom are in sales and marketing and 47 of whom are
in finance, legal, business development and administration. Our full-time employees include six with M.Ds and 40 with Ph.Ds., of whom five and 39, respectively, are in
research and development. None of our employees are represented by a labor union, and we consider our employee relations to be good.
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Information about Our Executive Officers and Significant Employees
The following table provides information regarding our executive officers and significant employees as of April 1, 2024:
Name
Executive Officers:
Gregory A. Demopulos, M.D.
Michael A. Jacobsen
Peter B. Cancelmo, J.D.
Significant Employees:
Nadia Dac
Mariana N. Dimitrova, Ph.D.
George A. Gaitanaris, M.D., Ph.D.
Andreas Grauer, M.D.
Catherine A. Melfi, Ph.D.
J. Steven Whitaker, M.D., J.D.
Peter W. Williams
Age
Position(s)
65
65
45
54
58
67
63
65
68
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President, Chief Executive Officer and Chairman of the Board of Directors
Vice President, Finance, Chief Accounting Officer and Treasurer
Vice President, General Counsel and Secretary
Vice President, Chief Commercial Officer
Vice President, Chemistry, Manufacturing and Controls
Vice President, Science and Chief Scientific Officer
Vice President, Chief Medical Officer
Vice President, Regulatory Affairs & Quality Systems and Chief Regulatory Officer
Vice President, Clinical Development
Vice President, Human Resources
Gregory A. Demopulos, M.D. founded our company and has served as our president, chief executive officer and chairman of the board of directors since June 1994.
He also served as our chief financial officer and treasurer from January 2009 to October 2013 in an interim capacity and as our chief medical officer from June 1994 to
March 2010. Prior to founding Omeros, Dr. Demopulos completed his residency in orthopedic surgery at Stanford University and his fellowship training in hand and
microvascular surgery at Duke University. Dr. Demopulos currently serves on the board of trustees of the Smead Funds Trust, an open-end mutual fund company
registered under the Investment Company Act of 1940. Dr. Demopulos received his M.D. from the Stanford University School of Medicine and his B.S. from Stanford
University. Dr. Demopulos is the brother of Peter A. Demopulos, M.D., a member of our board of directors.
Michael A. Jacobsen has served as our vice president, finance, chief accounting officer and treasurer since October 2013. Prior to joining Omeros, Mr. Jacobsen
served as vice president of finance of Sarepta Therapeutics, Inc. from September 2011 to May 2013 and as its chief accounting officer from September 2011 to
December 2012. From April 2007 to August 2011, Mr. Jacobsen was vice president and chief accounting officer at ZymoGenetics, Inc. Prior to his service with
ZymoGenetics, Mr. Jacobsen held various roles at ICOS Corporation, including senior director of finance and corporate controller. From April 1995 to October 2001,
Mr. Jacobsen held vice president of finance or chief financial officer roles at three companies in the software, computer hardware and internet retailing industries, two of
which were publicly traded. Mr. Jacobsen is a certified public accountant and received his bachelor’s degree in accounting from Idaho State University.
Peter B. Cancelmo, J.D. has served as our vice president, general counsel and secretary since June 2019. He joined Omeros as deputy general counsel in January
2019. Prior to joining Omeros, Mr. Cancelmo was a principal and shareholder at Garvey Schubert Barer, P.C., where he represented clients in the life sciences and other
technology industries in mergers, acquisitions, strategic alliances, public and private securities offerings, and a range of other corporate, commercial and financial
transactions. He served as chair of the firm’s business practice group from 2016 until his departure in December 2018. Mr. Cancelmo previously practiced corporate and
transactional law at Davies, Ward, Philips and Vineberg LLP, in New York, and Choate, Hall & Stewart LLP, in Boston. Mr. Cancelmo received his J.D. from Boston
University and his B.A. from Saint Michael’s College.
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Nadia Dac has served as our chief commercial officer since January 2021. Ms. Dac brings nearly three decades of international experience as a strategic commercial
leader at large and small biopharmaceutical companies. Prior to joining Omeros, Ms. Dac served as the chief commercial officer at Alder Pharmaceuticals, Inc. (acquired
in 2019 by Lundbeck) from April 2019 until June 2020 and as vice president of global specialty commercial development at AbbVie, Inc. from December 2014 to March
2019. She previously served as vice president of marketing at Auxilium Pharmaceuticals, Inc. from May 2013 to September 2014, when the company was acquired by
Endo International plc. From 2009 to 2013, Ms. Dac held several roles of increasing responsibility at Novartis AG, including global vice president of neuroscience
professional relations prior to her role as vice president of Novartis’ multiple sclerosis franchise, and at Biogen Inc., Johnson & Johnson, and Eli Lilly and Company. She
holds a B.S. in Marketing from Rutgers University.
Mariana N. Dimitrova, Ph.D., has served as our vice president chemistry, manufacturing, and controls (“CMC”) since October 2022. Prior to joining Omeros in this
role, Dr. Dimitrova had 20 years of pharmaceutical experience with CMC leadership spanning formulation development, drug product and device development, drug
delivery and Human Factors engineering, analytical sciences, process development, and clinical manufacturing. In her career, Dr. Dimitrova contributed to the
development of a number of monoclonal antibodies, Fc-fusion proteins, PEG-proteins, bispecific molecules, cytokines, DNA, peptides, and small molecules at Amgen
Inc., MedImmune (Astra Zeneca), Biogen, and Jazz Pharmaceuticals. Dr. Dimitrova contributed to the commercialization of nine patient-convenient drug/device
combination products for the treatment of autoimmune, respiratory, neurodegenerative, hematology, and infectious diseases. Most recently, from May 2019 to
September 2022, Dr. Dimitrova was vice president of product and device development at Akero Therapeutics, developing Fc-FGF21 fusion protein for treatment of
NASH. Prior to her industry work, Dr. Dimitrova spent five years in academia, including at the National Heart, Lung, and Blood Institute at the National Institutes of
Health and the National Institute of Advanced Industrial Science and Technology (AIST) in Japan. Dr. Dimitrova holds a Ph.D. in Biophysics and Biological Sciences
from the Bulgarian Academy of Sciences and the AIST, and a M.S. in Chemistry from Kliment Ohridski University in Bulgaria.
George A. Gaitanaris, M.D., Ph.D. has served as our vice president, science since August 2006 and as our chief scientific officer since January 2012. From
August 2003 until our acquisition of nura, inc., in August 2006, Dr. Gaitanaris served as the chief scientific officer of nura, a company that he co-founded, and that
developed treatments for central nervous system disorders. From 2000 to 2003, Dr. Gaitanaris served as president and chief scientific officer of Primal, Inc., a
biotechnology company that was acquired by nura in 2003. Prior to co-founding Primal, Dr. Gaitanaris served as staff scientist at the National Cancer Institute.
Dr. Gaitanaris received his Ph.D. in cellular, molecular and biophysical studies and his M.Ph. and M.A. from Columbia University and his M.D. from the Aristotelian
University of Greece.
Andreas Grauer, M.D. has served as our chief medical officer since October 2023. Prior to joining Omeros, Dr. Grauer served as chief medical officer at Federation Bio
from October 2021, where he led all clinical activities with a focus on hyperoxaluria and immuno-oncology. From March 2019 to August 2021, Dr. Grauer was chief medical
officer of Corcept Therapeutics, Inc., leading its global development organization in the design and execution of clinical programs directed to oncology, neurology,
endocrinology, and metabolism indications. From December 2007 to December 2018, Dr. Grauer held several roles of increasing responsibility at Amgen, most recently
serving as vice president of global development, therapeutic area head, and co-chair of the franchise steering committee for bone, nephrology and inflammation. Earlier
in his career, Dr. Grauer was at Proctor and Gamble Pharmaceuticals where he held roles as global executive medical director for bone and for new technology
development. Dr. Grauer received his M.D. from the University of Heidelberg Medical School in Germany, where he also completed his clinical training in internal
medicine and endocrinology. He did research in molecular and cellular endocrinology both there and during a post-doctoral fellowship at Baylor College of Medicine. He
holds an active associate professorship of medicine at the University of Heidelberg Medical School.
Catherine A. Melfi, Ph.D. has served as our vice president, regulatory affairs and quality systems since October 2012 and has served as our chief regulatory officer
since April 2016. Dr. Melfi previously served from January 1996 to September 2012 at Eli Lilly and Company, where she held technical and leadership roles of increasing
scope and responsibility, including as senior director and scientific director in global health outcomes and regulatory affairs, respectively. Prior to joining Eli Lilly,
Dr. Melfi held various faculty and research positions at Indiana University, including appointments in its Economics Department, in the School of Public and
Environmental Affairs, and in the Indiana University School of Medicine. Dr. Melfi received her Ph.D. in Economics from the University of North Carolina - Chapel Hill
and B.S. in Economics from John Carroll University.
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J. Steven Whitaker, M.D., J.D. has served as our vice president, clinical development since joining Omeros in 2010, and served as our chief medical officer from
March 2010 to August 2018 and from November 2019 to October 2023. From May 2008 to March 2010, Dr. Whitaker served as the chief medical officer, vice president of
clinical development at Allon Therapeutics, Inc., a biotechnology company focused on developing drugs for neurodegenerative diseases. From August 2007 to
May 2008, he served as a medical consultant to Accelerator Corporation, a biotechnology-company investor and incubator. From May 1994 to May 2007, Dr. Whitaker
served at ICOS Corporation, which was acquired by Eli Lilly and Company in 2007. At ICOS, he held roles of increasing responsibility in clinical research and medical
affairs, most recently as divisional vice president, clinical research as well as medical director of the Cialis® global product team. Dr. Whitaker received his M.D. from the
Indiana University School of Medicine, his J.D. from the University of Washington and his B.S. from Butler University.
Peter W. Williams has served as our vice president, human resources since June 2020. Prior to joining Omeros, Mr. Williams served as the senior vice president of
human resources at Redbox Automated Retail, LLC from 2016 to 2019, where he led human resources and internal communications functions. From 2013 to 2016, Mr.
Williams served as the vice president, HR operations at Outerwall Inc. (Coinstar) and before that he held human resources leadership roles at Coinstar from 2009 to 2013.
Prior to 2009, Mr. Williams held human resources leadership roles at various technology and consumer focused companies, including Washington Mutual, Inc., Sterling
Commerce, Inc., Expedia, Inc., and Verio, Inc. Mr. Williams received a B.A. in Business Administration and a B.A. in English from the University of Washington.
Corporate Information
We were incorporated in 1994 as a Washington corporation. Our principal executive offices are located at 201 Elliott Avenue West, Seattle, Washington, 98119, and
our telephone number is (206) 676-5000. Our website address is www.omeros.com. We make available, free of charge through our investor relations website at
investor.omeros.com, our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, including exhibits to those reports, as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the SEC. Our websites and the information contained therein or incorporated therein are not intended to be incorporated into this Annual
Report on Form 10-K. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding reports that we file or
furnish electronically with them at www.sec.gov.
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ITEM 1A. RISK FACTORS
The risks and uncertainties described below may have a material adverse effect on our business, prospects, financial condition or operating results. In addition,
we may be adversely affected by risks that we currently deem immaterial or by other risks that are not currently known to us. You should carefully consider these risks
before making an investment decision. The trading price of our common stock could decline due to any of these risks and you may lose all or part of your investment.
In assessing the risks described below, you should also refer to the other information contained in this Annual Report on Form 10-K.
Risks Related to Our Products, Programs and Operations
We have incurred cumulative operating losses since inception. If we are unable to raise additional capital when needed we may be unable to complete the development
and commercialization of our drug candidates or to continue our other preclinical development programs.
Our operations have consumed substantial amounts of cash since our incorporation, As of December 31, 2023, we had cash, cash equivalents and short-term
investments of $171.8 million. Our cash provided by operations was $74.7 million and our net loss for the year ended December 31, 2023 was $117.8 million. We expect to
continue to spend substantial amounts to:
● initiate and conduct clinical trials and manufacture clinical and registration batches for our drug candidates;
● continue our research and development in our programs;
● make principal, interest and fee payments as required under our 5.25% Convertible Senior Notes due 2026 (the “2026 Notes”); and
● commercialize and launch drug candidates for which we may receive regulatory approval.
We expect to continue to incur additional losses until such time as we generate significant revenue from the sale of commercial products or from partnerships. We
are unable to predict the extent of any future losses and cannot provide assurance that we will generate sufficient revenue from commercial products in the future to
fund our operations fully. If we are unable to generate sufficient revenue from commercialized products or partnership arrangements, we may never become and remain
profitable and will be required to raise additional capital to continue to fund our operations. We cannot be certain that additional capital will be available to us on
acceptable terms, if at all, when required. Adverse developments to our financial condition or business, as well as disruptions in the global equity and credit markets,
may limit our ability to access capital. If we do not raise additional capital when needed through one or more funding avenues, such as debt or equity financings or
corporate partnering, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our drug candidates or one
or more of our preclinical programs or other research and development initiatives. In addition, we may be required to seek collaborators for one or more of our current or
future products at an earlier stage than otherwise would be desirable or on terms that are less favorable than otherwise might be available or to relinquish or license on
unfavorable terms our rights to technologies or products that we otherwise would seek to develop or commercialize ourselves. We also may have insufficient funds or
otherwise be unable to advance our preclinical programs to a point where they can generate revenue through partnerships, collaborations or other arrangements. Any of
these actions could limit the amount of revenue we are able to generate and harm our business and prospects.
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Failure to obtain and maintain regulatory approval in the U.S. or in foreign jurisdictions would prevent us from commercializing and marketing our drug candidates.
The regulatory process is subject to substantial agency discretion and risks, including those described herein and elsewhere in these “Risk Factors.” In October
2021, we received a CRL from FDA regarding our BLA for narsoplimab for the treatment of TA-TMA. In the CRL, FDA expressed difficulty in estimating the treatment
effect of narsoplimab in TA-TMA and asserted that additional information would be needed to support regulatory approval. We appealed FDA’s decision to issue the
CRL through a formal dispute resolution process that concluded in late 2022. Although our appeal was denied, the decision identified a potential path for resubmission
of the BLA based on inclusion of certain additional information and analyses. Consistent with subsequent interactions with FDA’s review division regarding
resubmission of the BLA, we submitted to FDA in the fall of 2023 an analysis plan to assess already existing clinical trial data, existing data from an historical control
population available from an external source, data from the narsoplimab expanded access program, and data directed to the mechanism of action of narsoplimab. We are
having ongoing discussions with the agency regarding the proposed analysis plan and are currently unable to estimate when we will submit the BLA. Additionally, the
requirements for resubmission of our BLA may be costly, require significant time and may not result in approval. Ultimately, we cannot guarantee that FDA will ever
approve narsoplimab for the treatment of TA-TMA or any other indication.
We also intend to market outside the U.S. any of our drug candidates that are approved in the future. In order to market our products in non-U.S. jurisdictions, we or
our partners must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. The regulatory approval procedure varies
among countries and can involve additional testing and data review. The requirements governing marketing authorization, the conduct of clinical trials, pricing and
reimbursement vary from country to country. Approval by FDA does not ensure approval by the EMA, and approval by one foreign regulatory authority does not
ensure approval by regulatory agencies in other foreign countries or by FDA. The time required to obtain regulatory approval outside the U.S. and EU may differ from
that required to obtain FDA or EU approval. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval discussed in
these “Risk Factors” and we may not obtain foreign regulatory approvals on a timely basis, or at all. In addition, even if we were able to obtain regulatory approval for a
product in one or more foreign jurisdictions, we may need to complete additional requirements to maintain that approval and our ability to market the product in the
applicable jurisdiction.
If any product that we develop and commercialize does not receive adequate coverage or reimbursement from governments and/or private payers our prospects for
revenue and profitability would suffer.
The success of any product that we or our third-party business partners commercialize in the future will depend heavily on the pricing, availability and duration of
adequate coverage or reimbursement for any such product from government, private and other third-party payers, both in the U.S. and in other countries.
There may be significant delays in obtaining coverage or reimbursement for newly approved products, and we may not be able to provide data sufficient to be
granted adequate coverage or reimbursement. Even when a payer determines that a product is eligible for reimbursement, coverage may be limited to the uses of a
product that are either approved by FDA (or, in other countries, the relevant country’s regulatory agency) and/or appear in a recognized drug compendium, or other
conditions may apply. Moreover, eligibility for coverage does not mean that any product will be reimbursed at a rate that allows us to make a profit or at a rate that
covers our costs, including research, development, manufacturing, sales and distribution. Increasingly, government and private third-party payers that reimburse for
healthcare services and products are requiring that companies provide them with predetermined discounts from list prices and are challenging the prices charged for
medical products, which could adversely impact the pricing of our products. Any reduction in reimbursement from Medicare, including as a result of the Inflation
Reduction Act, or other government programs may result in a similar reduction in payments from private payers. Pricing may also be adversely affected by changes in
the terms, scope and/or complexity of government pricing requirements. Even if we achieve coverage or reimbursement for a product, the initial rate or method at which
the product will be reimbursed could become unfavorable to us at the time reimbursement is initiated or in the future or may be of a limited duration. In addition,
obtaining acceptable coverage and reimbursement from one payer does not guarantee that we will obtain similar acceptable coverage or reimbursement from another
payer.
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In non-U.S. jurisdictions, we must obtain separate reimbursement approvals and comply with related foreign legal and regulatory requirements. In some countries,
including those in the EU, our products may be subject to government price controls. Pricing negotiations with governmental authorities can take a considerable amount
of time and expenditure of resources after the receipt of marketing approval for a product. We provide no assurances that the price of any product in one or more of
these countries or regions will allow us to make a profit or cover our costs, including research, development, manufacturing, sales and distribution, and as a result we
may decide to delay, potentially indefinitely, initiating sales in the particular country or region.
If the reimbursement or pricing that we are able to obtain and maintain for any product that we develop and commercialize is inadequate, is significantly delayed or
is subject to overly restrictive conditions, our ability to generate revenue, attain profitability and/or commercialize our drug candidates may be impaired and there could
be a material adverse effect on our business, financial condition, results of operations and growth prospects and the trading price of our stock could decline.
Our ability to meet our future capital requirements is partially dependent on certain milestone and royalty payments that we are eligible to receive based on Rayner’s
sales of OMIDRIA, and, if sales of OMIDRIA are less than anticipated and/or Rayner is unable to expand sales of OMIDRIA outside the U.S., our financial condition
and results of operations may be materially adversely affected, the price of our common stock may decline and we may be unable to access needed capital on favorable
terms, or at all.
In February 2024, we sold to DRI an expanded interest in OMIDRIA royalties payable by Rayner. Pursuant to the Amendment with DRI, DRI is entitled to receive all
royalties on U.S. net sales of OMIDRIA between January 1, 2024 and December 31, 2031. Omeros retains the right to receive all royalties payable by Rayner on any net
sales of OMIDRIA outside the U.S. payable from and after January 1, 2024, as well as all royalties on global net sales of OMIDRIA payable from and after December 31,
2031. We received $115.5 million in cash upon closing of the Amendment. Additionally, we are eligible under the Amendment to receive two milestone payments of up to
$27.5 million each, payable in January 2026 and January 2028, respectively, based on achievement of certain thresholds for U.S. net sales of OMIDRIA.
The royalty rate payable by Rayner on net sales of OMIDRIA is currently 30% in the United States and 15% outside the U.S. The royalty rate is subject to further
reduction to 10% of U.S. net sales upon the occurrence of certain events, including during any specific period in which OMIDRIA is no longer eligible for separate
payment. The availability of royalties from Rayner and/or milestone payments from DRI is dependent on Rayner’s net sales of OMIDRIA and may be of lesser magnitude
than anticipated or may not become payable at all. We cannot provide assurance that royalty income from Rayner and/or milestone payments from DRI, if they become
payable, will be a meaningful source of capital in the future. Sales-based royalty income and milestone payments may be affected by any number of factors, including:
● Rayner’s ability to successfully market and sell OMIDRIA in the U.S.;
● whether, and to what extent, Rayner is able to expand sales of OMIDRIA outside the U.S.;
● pricing, coverage and reimbursement policies of government and private payers such as Medicare, Medicaid, the U.S. Department of Veterans Affairs, group
purchasing organizations, insurance companies, health maintenance organizations and other plan administrators;
● a lack of acceptance by physicians, patients and other members of the healthcare community;
● interruptions in the supply of OMIDRIA;
● the availability, relative price and efficacy of the product as compared to alternative treatment options or branded, compounded or generic competing products;
● an unknown safety risk; and
● changed or increased regulatory restrictions in the U.S., EU and/or other foreign territories.
Our operating results are unpredictable and may fluctuate.
Our operating results are difficult to predict and will likely fluctuate from quarter to quarter and year to year. We believe that our quarterly and annual results of
operations may be affected by a variety of factors, including:
● the extent and magnitude of certain payments to which we may be entitled based on Rayner’s net sales of OMIDRIA may be affected by the extent of coverage
and reimbursement for OMIDRIA, market acceptance of the product and Rayner’s ability to execute an effective sales strategy;
● the extent of any payments received from any collaboration agreements or development funding arrangements that we may enter into from time to time, as well
as the extent of any payments that we are required to make under existing or future collaboration and license agreements, which may include sales-based
royalties and milestone payments based on the achievement of development, regulatory and sales milestones and may vary significantly from quarter to
quarter;
● the timing, cost and level of investment in our research and development activities as well as expenditures we may incur to acquire or develop additional
technologies, drug candidates, or in preparation for potential commercialization of our drug candidates; and
● whether we are able to obtain marketing approval for any of our drug candidates, the extent and timing of revenue from sales of any such approved product and
the magnitude and timing of expenses associated with the manufacturing and sale of any such approved product.
Any of these risk factors, should one or more occur, could adversely affect our results of operations and financial condition and cause the trading price of our stock
to decline.
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We are subject to extensive government regulation and the failure to comply with these regulations may have a material adverse effect on our operations and business.
Both before and after approval of any product, we and our suppliers, contract manufacturers and clinical investigators are subject to extensive regulation by
governmental authorities in the U.S. and other countries, covering, among other things, testing, manufacturing, quality control, clinical trials, post-marketing studies,
reporting, risk management plans, labeling, advertising, promotion, distribution, import and export, governmental pricing, price reporting and rebate requirements. Failure
to comply with applicable requirements could result in one or more of the following actions: warning letters; unanticipated expenditures; delays in approval or refusal to
approve a drug candidate; product recall or seizure; interruption of manufacturing or clinical trials; operating or marketing restrictions; injunctions; criminal prosecution
and civil or criminal penalties including fines and other monetary penalties; adverse publicity; and disruptions to our business. Further, government investigations into
potential violations of these laws would require us to expend considerable resources and face adverse publicity and the potential disruption of our business even if we
are ultimately found not to have committed a violation.
Obtaining FDA approval of our drug candidates requires substantial time, effort and financial resources and may be subject to both expected and unforeseen
delays, and there can be no assurance that any approval will be granted on any of our drug candidates on a timely basis, if at all. As was the case with our BLA for
narsoplimab in TA-TMA, with respect to which FDA issued a CRL, even after collaborating closely with FDA or regulators with corollary responsibilities in jurisdictions
outside the U.S. regarding the contents of a marketing application a regulator may decide that the design of our clinical trials or clinical data collection protocols as
actually run, or our resulting data, are insufficient for approval of our drug candidates. FDA or other regulators may require us to run additional preclinical, clinical or
other studies or perform additional work related to chemistry, manufacturing and controls. In addition, we, FDA or an independent institutional review board or ethics
committee may suspend or terminate human clinical trials at any time on various grounds, including a finding that the patients are or would be exposed to an
unacceptable health risk or because of the way in which the investigators on whom we rely carry out the trials. We are subject to extensive government regulation of the
testing of our investigational products, including the requirement that we conduct all of our clinical trials in accordance with FDA’s GCP requirements and similar
requirements outside of the U.S. If we are unable to comply with these requirements, if we are required to conduct additional trials or to conduct other testing of our
drug candidates beyond that which we currently contemplate for regulatory approval, if we are unable to complete our clinical trials or other testing successfully, or if
the results of these and other trials or tests fail to demonstrate efficacy or raise safety concerns, we may face substantial additional expenses, be delayed in obtaining
marketing approval for our drug candidates or may never obtain marketing approval.
We are also required to comply with extensive governmental regulatory requirements after a product has received marketing authorization. Governing regulatory
authorities may require post-marketing studies that may negatively impact the commercial viability of a product. Once on the market, a product may become associated
with previously undetected adverse effects and/or may develop manufacturing difficulties. We are required to comply with other post-marketing requirements including
cGMPs, advertising and promotion restrictions, pharmacovigilance requirements including risk management activities, reporting and recordkeeping obligations, and
other requirements. As a result of any of these or other problems or failure to comply with our regulatory obligations, a product’s regulatory approval could be
withdrawn, which could harm our business and operating results. In addition, we must maintain an effective healthcare compliance program in order to comply with U.S.
and other laws applicable to marketed drug products and, in particular, laws (such as the Anti-Kickback Statute, the False Claims Act and the Sunshine Act) applicable
when drug products are reimbursed by a federal or state healthcare program. U.S. laws such as the Foreign Corrupt Practices Act prohibit the offering or payment of
bribes or inducements to foreign public officials, including potentially physicians or other medical professionals who are employees of public healthcare entities in
jurisdictions outside the U.S. In addition, many countries have their own laws similar to the healthcare compliance laws that exist in the U.S. Implementing and
maintaining an effective compliance program requires the expenditure of significant time and resources. If we are found to be in violation of any of these laws, we may be
subject to significant penalties, including but not limited to civil or criminal penalties, damages and fines as well as exclusion from government healthcare programs.
We may face difficulties from changes to current regulations as well as future legislation.
Existing regulatory policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our drug
candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the U.S.
or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain
regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.
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Any reduction in reimbursement from Medicare resulting from the IRA or other legislative or policy changes or from other government programs may result in a
similar reduction in payments from private payers. These healthcare reforms and the implementation of any future cost containment measures or other reforms may
prevent us from being able to generate sufficient revenue, attain and/or maintain profitability or commercialize our drug candidates. We cannot be sure whether
additional legislative changes will be enacted, whether existing legislation will be implemented, interpreted or enforced as anticipated or whether FDA regulations,
guidance or interpretations will be changed, or what the impact of such changes on our drug candidates, if any, may be.
We have no internal capacity to manufacture commercial or clinical supplies of our drug candidates and intend to continue to rely solely on third-party
manufacturers, which could significantly limit or delay our clinical trials or regulatory submissions and may negatively impact our financial conditions and results
of operations. If we are unable to establish relationships with contract manufacturers that have sufficient manufacturing capacity available to meet our needs, or if the
contract manufacturers that we rely on experience difficulties manufacturing and supplying our drug candidates, or fail FDA or other regulatory inspections, then
our clinical trials or regulatory submissions may be significantly limited or delayed or we may have inadequate supply to meet demand for any product that we
commercialize in the future.
We rely and intend to continue to rely on third-party manufacturers to produce quantities of clinical drug supplies of our drug candidates that are needed for
clinical trials and to support NDAs, BLAs, or similar applications to regulatory authorities seeking marketing approval for our drug candidates, as well as to produce
inventory of our drug candidates for commercial use in anticipation of marketing approval. Global demand for contract manufacturing is volatile and the available supply
of contract manufacturing capacity is limited and unpredictable. We cannot provide any assurance that we will be able to enter into or maintain these types of
arrangements on commercially reasonable terms, or at all, or that manufacturing arrangements will meet our requirements. Our contract manufacturers previously have
and may in the future require us to place orders or make other financial commitments several years in advance of manufacturing commencement based on forecasts of
our long-term commercial supply requirements for drug candidates that have not yet received, and may never receive, regulatory approval. We may be required to pay
significant cancellation fees or other financial penalties in connection with the withdrawal or cancellation of any binding order for manufacturing that we later determine
is not needed. The fees or other financial obligations that we may incur in connection with withdrawn or cancelled orders may be material and any such financial penalty
would negatively impact our financial condition and results of operations.
If we or one of our manufacturers were to terminate one of these arrangements early, or the manufacturer was unable to supply product quantities sufficient to meet
our requirements, we would be required to transfer manufacturing to an approved alternative facility and/or establish additional manufacturing and supply
arrangements. We may also need to establish additional or replacement manufacturers, potentially with little or no notice, in the event that one of our manufacturers fails
to comply with FDA and/or other pharmaceutical manufacturing regulatory requirements. Even if we are able to establish additional or replacement manufacturers,
identifying these sources and entering into definitive supply agreements and obtaining regulatory approvals may require a substantial amount of time and cost and may
create a shortage of the product. It can take several years to qualify and validate a new contract manufacturer, and we cannot guarantee that we would be able to
complete in a successful and timely manner the appropriate validation processes or obtain the necessary regulatory approvals for one or more additional or replacement
manufacturers. Such alternate supply arrangements may not be available on commercially reasonable terms, or at all. Additionally, if we are unable to engage multiple
suppliers to manufacture our products, we may have inadequate supply to meet demand for our product.
In addition, narsoplimab, OMS906 and OMS1029 are biologic drug products and other drug candidates from certain of our programs, including but not limited to
MASP-2 and MASP-3, could be biologic drug products. We do not have the internal capability to produce biologics for use in clinical trials or on a commercial scale.
There are only a limited number of manufacturers of biologic drug products and we may be unable to enter into agreements on commercially reasonable terms with a
sufficient number of them to meet clinical or commercial demand, if at all. The regulatory requirements for commercial supply are more stringent than for clinical supply
and we cannot guarantee that a contract manufacturer producing drug product for clinical trials will be able to complete successfully the appropriate validation
processes or obtain the necessary regulatory approvals for marketing approval and commercial supply in a timely manner or at all.
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Our contract manufacturers may encounter difficulties with formulation, manufacturing, supply chain and/or release processes that could result in delays in clinical
trials and/or regulatory submissions or that could impact adversely the commercialization of our products or drug candidates, as well as in the initiation of enforcement
actions by FDA and other regulatory authorities. For example, our manufacturers are required to comply with FDA’s GMP requirements and are subject to periodic
inspections by FDA. If our manufacturers are unable to comply with FDA requirements, they may be unable to meet our supply needs. These difficulties also could
result in the recall or withdrawal of a product from the market or a failure to have adequate supplies to meet market demand. If the safety or manufacturing quality of any
drug candidate supplied by contract manufacturers is compromised due to one or more of those contract manufacturers’ failure to adhere to applicable laws or for other
reasons, we may not be able to maintain regulatory approval to run clinical trials or to obtain and maintain regulatory approval for one or more of our drug candidates,
which would harm our business and prospects significantly.
Any significant delays in the manufacture and/or supply of clinical or commercial supplies could materially harm our business, financial condition, results of
operations and prospects.
Ingredients, excipients, test kits and other materials necessary to manufacture our drug candidates may not be available on commercially reasonable terms, or at all,
which may adversely affect the development and commercialization of our drug candidates.
We and our third-party manufacturers must obtain from third-party suppliers the APIs, excipients, and/or other raw materials plus primary and secondary packaging
materials necessary for our contract manufacturers to produce our drug candidates for our clinical trials and, to the extent approved or commercialized, for commercial
distribution. Although we have entered or intend to enter into agreements with third-party suppliers that will guarantee the availability and timely delivery of APIs,
excipients, test kits and materials for our drug candidates, we have not entered into agreements for the supply of all such ingredients, excipients, test kits or materials,
and we may be unable to secure all such supply agreements or guarantees on commercially reasonable terms, if at all. Even if we were able to secure such agreements or
guarantees, our suppliers may be unable or choose not to provide us the ingredients, excipients, test kits or materials in a timely manner or in the quantities required.
Further, if we or our third-party manufacturers are unable to obtain APIs, excipients, test kits and materials as necessary for our clinical trials or for the manufacture of
commercial supplies of our drug candidates, if approved, potential regulatory approval or commercialization would be delayed, which would materially and adversely
affect our ability to generate revenue from the sale of our drug candidates.
We may be unable to advance clinical development of narsoplimab for treatment of COVID-19 and, even if successful, we may be unable to manufacture narsoplimab in
sufficient quantities.
Narsoplimab has been used to treat critically ill COVID-19 patients under our compassionate use program with highly positive results and, in an analysis of the
randomized population in the narsoplimab treatment arm of I-SPY COVID-19 trial, the addition of narsoplimab to standard-of-care treatment of critically ill COVID-19
patients resulted in a mortality benefit. Notwithstanding these results, we may determine not to continue clinical development of narsoplimab for COVID-19 and/or
further clinical evaluation of narsoplimab for the treatment of COVID-19 may not be feasible as a result of a number of factors, including decreasing rates of severe
illness in patients with COVID-19 and the availability of alternative preventive or therapeutic agents for COVID-19. Additionally, the results of the I-SPY-COVID-19 trial
may be not be viewed by regulators, government officials and others as strong evidence of narsoplimab’s efficacy in the treatment of severe COVID-19 because the
narsoplimab treatment arm of the I-SPY-COVID-19 trial was terminated prior to accrual of the maximum of 125 patients on the basis of analysis in a pre-consented
population in which substantial bias was detected. Also, contract manufacturing capacity and supplies of raw materials necessary for the production of narsoplimab are
limited and we may be unable to secure the large-scale manufacturing capacity from third parties necessary to manufacture narsoplimab in sufficient quantities to enable
broad availability of narsoplimab for COVID-19 patients. These risks could limit our ability to develop or commercialize a therapeutic for COVID-19.
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If our clinical trials or clinical protocols are delayed, suspended or terminated, we may be unable to develop our drug candidates on a timely basis, which would
adversely affect our ability to obtain regulatory approvals, increase our development costs and delay or prevent commercialization of approved products.
We cannot predict whether we will encounter problems with any of our completed, ongoing or planned clinical trials or clinical data collection protocols that will
cause regulatory agencies, institutional review boards or ethics committees, or us to delay our clinical trials or suspend or delay the analysis of the data from those
trials. Clinical trials and clinical data protocols have been, and in the future can be, delayed for a variety of reasons, including:
● discussions with FDA, the EMA or other foreign authorities regarding the scope or design of our clinical trials or clinical data collection protocols;
● delays or the inability to obtain required approvals from institutional review boards, ethics committees or other responsible entities at clinical sites selected for
participation in our clinical trials;
● delays in enrolling patients into clinical trials, collecting data from enrolled patients or collecting historical control data for any reason including disease
severity, trial or data collection protocol design, study eligibility criteria, patient population size (e.g., for orphan diseases or for some pediatric indications),
proximity and/or availability of clinical trial sites for prospective patients, availability of competing therapies and clinical trials, regional differences in diagnosis
and treatment, perceived risks and benefits of the product or drug candidate, disruptions due to external events or conditions affecting the localities or regions
in which our clinical trials are conducted, such as terrorism, political crises, natural disasters, war and wartime conditions, such as those in Ukraine, which has
affected the operation of our clinical trials of OMS906, or outbreaks of contagious disease such as the COVID-19 pandemic, which previously slowed
enrollment in our clinical trials of narsoplimab;
● lower than anticipated retention rates of patients in clinical trials;
● the need to repeat or conduct additional clinical trials as a result of inconclusive or negative results, failure to replicate positive early clinical data in subsequent
clinical trials, failure to deliver an efficacious dose of a drug candidate, poorly executed testing, a failure of a clinical site to adhere to the clinical protocol or to
follow GCPs or other study requirements, an unacceptable study design or other problems;
● adverse findings in clinical or nonclinical studies related to the safety of our drug candidates in humans;
● an insufficient supply of drug candidate materials or other materials necessary to conduct our clinical trials;
● the need to qualify new suppliers of drug candidate materials for FDA and foreign regulatory approval;
● an unfavorable inspection or review by FDA or other regulatory authority of a clinical trial site or records of any clinical investigation;
● the occurrence of unacceptable drug-related side effects or adverse events experienced by participants in our clinical trials;
● the suspension by a regulatory agency of a trial by imposing a clinical hold; or
● the amendment of clinical trial or data collection protocols to reflect changes in regulatory requirements and guidance or other reasons as well as subsequent
re-examination of amendments to clinical trial or data collection protocols by regulatory agencies, institutional review boards or ethics committees.
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In particular, because PNH and C3G, the indications for which our ongoing clinical trials are evaluating OMS906, are rare conditions, we have opened and expect to
continue opening clinical sites in Ukraine and other countries that may be affected by armed conflict or political instability or that have not been traditionally established
as centers for clinical research. Like Ukraine, some of these areas have been, and may continue to be, affected by such conflict, instability and/or health infrastructure
challenges. Enrollment and retention of patients in, or the ability to receive results from, these clinical trials could be disrupted by the existing conditions in these areas
or other geopolitical or macroeconomic developments. If patients withdraw from our trials, miss scheduled doses or follow-up visits or otherwise fail to follow trial
protocols, if we are unable to resupply the drugs to clinical sites on schedule, or if our trial results are otherwise disrupted or disputed due to such conditions and
developments, the integrity of data from our trials may be compromised or not accepted by FDA or other regulatory authorities, which would represent a significant
setback for the development of this drug candidate.
In addition, our clinical trial or development programs have been, and in the future may be, suspended or terminated by us, FDA or other regulatory authorities, or
institutional review boards or ethics committees due to a number of factors, including:
● failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;
● inspection of the clinical trial operations or trial sites by FDA or other regulatory authorities resulting in the imposition of a clinical hold;
● our failure to comply with our regulatory obligations as a sponsor of clinical research, such as adverse event reporting, control of study drug, adequate study
monitoring, and other obligations;
● the failure to remove a clinical hold in a timely manner, if at all;
● unforeseen safety issues or any determination that a trial presents unacceptable health risks;
● inability to deliver an efficacious dose of a drug candidate; or
● lack of adequate funding to continue the clinical trial or development program, including as a result of unforeseen costs due to enrollment delays, requirements
to conduct additional trials and studies and/or increased expenses associated with the services of our contract research organizations (“CROs”), or other third
parties.
If the results of our clinical trials are not available when we expect or if we encounter any delay in the analysis of data from our clinical trials, we may be unable to
file for regulatory approval or conduct additional clinical trials on the schedule we currently anticipate. Many of the factors that cause, or lead to, a delay in the
commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of a drug candidate. Any delays in completing our clinical
trials could increase our development costs, could slow down our product development and regulatory submission process, could delay our receipt of product revenue
and could make it difficult to raise additional capital. In addition, significant clinical trial delays also could allow our competitors to bring products to market before we
do and impair our ability to commercialize our future products, potentially harming our business.
Because we have a number of drug candidates and development programs, we may expend our limited resources to pursue a particular drug candidate or indication
and fail to capitalize on drug candidates or indications for which there is a greater likelihood of obtaining regulatory approval and that may be more profitable, if
approved.
We have limited resources and must focus on the drug candidates and clinical and preclinical development programs that we believe are the most promising. As a
result, we may forgo or delay the pursuit of opportunities with other drug candidates or other indications that later prove to have greater commercial potential and may
not be able to progress development programs as rapidly as otherwise possible. Further, if we do not accurately evaluate the commercial potential or target market for a
particular drug candidate, we may relinquish valuable rights to that drug through collaboration, license or other royalty arrangements in cases in which it would have
been advantageous for us to retain sole development and commercialization rights.
Our drug candidates may not successfully complete clinical development or be suitable for successful commercialization or generation of revenue through
partnerships, and our preclinical programs may not produce drug candidates that are suitable for clinical trials.
We must successfully complete preclinical testing, which may include demonstrating efficacy and the lack of toxicity in established animal models, before
commencing clinical trials for any drug candidate. Many pharmaceutical and biological drug candidates do not successfully complete preclinical testing. There can be
no assurance that positive results from preclinical studies will be predictive of results obtained from subsequent preclinical studies or clinical trials.
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Even if preclinical testing is successfully completed, we cannot be certain that any drug candidates that do advance into clinical trials will successfully demonstrate
safety and efficacy in clinical trials. Even if we achieve positive results in early clinical trials, they may not be predictive of the results in later trials, and safety and/or
efficacy outcomes of early clinical trials may not be consistent with outcomes of subsequent clinical trials. There can be no assurance that we will be able to
successfully commercialize our current or future drug candidates or to meet our expectations with respect to revenues or profits from such products.
We may incur substantial costs as a result of commercial disputes, claims, litigation or other legal proceedings relating to our business operations, especially with
regard to patent and other intellectual property rights, and such costs or an adverse outcome in such a proceeding may adversely affect our financial condition,
results of operations and/or stock price.
Our business involves numerous commercial contractual arrangements, important intellectual property rights, potential product liability, uncertainties with respect
to clinical development, manufacture and regulatory approvals and other aspects that create heightened risks of disputes, claims and legal proceedings. These include
claims that may be faced in one or more jurisdictions related to the safety of our drug candidates, the development of our drug candidates, our ability to obtain
regulatory approval for our drug candidates, our expectations regarding product development and regulatory approval, sales and marketing practices, commercial
disputes including with contract manufacturers, competition, environmental matters, employment matters and other matters. These matters could consume significant
time and resources, even if we are successful. Many of our competitors and contractual counterparties are significantly larger than we are and, as a result, may be able to
sustain the costs of complex litigation more effectively than we can because they have substantially greater resources. In addition, we may pay damage awards or
settlements or become subject to equitable remedies that could, individually or in the aggregate, have a material negative effect on our financial condition, results of
operations or stock price. Any uncertainties resulting from the initiation and continuation of any litigation also could have a material adverse effect on our ability to
raise the capital necessary to continue our operations.
We may initiate or become subject to litigation regarding patents and other intellectual property rights. Patent infringement litigation involves many complex
technical and legal issues and its outcome is often difficult to predict and the risk involved in doing so can be substantial. Manufacturers of generic or biosimilar drugs
could seek approval to market a generic or biosimilar version of our products or challenge our intellectual property rights with respect to our drug candidates.
Further, our industry has produced a large number of patents and it is not always clear which patents cover various types of products or methods of use. A third
party may claim that we or our contract manufacturers are using inventions covered by the third party’s patent rights and may go to court to stop us from engaging in
the alleged infringing activity, including making, using or selling our drug candidates. These lawsuits are costly and could affect our results of operations and divert the
attention of managerial and technical personnel. There is a risk that a court would decide that we, or our contract manufacturers, are infringing the third party’s patents
and would order us or our contractors to stop the activities covered by the patents. In addition, if we or our contract manufacturers are found to have violated a third
party’s patent, we or our contract manufacturers could be ordered to pay damages to the other party. We have agreed or may in the future agree to indemnify our
contract manufacturers against certain patent infringement claims and thus may be responsible for any of their costs associated with such claims and actions. If we were
sued for patent infringement, we would need to demonstrate that our drug candidates or methods of use either do not infringe the patent claims of the relevant patent or
that the patent claims are invalid, and we might be unable to do this. Proving invalidity, in particular, is difficult since it requires clear and convincing evidence to
overcome the presumption of validity enjoyed by issued patents.
It is difficult and costly to protect our intellectual property and our proprietary technologies, and we may not be able to ensure their protection.
Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection for the use, formulation and structure of our
drug candidates, the methods used to manufacture them, the related therapeutic targets and associated methods of treatment as well as on successfully defending these
patents against potential third-party challenges. Our ability to protect our drug candidates from unauthorized making, using, selling, offering to sell or importing by third
parties is dependent on the extent to which we have rights under valid and enforceable patents that cover these activities.
36
The patent positions of pharmaceutical, biotechnology and other life sciences companies can be highly uncertain and involve complex legal and factual questions
for which important legal principles remain unresolved. Changes in either the patent laws or in interpretations of patent laws in the U.S. and other countries may diminish
the value of our intellectual property. Further, the determination that a patent application or patent claim meets all of the requirements for patentability is a subjective
determination based on the application of law and jurisprudence. The ultimate determination by the U.S. Patent and Trademark Office or by a court or other trier of fact in
the U.S., or corresponding foreign national patent offices or courts, on whether a claim meets all requirements of patentability cannot be assured. Although we have
conducted searches for third-party publications, patents and other information that may affect the patentability of claims in our various patent applications and patents,
we cannot be certain that all relevant information has been identified. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our
patents or patent applications, in our licensed patents or patent applications or in third-party patents.
We cannot provide assurances that any of our patent applications will be found to be patentable, including over our own prior art patents, or will issue as patents.
Neither can we make assurances as to the scope of any claims that may issue from our pending and future patent applications nor to the outcome of any proceedings by
any potential third parties that could challenge the patentability, validity or enforceability of our patents and patent applications in the U.S. or foreign jurisdictions. Any
such challenge, if successful, could limit patent protection for our drug candidates and/or materially harm our business.
The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights
or permit us to gain or keep our competitive advantage. In addition, to the extent that we are unable to obtain and maintain patent protection for one of our drug
candidates or in the event that such patent protection expires or is limited to method of use patent protection, it may no longer be cost-effective to extend our portfolio
by pursuing additional development of a product or drug candidate for follow-on indications.
We also may rely on trade secrets to protect our technologies or drug candidates, especially where we do not believe patent protection is appropriate or obtainable.
Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisers may
unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third-party entity illegally obtained and is using any of our trade secrets is
expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the U.S. are sometimes less willing to protect trade secrets. Moreover, our
competitors may independently develop equivalent knowledge, methods and know-how.
Our indebtedness and liabilities could limit the cash flow available for our operations and expose us to risks that could adversely affect our business, financial
condition and results of operations.
As of December 31, 2023, we had $213.2 million total aggregate principal amount of our 2026 Notes outstanding, and we had approximately $1.3 million of
outstanding finance lease obligations. We may incur additional indebtedness to meet future financing needs. Our existing and future indebtedness could have
significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things:
● requiring a substantial portion of our cash flow from operations to service and repay our indebtedness, which will reduce the amount of cash available for other
purposes;
● limiting our ability to obtain additional financing;
● limiting our flexibility to plan for, or react to, changes in our business;
37
● diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon any conversion of the Convertible Notes;
● placing us at a possible competitive disadvantage with competitors that are less leveraged than we are or have better access to capital; and
● increasing our vulnerability to adverse economic and industry conditions.
Our ability to make scheduled payments of the principal of, to pay interest on, or to refinance our indebtedness, including the Convertible Notes, depends on our
future performance, which is subject to many factors, including, economic, financial, competitive and other circumstances beyond our control. Our business may not
generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under our indebtedness, including the Convertible
Notes, and our cash needs may increase in the future. In addition, future indebtedness that we may incur may contain financial and other restrictive covenants that limit
our ability to operate our business, raise capital or make payments under our other indebtedness. If we fail to comply with these covenants or to make payments under
our indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately
payable in full.
Competitors may develop products that are less expensive, safer or more effective, or which may otherwise diminish or eliminate the success of any products that we
may commercialize.
We may not achieve commercial success if our competitors, many of which have significantly more resources and experience than we have, market products that are
safer, more effective, less expensive or faster to reach the market than any products that we may develop and commercialize. Our competitors also may market a product
that proves to be unsafe or ineffective, which may affect the market for future product we are developing, regardless of the safety or efficacy of our product. The failure
of any future product that we may market to compete effectively with products marketed by our competitors would impair our ability to generate revenue, which would
have a material adverse effect on our future business, our financial condition and our results of operations.
The loss of members of our management team could substantially disrupt our business operations.
Our success depends to a significant degree on the continued individual and collective contributions of our management team. The members of our management
team are at-will employees, and we do not maintain any key-person life insurance policies other than on the life of Gregory A. Demopulos, M.D., our president, chief
executive officer and chairman of the board of directors. Losing the services of any key member of our management team, whether from death or disability, retirement,
competing offers or other causes, without having a readily available and appropriate replacement could delay the execution of our business strategy, cause us to lose a
strategic partner, or otherwise materially affect our operations.
We rely on highly skilled personnel and, if we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able to maintain our
operations or grow effectively.
Our performance is largely dependent on the talents and efforts of highly skilled individuals, many of whom possess specialized expertise that may be difficult to
replace. Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization. If
we are unable to hire and train a sufficient number of qualified employees for any reason, we may not be able to implement our current initiatives or grow effectively. We
maintain a rigorous, highly selective and time-consuming hiring process. We believe that our approach to hiring has significantly contributed to our success to date. If
we do not succeed in attracting qualified personnel and retaining and motivating existing personnel, our existing operations may suffer and we may be unable to grow
effectively.
38
We may encounter difficulties managing our growth, which could delay our business plans or adversely affect our results of operations.
To manage our future growth, we must continue to implement and improve our managerial, operational and financial systems and continue to recruit, train and retain
qualified personnel. We may not be able to implement necessary business processes and systems, recruit, train and retain additional qualified personnel and otherwise
manage the growth of our enterprise due to factors such as limited financial resources and competition for qualified personnel within local, national and international
markets. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage
growth could delay the execution of our business plans or disrupt our operations. Additionally, our inability to manage growth effectively could cause our operating
costs to exceed our forecasts.
Product liability claims may damage our reputation and, if insurance proves inadequate, these claims may harm our business.
We may be exposed to the risk of product liability claims that is inherent in the biopharmaceutical industry. A product liability claim may damage our reputation by
raising questions about our product’s safety and efficacy and could limit our ability to sell one or more products by preventing or interfering with commercialization of
our drug candidates. In addition, product liability insurance for the biopharmaceutical industry is generally expensive to the extent it is available at all. There can be no
assurance that we will be able to obtain or maintain such insurance on acceptable terms for any product we bring to market. Further, our product liability insurance
coverage may not provide coverage for or may be insufficient to reimburse us for any or all expenses or losses we may suffer. A successful claim against us with respect
to uninsured liabilities or in excess of insurance coverage could have a material adverse effect on our business, financial condition and results of operations.
We rely on third parties to conduct portions of our preclinical research and clinical trials. If these third parties do not perform as contractually required or otherwise
expected, or if we fail to adequately supervise or monitor these parties, we may not be able to obtain regulatory approval for or commercialize our drug candidates.
We rely on third parties, such as CROs, medical and research institutions and clinical investigators, to conduct a portion of our preclinical research, assist us in
conducting our clinical trials or to conduct third party-sponsored clinical trials of our drug candidates. Nonetheless, we are responsible for confirming that our
preclinical research and clinical trials are conducted in accordance with applicable regulations, the relevant trial protocol and within the context of approvals by an
institutional review board or ethics committee, and we may not always be successful in ensuring such compliance. Our reliance on these third parties does not relieve us
of responsibility for ensuring compliance with FDA and other regulations and standards for conducting, monitoring, recording and reporting the results of preclinical
research and clinical trials to assure that data and reported results are credible and accurate and that the trial participants are adequately protected. If these third parties
do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if the third parties need to be replaced or if the quality or
accuracy of the data they obtain is compromised due to their failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our preclinical
and clinical development processes may be extended, delayed, suspended or terminated, and we may not be able to commercialize or obtain regulatory approval for our
drug candidates.
If we are unable to obtain licenses from third parties on commercially reasonable terms or fail to comply with our obligations under such agreements, our business
could be harmed.
It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our products, in which case we would be required to
obtain a license from these third parties. If we are unable to license such technology, or if we are forced to license such technology on unfavorable terms, our business
could be materially harmed. If we are unable to obtain a necessary license, we may be unable to develop or commercialize the affected products or product candidates,
which could materially harm our business and the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with
respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation. Even if we are able to obtain a license, it may be non-exclusive, which
could enable our competitors to obtain access to the same technologies licensed to us.
If we fail to comply with our obligations under license agreements, our counterparties may have the right to terminate these agreements, in which event we might not
be able to develop, manufacture or market, or may be forced to cease developing, manufacturing or marketing, any product that is covered by these agreements or may
face other penalties under such agreements. Such an occurrence could materially adversely affect the value of the product or product candidate being developed under
any such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or
reinstated agreements with less favorable terms, cause us to lose our rights under these agreements, including our rights to important intellectual property or
technology, or impede, delay or prohibit the further development or commercialization of one or more product candidates that rely on such agreements.
As a non-accelerated filer, we are no longer required to comply with the auditor attestation requirements of the Sarbanes-Oxley Act.
As of December 31, 2023, we are a non-accelerated filer under the Exchange Act and, therefore, we are no longer required to comply with the auditor attestation
requirements of Section 404(b) of the Sarbanes-Oxley Act. Therefore, our internal controls over financial reporting will not receive the level of review provided by the
process relating to the auditor attestation included in annual reports of issuers that are subject to the auditor attestation requirements. In addition, we cannot predict if
investors will find our common stock less attractive because we are not required to comply with the auditor attestation requirements. If some investors find our common
stock less attractive as a result, there may be a less active trading market for our common stock and the trading price for our common stock may be negatively affected.
Our share repurchase program could affect the price of our common stock and increase volatility and may be suspended or terminated at any time, which may result
in a decrease in the trading price of our common stock.
In November 2023, our board of directors authorized a share repurchase program to repurchase, from time to time, up to $50.0 million of our outstanding shares of
common stock in the open market, including under trading plans established pursuant to Rule 10b5-1 and Rule 10b-18 under the Exchange Act, or in privately negotiated
transactions. The share repurchase program does not have a fixed expiration date, may be suspended or discontinued at any time, and does not obligate us to acquire
any amount of our common stock. The timing, manner, price, and amount of any repurchases may be determined by us at our discretion and will depend on a variety of
factors, including business, economic and market conditions, prevailing stock prices, corporate and regulatory requirements, and other considerations. As of March 26,
2024, approximately $33.8 million remained available to repurchase of our outstanding shares of common stock under the share repurchase program.
Repurchases pursuant to our share repurchase program could affect our stock price and increase its volatility. The existence of a share repurchase program could
also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our common stock. There
can be no assurance that any repurchases will enhance shareholder value, because the market price of our common stock may decline below the levels at which we
repurchased our common stock. Although our share repurchase program is intended to enhance long-term shareholder value, short-term stock price fluctuations could
reduce the share repurchase program’s effectiveness.
39
General Risk Factors Related to our Business
Cyber-attacks or other failures in telecommunications or information technology systems could result in information theft, data corruption and significant disruption
of our business operations.
We utilize information technology systems and networks to process, transmit and store electronic information in connection with our business activities. As use of
digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have
increased in frequency and sophistication. These threats pose a risk to the security of our systems and networks, the confidentiality and the availability and integrity of
our data. There can be no assurance that we will be successful in preventing cyber-attacks or mitigating their effects. Similarly, there can be no assurance that our
collaborators, CROs, third-party logistics providers, distributors and other contractors and consultants will be successful in protecting our clinical and other data that is
stored on their systems. While we have not experienced any previous cybersecurity incidents that have had a material adverse effect on or company, we cannot provide
assurance that a future cybersecurity incident will not occur or that it would not materially affect our business, results of operations or financial condition. In addition,
we may suffer reputational harm or face litigation or adverse regulatory action as a result of cyber-attacks or other data security breaches and may incur significant
additional expense to implement further data protection measures.
Our stock price has been and may continue to be volatile, and the value of an investment in our common stock may decline.
During the 12-month period ended December 31, 2023, the closing price of our stock ranged from as high as $7.57 per share and as low as $1.08 per share. The
trading price of our common stock is likely to continue to be highly volatile and could be subject to wide fluctuations in response to numerous factors, many of which
are beyond our control. In addition, the stock market has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the
operating performance of publicly traded companies. Broad market and industry factors may seriously affect the market price of companies’ stock, including ours,
regardless of actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock. In addition, in the past, following
periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against
these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
If we issue additional shares of our common stock or other securities that may be convertible into, or exercisable or exchangeable for, our common stock, our existing
shareholders would experience further dilution.
To the extent that we raise additional funds in the future by issuing equity securities, our shareholders would experience dilution, which may be significant and
could cause the market price of our common stock to decline significantly. In addition, approximately 15.3 million shares of common stock were subject to outstanding
options as of December 31, 2023 and may become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements. As of
December 31, 2023, we also had approximately 8.8 million additional shares of common stock reserved for future issuance under our employee benefit plans that are not
subject to outstanding options. Further, to the extent we issue common stock upon conversion of the Convertible Notes, such conversion would dilute the ownership
interests of existing stockholders despite the expected reduction of such dilution as a result of the capped call transactions that we entered into in connection with the
original issuances of the Convertible Notes. If the holders of outstanding options or warrants elect to exercise some or all of them, or if the shares subject to our
employee benefit plans are issued and become eligible for sale in the public market, or we issue common stock upon conversion of the Convertible Notes, our
shareholders would experience dilution and the market price of our common stock could decline.
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If we or the third parties upon whom we rely are adversely affected by natural disasters or other events, our business continuity and disaster recovery plans may not
adequately protect us from such interruptions.
Any unplanned event, such as flood, fire, explosion, earthquake, tsunami, extreme weather condition, power shortage, power outage, telecommunication failure, or
other natural or man-made accidents or incidents could disrupt our operations. If a natural disaster or other event were to occur that prevents us from using all or a
significant portion of our headquarters, that damages critical infrastructure, such as the manufacturing facilities of our third-party manufacturers, or that otherwise
disrupts operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. We may not carry sufficient
business interruption insurance to compensate us for all losses that may occur. The disaster recovery and business continuity plans we have in place may not be
adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of a natural disaster or other event, which could have a
material adverse effect on our business, and we could potentially lose valuable data and other items. The occurrence of any of the foregoing could have a material
adverse effect on our business, financial condition and results of operations.
Anti-takeover provisions in our charter documents and under Washington law could make an acquisition of us, which may be beneficial to our shareholders, difficult
and prevent attempts by our shareholders to replace or remove our current management.
Provisions in our articles of incorporation and bylaws and under Washington law may delay or prevent an acquisition of us or a change in our management. These
provisions include a classified board of directors, a prohibition on shareholder actions by less than unanimous written consent, restrictions on the ability of
shareholders to fill board vacancies and the ability of our board of directors to issue preferred stock without shareholder approval. In addition, because we are
incorporated in Washington, we are governed by the provisions of Chapter 23B.19 of the Washington Business Corporation Act, which, among other things, restricts
the ability of shareholders owning 10% or more of our outstanding voting stock from merging or combining with us. Although we believe these provisions collectively
provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer may be
considered beneficial by some shareholders. In addition, these provisions may frustrate or prevent any attempts by our shareholders to replace or remove our current
management by making it difficult for shareholders to replace members of our board of directors, which is responsible for appointing the members of our management.
We have never declared or paid dividends on our capital stock, and we do not anticipate paying dividends in the foreseeable future.
Our business requires significant funding. We currently plan to invest all available funds and future earnings, if any, in the development and growth of our
business. Therefore, we currently do not anticipate paying any cash dividends on our common stock in the foreseeable future. As a result, a rise in the market price of
our common stock, which is uncertain and unpredictable, will be the sole source of potential gain for shareholders in the foreseeable future, and an investment in our
common stock for dividend income should not be relied upon.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
Omeros maintains a cybersecurity risk management program that is designed to assess, identify, manage and respond to risks from cybersecurity threats in a robust
manner. This program shares certain common methodologies, reporting channels and governance processes applicable to our management of other risk areas, such as
legal, compliance, strategic, operational and financial risk.
We utilize a range of internal and external resources to assess and identify cybersecurity threats and vulnerabilities. We access and utilize information drawn from a
range of publications, reports and services to assess our cybersecurity risk profile, develop awareness of emerging cybersecurity threats and threat actors and identify
risk factors that are particularly relevant to the biotechnology and pharmaceutical sector and to our company. We also work with third parties that assist us to identify,
assess and manage cybersecurity risks, including external auditors, consulting firms, managed security service providers and penetration testing firms.
We have implemented and maintain various technical, physical and organizational measures, processes, standards and/or policies designed to manage and mitigate
material risks from cybersecurity threats. These include data encryption, network security controls, access controls, physical security, asset management, system
hardening, vulnerability management and patching and continuous monitoring of information technology systems and network telemetry data using a variety of manual
and automated tools and systems designed to detect and respond to suspicious or unusual activity. We maintain systems and plans for business continuity and
disaster recovery and have implemented tools and procedures for cybersecurity incident detection and response. We also operate a cybersecurity training program for
employees that includes required webinars and deployment of simulated phishing and similar attacks in which threat actors utilize social engineering to gain access to
company systems.
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We take a risk-weighted approach to mitigation of cybersecurity risks associated with use of third-party service providers. Based on an assessment of the
cybersecurity risks presented by a given third-party service provider, we seek to minimize third-party cybersecurity risk on a case-by-case basis, generally through a
combination of due diligence in the selection of qualified vendors and the imposition of contractual terms requiring the vendor to maintain specified cybersecurity
safeguards and/or to accept financial responsibility for security breaches occurring within the vendor’s area of responsibility.
We are not aware of any specific risks from specific cybersecurity threats, and have not experienced any previous cybersecurity incidents, that have materially
affected or are reasonably likely to materially affect our company, including our business strategy, results of operations or financial condition. While we continue to
invest in the security and resiliency of our information technology systems and to enhance our cybersecurity controls and processes, we cannot provide assurance that
a future cybersecurity incident will not occur or that it would not materially affect our company. Please see Item 1A of Part I of this Annual Report under the heading
“Risk Factors” for additional discussion about risks related to cybersecurity.
Governance
Cybersecurity is an important part of our risk management processes and an area of focus for our board of directors and management. Pursuant to its charter, the
audit committee of our board of directors is responsible for the oversight of management’s efforts to address cybersecurity risk. Management reports to the audit
committee on cybersecurity risk matters periodically, typically twice annually. These reports normally address matters such as: the evolving cybersecurity risk
environment and the emergence of new threats; outcomes and learnings from penetration testing, security audits or vulnerability assessments; evaluation of existing
controls, tools and procedures and progress on implementation of any new initiatives to manage and mitigate cybersecurity risk. In addition, members of our board of
directors regularly engage in discussions with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and
strategy programs.
Our cybersecurity risk management program is managed by our Director of Information Technology (the “IT Director”), whose team is responsible for leading
enterprise-wide cybersecurity strategy, policy, standards, architecture and processes. The IT Director has been with the organization since 2007, has a post-graduate
degree in Information Security, and is a member of InfraGard, a partnership between the Federal Bureau of Investigation and members of the private sector for the
protection of U.S. critical infrastructure. The IT Director is informed about and monitors prevention, detection, mitigation and remediation of cybersecurity risks and
incidents through various means, which may include, among other things, briefings with dedicated internal security personnel, threat intelligence and other information
obtained from governmental, public or private sources, including external consultants engaged by us, and alerts and reports produced by security tools deployed in our
information technology environment. The IT Director provides periodic reports on cybersecurity risk to the audit committee of our board of directors, as well as our
chief executive officer and other members of our senior management as appropriate.
ITEM 2. PROPERTIES
We lease approximately 113,060 square feet for our principal office and laboratory space in the building located at 201 Elliott Avenue West, Seattle, Washington
(“the Omeros Building”), which includes 7,245 square feet of laboratory space that we are subleasing to third parties. The lease term for our space is through
November 2027. We also have two options to extend the lease term, each by five years. The annual base rent due under the lease for our principal office and laboratory
space is $7.0 million for 2024, $7.1 million for 2025, $6.9 million for 2026, and $5.9 million for 2027. In addition, we are responsible for paying our proportionate share of the
building’s utilities, taxes, insurance and maintenance as well as a property management fee.
We believe that our facilities are sufficient for our anticipated near-term needs.
ITEM 3. LEGAL PROCEEDINGS
From time to time, in the ordinary course of business, we may be involved in various claims, lawsuits and other proceedings. As of the date of filing of this Annual
Report on Form 10-K, we were not involved in any material legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
PART II
Market Information
Our common stock is traded on The Nasdaq Global Market under the symbol “OMER.”
Holders
As of March 28, 2024, there were approximately 57,942,695 shares of our common stock outstanding, which were held by 84 holders of record.
Dividends
We have never declared or paid any cash dividends on our capital stock. We expect to retain all available funds and future earnings to fund the development and
growth of our business and we do not anticipate paying any cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
We did not sell any equity securities that were not registered under the Securities Act during the three fiscal years ended December 31, 2023.
Stock Performance Graph
The following graph compares the cumulative total shareholder return for our common stock (OMER), the Nasdaq Biotechnology Index (NBI) and the Nasdaq U.S.
Benchmark TR Index (NQUSBT) for the period beginning December 31, 2018 and ending December 31, 2023. This graph assumes that $100 was invested on
December 31, 2018 in our common stock, the Nasdaq Biotechnology Index and the Nasdaq U.S. Benchmark TR Index. It also assumes that any dividends were
reinvested. The data shown in the following graph are not necessarily indicative of future stock price performance.
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Comparison of 5 Year Cumulative Return
Assumes Initial Investment of $100
The foregoing information shall not be deemed to be “soliciting material” or to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to
liability under that Section. In addition, the foregoing information shall not be deemed to be incorporated by reference into any of our filings under the Exchange Act or
the Securities Act, except to the extent that we specifically incorporate this information by reference.
Issuer Purchases of Equity Securities
The following table provides information regarding our repurchases of our common stock during the quarter ended December 31, 2023:
Period
10/01/23 – 10/31/23
11/01/23 – 11/30/23
12/01/23 – 12/31/23
Total
____________
Total Number of
Shares
Purchased
Average Price
Paid per Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (1)
Maximum
Approximate
Dollar Value
of Shares That
May Yet Be
Purchased
Under the Plans
or Programs (1)
(In thousands)
— $
579,387
1,224,757
1,804,144 $
—
1.98
2.80
2.54
— $
579,387
1,224,757
1,804,144
—
48,852
45,424
(1) On November 9, 2023, our board of directors approved an indefinite term share repurchase program under which we may repurchase from time to time up to $50.0
million of our common stock in the open market, including under trading plans established pursuant to Rule 10b5-1 and Rule 10b-18 under the Exchange Act, or in
privately negotiated transactions. As of March 26, 2024, approximately $33.8 million remained available for repurchase of our outstanding shares of common stock
under the share repurchase program.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the audited annual consolidated financial statements and the related notes thereto
included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks
and uncertainties. Actual results may differ materially from those discussed in these forward-looking statements due to a number of factors, including those set forth
in the section entitled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. For further information regarding forward-looking statements, please refer
to the special note regarding forward-looking statements at the beginning of this Annual Report on Form 10-K. Throughout this discussion, unless the context
specifies or implies otherwise, the terms “Company,” “we,” “us” and “our” refer to Omeros Corporation and our wholly owned subsidiaries.
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Overview
We are a clinical-stage biopharmaceutical company committed to discovering, developing and commercializing small-molecule and protein therapeutics for large-
market as well as orphan indications targeting immunologic disorders including complement-mediated diseases, cancers related to the dysfunction of the immune
system, and addictive and compulsive disorders.
Complement Inhibitor Programs
The complement system plays a role in the body’s inflammatory response and becomes activated as a result of tissue damage or trauma or microbial pathogen
invasion. Inappropriate or uncontrolled activation of the complement system can cause diseases characterized by serious tissue injury. Three main pathways can
activate the complement system: classical, lectin, and alternative. Omeros is focused on development of therapeutics to treat diseases associated with the lectin and/or
alternative pathways of complement. Omeros is developing antibodies as well as small-molecule inhibitors of key enzymes known to be centrally involved in the in
activation of the targeted pathway of complement.
Lectin Pathway / MASP 2
MASP-2, is a novel pro-inflammatory protein target that is the effector enzyme of the lectin pathway and is required for the function of this pathway. Omeros is
developing antibodies and small-molecule inhibitors of MASP-2 as potential therapeutics for diseases in which the lectin pathway has been shown to contribute to
significant tissue injury and pathology. When not treated, these diseases are typically characterized by significant end-organ damage, such as kidney or central nervous
system injury. Importantly, inhibition of MASP-2 has been demonstrated not to interfere with the antibody-dependent classical complement activation pathway, a critical
component of the acquired immune response to infection.
The lead drug candidate in our MASP-2 inhibitor program is narsoplimab (OMS721), a proprietary, patented human monoclonal antibody targeting MASP-2,
the effector enzyme of the lectin pathway of complement. Clinical development of narsoplimab is currently focused primarily on TA-TMA and development efforts are
also directed to COVID-19, ARDS and PASC. We are also developing OMS1029, a long-acting, next-generation antibody targeting MASP-2 and the lectin pathway
which we expect will be well-suited to indications requiring long-term, chronic administration. In addition, we are advancing our orally administered small-molecule
MASP-2 inhibitor through IND-enabling studies. For more information, see Part I, Item 1 in this Annual Report on Form 10-K under the heading “Complement Inhibitor
Programs: MASP-2 Program – Lectin Pathway Disorders”.
Alternative Pathway / MASP-3
Our pipeline of clinical-stage complement-targeted therapeutic candidates also includes OMS906, a proprietary, patented monoclonal antibody targeting MASP-
3, the key activator of the alternative pathway of complement. We believe OMS906 has the potential to treat a wide range of alternative pathway-related diseases and
that its attributes favorably differentiate OMS906 from other marketed and in-development alternative pathway inhibitors. Clinical development of OMS906 is currently
focused on rapidly advancing to Phase 3 clinical trials in multiple alternative pathway-related disorders, including PNH and C3G. We have multiple ongoing Phase 2
clinical trials evaluating OMS906 in these indications. For more information, see Part I, Item 1 in this Annual Report on Form 10-K under the heading “Complement
Inhibitor Programs: MASP-3 Program – Alternative Pathway Disorders”.
PDE7 Inhibitor Programs
Our PDE7 inhibitor program, which we refer to as OMS527, comprises multiple PDE7 inhibitor compounds and is based on our discoveries of previously unknown
links between PDE7 and any addiction or compulsive disorder, and between PDE7 and any movement disorders. In April 2023, we were awarded a grant from the
National Institute on Drug Abuse, part of the National Institutes of Health, to develop our lead orally administered PDE7 inhibitor compound, for which we have
successfully completed a Phase 1 study, for the treatment of cocaine use disorder (“CUD”). The grant amount, a total of $6.69 million over three years, is intended to
support preclinical cocaine interaction/toxicology studies to assess safety of the therapeutic candidate in the presence of concomitant cocaine administration, as well as
an in-patient, placebo-controlled clinical study evaluating the safety and effectiveness of OMS527 in adults with CUD who receive concurrent intravenous cocaine.
The preclinical study is intended to provide the toxicology data necessary to support the human study of OMS527 in CUD. The toxicology study is underway and is
expected to be completed in late 2024. Additionally, with investigators at Emory University, we are also evaluating OMS527 as a potential treatment for levodopa-
induced dyskinesia, a common and debilitating side effect of long-term levodopa dosing in patients with Parkinson’s disease. For more information, see Part I, Item 1 in
this Annual Report on Form 10-K under the heading “Other Clinical Programs: PDE7 Inhibitor Programs – OMS527”.
Pre-clinical Programs
We are advancing preclinical research on potential molecular and cellular therapies for cancer. On the molecular front, we have developed novel biologic platforms to
target cancer cells specifically and kill them directly or indirectly through the potentiation of the immune system. Our novel molecules combine tumor antigens with a
potent adjuvant and show high levels of killing in cancer cells. We believe that some of these molecules could function as therapeutic vaccines against a broad range of
tumors, potentially transforming treatment of both solid tumors and hematologic cancers. On the cellular front, we are evaluating novel approaches for both adoptive T
cell and CAR T therapies. We have 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. We continue to develop and validate our novel approach, which we believe could improve response
rates for patients receiving either engineered or native T cell therapies for liquid or solid tumors.
OMIDRIA Sale and Royalty Monetization Transactions
We previously developed and commercialized OMIDRIA® (phenylephrine and ketorolac intraocular solutions) 1%/0.3%, which is approved by FDA for use during
cataract surgery or intraocular ("IOL") replacement to maintain pupil size by preventing intraoperative miosis (pupil constriction) and to reduce postoperative ocular
pain. We marketed OMIDRIA in the U.S. from the time of its commercial launch in 2015 until December 2021.
On December 23, 2021, we sold our commercial product OMIDRIA and certain related assets, including inventory and prepaid expenses, to Rayner. Rayner paid us
$126.0 million in cash at the closing and we retained all outstanding accounts receivable, accounts payable, and accrued expenses as of the closing date.
Under the Asset Purchase Agreement, we were entitled to receive a $200.0 million Milestone Payment within 30 days following an event (the "Milestone Event")
that establishes separate payment for OMIDRIA for a continuous period of at least four years when furnished in the ambulatory surgery center ("ASC") setting. The
Milestone Event occurred in December 2022 and we recorded a $200.0 milestone receivable. We received the Milestone Payment together with accrued interest in
February 2023.
45
Under the Asset Purchase Agreement, the occurrence of the Milestone Event in December 2022 triggered a reduction in the U.S. royalty rate from 50% to 30% on
OMIDRIA net sales until the expiration or termination of the last issued and unexpired U.S. patent, which we expect to occur no earlier than 2035. Upon the occurrence
of certain events described in the Asset Purchase Agreement, including during any specific period in which OMIDRIA is no longer eligible for certain separate payment
(i.e., becomes included in the packaged payment rate for the surgical procedure) under Medicare Part B, the U.S. base royalty rate would be reduced to 10%. Pursuant to
legislation enacted in late 2022, we expect separate payment for OMIDRIA under Medicare Part B to extend until at least January 1, 2028.
As a result of the OMIDRIA divestiture, the results of OMIDRIA operations have been reclassified to net income from discontinued operations, net of tax in our
consolidated statements of operations and comprehensive income (loss) and excluded from continuing operations for all periods presented.
On September 30, 2022, we sold to DRI an interest in a portion of our future OMIDRIA royalty receipts and received $125.0 million in cash consideration which we
recorded as an OMIDRIA royalty obligation on our consolidated balance sheet. Interest expense is recorded as a component of continuing operations. The aggregate
amount of royalties to which DRI is entitled under this arrangement is capped at $188.4 million.
On February 1, 2024, we sold to DRI an expanded interest in the OMIDRIA royalties pursuant to the terms of an amended and restated royalty purchase agreement
dated February 1, 2024 (the “Amendment”). We received $115.5 million in cash upon closing of the Amendment. The Amendment eliminated the caps on royalty
payments effective beginning in the first quarter of 2024, and provides that DRI will now receive all royalties on U.S. net sales of OMIDRIA payable between January 1,
2024 and December 31, 2031. DRI is entitled to payment only to the extent of royalty payments that are payable on U.S. net sales of OMIDRIA on or before December 31,
2031 and DRI has no recourse to our assets other than its interest in the OMIDRIA royalties. Omeros retains the right to receive all royalties payable by Rayner on any
net sales of OMIDRIA outside the U.S. payable from and after January 1, 2024, as well as all royalties on global net sales of OMIDRIA payable from and after December
31, 2031. In addition to the cash consideration received at closing, the Amendment also entitles us to receive a milestone payment ranging between $10.0 million and
$27.5 million if U.S. net sales of OMIDRIA reach applicable thresholds ranging between a total of $156.0 million and $160.0 million for any period of four consecutive
quarters ending prior to January 1, 2026 as well as a separate milestone payment ranging between $8.0 million and $27.5 million if U.S. net sales of OMIDRIA reach
applicable thresholds ranging between a total of $181.0 million and $185.0 million for any period of four consecutive quarters ending prior to January 1, 2028. See Part II,
Item 8, “Note 8 – OMIDRIA Royalty Obligation” to our Consolidated Financial Statements in this Annual Report on Form 10-K for additional information.
As of December 31, 2023, we had cash, cash equivalents and short-term investments of $171.8 million and, in February 2024, we received $115.5 million from DRI.
46
Results of Operations
Research and Development Expenses
Our research and development expenses can be divided into three categories: direct external expenses, which include clinical research and development and
preclinical research and development activities; internal, overhead and other expenses; and stock-based compensation expense. Direct external expenses consist
primarily of expenses incurred pursuant to agreements with third-party manufacturing organizations prior to receiving regulatory approval for a drug candidate, CROs,
clinical trial sites, collaborators, licensors and consultants. Pre-clinical research and development includes costs prior to beginning Phase 1 studies in human subjects.
Internal, overhead and other expenses primarily consist of costs for personnel, overhead, rent, utilities and depreciation. The discontinued operations of OMIDRIA
relates to the costs of drug manufacturing stability, quality control testing and costs of employees and consultants. The following table illustrates our expenses
associated with these activities:
Continuing research and development expenses:
Direct external expenses:
Clinical research and development:
MASP-2 program - OMS721 (narsoplimab)
MASP-3 program - OMS906
MASP-2 program - OMS1029
Other
Total clinical research and development
Preclinical research and development
Total direct external expenses
Internal, overhead and other expenses
Stock-based compensation expenses
Total continuing research and development expenses
Discontinued research and development expenses
Total research and development expenses
2023
Year Ended
Year Ended December 31,
2022
(In thousands)
2021
$
$
35,352 $
22,853
6,249
153
64,607
5,172
69,779
40,337
4,754
114,870
—
114,870 $
50,408 $
6,304
2,687
442
59,841
7,254
67,095
39,503
6,123
112,721
—
112,721 $
48,806
7,005
—
555
56,366
15,031
71,397
40,587
6,791
118,775
3,839
122,614
Clinical research and development expenses increased $4.8 million between 2023 and 2022. The $16.5 million increase in OMS906 development costs was due to an
increase in manufacturing and Phase 2 clinical trial costs and a $5.0 million development milestone paid in 2023 under a technology license agreement. The $3.6 million
increase in OMS1029 expense was primarily due to costs associated with initiation of human trials and other clinical development costs, i.e. the transition from preclinical
to clinical development status in the third quarter of 2022. These increases were offset by decreased narsoplimab manufacturing costs during 2023.
The $3.5 million increase in clinical research and development costs between 2022 and 2021 was primarily due to the advancement of OMS1029 from preclinical
status to clinical research and development status on initiation of the Phase 1 clinical trial in the third quarter of 2022. Additionally, we incurred increased narsoplimab
drug manufacturing costs in 2022 compared to the prior year. These costs were partially offset by reduced costs in our OMS906 program resulting from the completion
of toxicology study work in the second quarter of 2022.
Preclinical research and development expenses decreased $2.1 million in 2023 compared to 2022, primarily due to the migration of OMS1029 from preclinical to
clinical research and development status during the third quarter of 2022, offset by an increase in preclinical oncology research costs during 2023. The $7.8 million
decrease in 2022 over 2021 in preclinical research and development expenses was primarily due to the migration of OMS1029 from preclinical to clinical research and
development status during the third quarter of 2022.
47
The changes in stock-based compensation expense between the three covered years were due to the valuations of employee stock options.
We expect our overall research and development costs in 2024 to be similar to 2023, driven by commercial narsoplimab manufacturing costs expected to be incurred
prior to FDA approval of TA-TMA, increases in OMS906 clinical and manufacturing costs, and decreases in OMS721 clinical costs. Our accounting policy is to expense
all manufacturing costs related to drug candidates until regulatory approval is reasonably assured in either the U.S. or Europe.
At this time, we are unable to estimate with certainty the longer-term costs we will incur in the continued development of our drug candidates due to the inherently
unpredictable nature of our preclinical and clinical development activities. Clinical development timelines, the probability of success and development costs can differ
materially as new data become available and as expectations change. Our future research and development expenses will depend, in part, on the preclinical or clinical
success of each drug candidate as well as ongoing assessments of each program’s commercial potential. In addition, we cannot forecast with precision which drug
candidates, if any, may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our
development plans and capital requirements.
We are required to expend substantial resources in the development of our drug candidates due to the lengthy process of completing clinical trials and seeking
regulatory approval. Any failure or delay in completing clinical trials, or in obtaining regulatory approvals, could delay our generation of product revenue and increase
our research and development expenses.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses are comprised primarily of salaries, benefits and stock-based compensation costs for sales, marketing and
administrative personnel who are not directly engaged in research and development. Costs also include marketing and selling expenses, professional and legal services,
general corporate costs and an allocation of our occupancy costs.
2023
Year Ended December 31,
2022
(In thousands)
2021
Continuing selling, general and administrative expenses:
Selling, general and administrative expenses, excluding stock-based compensation
expense
Stock-based compensation expense
Total continuing selling, general and administrative expenses
Discontinued selling, general and administrative expenses
Total selling, general and administrative expenses
$
$
42,520 $
7,140
49,660
—
49,660 $
42,626 $
8,042
50,668
—
50,668 $
46,688
8,154
54,842
25,428
80,270
Continuing selling, general and administrative expenses, excluding stock-based compensation expense, decreased $4.1 million between 2022 and 2021 primarily
related to reduced spending on pre-commercialization sales and marketing activities which were higher in 2021 as we prepared for the then anticipated approval and
commercial launch of narsoplimab for the treatment of TA-TMA.
The changes in stock-based compensation expense between the three covered years were due to the valuations of employee stock options.
48
Our selling, general and administrative expenses for 2024 will be highly dependent on whether narsoplimab receives U.S. marketing approval for treatment of TA-
TMA. If TA-TMA is approved in 2024, we expect to hire a field sales force and initiate commercial launch activities which will increase our selling, general and
administrative expenses. If narsoplimab is not approved in 2024, our selling, general and administrative expenses are expected to decrease in 2024.
Interest Expense
2023
Year Ended December 31,
2022
(In thousands)
2021
Interest expense
$
30,844 $
22,702 $
19,669
Interest expense is primarily comprised of interest and amortization of debt discount and issuance costs related to our convertible senior notes and interest on our
DRI royalty obligation (see Part II, Item 8, "Note 6 – Convertible Senior Notes" and "Note 8 – OMIDRIA Royalty Obligation” to our Consolidated Financial Statements
in this Annual Report on Form 10-K for additional information).
Interest expense increased $8.1 million in 2023 compared to 2022 primarily due to incurring interest from our DRI royalty obligation for the full year. Interest expense
increased $3.0 million in 2022 compared to 2021 primarily due to interest incurred from our DRI royalty obligation only in the fourth quarter of 2022.
Interest and Other Income
Interest and other income
$
16,342 $
4,062 $
1,740
The $12.3 million increase in interest and other income between 2023 and 2022 was primarily due to holding higher average cash and investment balances than in
the prior year as a result of receiving a $200.0 million Milestone Payment from Rayner in February 2023. The $2.3 million increase in interest and other income between
2022 and 2021 was primarily attributable to obtaining significantly higher interest rates on our cash and investments in 2022.
We expect interest and other income in 2024 to be less than 2023 primarily due to lower average cash and investment balances during 2024.
2023
Year Ended December 31,
2022
(In thousands)
2021
49
Gain on Early Extinguishment of Convertible Senior Notes
2023
Year Ended December 31,
2022
(In thousands)
2021
Gain on early extinguishment of convertible senior notes
$
4,112 $
— $
—
In December 2023, we repurchased $9.1 million par value of our 2026 Notes at a discount, realizing a $4.1 million non-cash gain on extinguishment.
Net Income from Discontinued Operations, Net of Tax
On December 23, 2021, we sold our commercial drug, OMIDRIA, to Rayner. As a result of the OMIDRIA divestiture, the results of OMIDRIA operations have been
reclassified to discontinued operations for all periods presented.
Net income from OMIDRIA discontinued operations, net of tax is shown below:
Product sales, net
Costs and expenses
Gross margin
Gain on sale of OMIDRIA
Milestone income
Interest on OMIDRIA contract royalty asset
Remeasurement adjustments
Other income
Income before income tax
Income tax expense (1)
Net income from discontinued operations, net of tax
2023
Year Ended December 31,
2022
(In thousands)
2021
— $
—
—
—
—
15,315
41,167
1,087
57,569
(462)
57,107 $
— $
—
—
—
200,000
18,634
14,457
307
233,398
(3,952)
229,446 $
110,735
30,631
80,104
305,648
—
—
—
1,035
386,787
(1,006)
385,781
$
$
(1) For further discussion of income tax expense, please refer to Part II, Item 8, “Note 13 – Income Taxes” to our Consolidated Financial Statements in this Annual
Report on Form 10-K.
50
Gain on the Sale of OMIDRIA
On December 23, 2021, we completed the sale of OMIDRIA to Rayner and received $126.0 million in cash at the closing. Additionally, we recorded an OMIDRIA
contract royalty asset of $184.6 million for the rights to receive future royalties from Rayner on OMIDRIA net sales. The sale of OMIDRIA qualified as an asset sale
under GAAP.
Rayner’s U.S. net sales of OMIDRIA for the years ended December 31, 2023 and 2022 were $135.3 million and $130.9 million, respectively. We earned royalties of
$40.6 million and $65.4 million on OMIDRIA net sales for the years ended December 31, 2023 and 2022, respectively, which we recorded as a reduction from the
OMIDRIA contract royalty asset. The decrease in royalty earnings between the years ended December 31, 2023 and 2022 was due to a reduction of our royalty rate on
U.S. net sales of OMIDRIA from 50% to 30% upon achievement of the $200.0 million Milestone Event. (For further discussion of discontinued operations, please refer
to Part II, Item 8, “Note 7 – Discontinued Operations – Sale of OMIDRIA” to our Consolidated Financial Statements in this Annual Report on Form 10-K).
Milestone Income
The Milestone Event occurred in December 2022, entitling us to receive a Milestone Payment of $200.0 million from Rayner. We received the Milestone Payment
together with accrued interest in February 2023.
Interest Income
During the years ended December 31, 2023 and 2022, we recorded $15.3 million and $18.6 million, respectively, of income in discontinued operations, representing
interest income on the outstanding OMIDRIA contract royalty asset at an implied interest rate of 11.0%.
Remeasurement Adjustments
During the years ended December 31, 2023 and 2022, we recorded $41.2 million and $14.5 million, respectively, of remeasurement adjustments. The $26.7 million
increase in 2023 was primarily attributable to assigning a greater probability of achieving higher royalty earnings on net sales of OMIDRIA as supported by our most
recent transaction with DRI, which closed on February 1, 2024.
Income Tax Expense
For the years ended December 31, 2023, 2022 and 2021, we recorded state income tax expense of $0.5 million, $4.0 million and $1.0 million, respectively, which could
not be offset by prior period net operating losses and tax credit carryforwards.
51
Financial Condition - Liquidity and Capital Resources
As of December 31, 2023, we had cash, cash equivalents and short-term investments of $171.8 million. For the year ended December 31, 2023, our cash provided
by operations was $74.7 million and our net loss was $117.8 million. In February 2024, we received $115.5 million upon the sale to DRI of our U.S. OMIDRIA royalty
receipts payable between January 1, 2024 and December 31, 2031.
Historically, we have incurred net losses from continuing operations and negative operating cash flows. We have not yet established an ongoing source of revenue
sufficient to cover our operating costs; therefore, we potentially need to continue to raise additional capital to accomplish our business plan and to retire our
outstanding convertible senior notes due in 2026. We plan to continue to fund our operations for at least the next twelve months with our existing cash and investments
and the $115.5 million we received in February 2024 from DRI. We have a sales agreement to sell shares of our common stock, from time to time, in an “at the market”
equity offering facility through which we may offer and sell shares of our common stock equaling an aggregate amount up to $150.0 million. Should it be determined to
be strategically advantageous, we could pursue debt financings as well as public and private offerings of our equity securities, similar to those we have previously
completed, or other strategic transactions, which may include licensing a portion of our existing technology. Should it be necessary to manage our operating expenses,
we could also reduce our projected cash requirements by delaying clinical trials, reducing selected research and development efforts, or implementing other
restructuring activities.
52
Cash Flow Data
Selected cash flow data
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
2023
Year Ended December 31,
2022
(In thousands)
2021
$
$
$
74,726 $
27,454 $
(106,084) $
(86,483) $
(127,564) $
124,248 $
(109,722)
193,710
6,319
Operating Activities. Net cash provided by operating activities for the year ended December 31, 2023 increased by $161.2 million compared to the same period in
2022. This increase was primarily due to collecting the $200.00 million Milestone Payment from Rayner in the current year and a $15.3 increase in accounts payable and
accrued expenses. These increases were offset by a $26.7 million change in the remeasurement of the OMIDRIA contract royalty asset, $8.7 million related to the
accretion of interest on U.S. government treasury bills and a $4.1 million gain on the early extinguishment of a portion of our 2026 Notes.
Net cash used in operating activities for the year ended December 31, 2022 decreased by $23.2 million compared to the same period in 2021. This change was
primarily due to a decrease in net income of $146.8 million as we recognized $310.6 million of non-cash gain from the sale of OMIDRIA in the prior year and a change in
cash collections of $124.7 million through accounts receivables and royalty earnings. This was offset by a $200.0 million milestone receivable recognized in 2022 as well
as $35.6 million in non-cash charges and $29.7 million of accounts payable, accrued expenses and other.
Investing Activities. Net cash provided by investing activities increased $155.0 million during 2023 compared to 2022 driven by net proceeds from the purchase and
sale of investments.
Net cash provided by investing activities decreased $321.3 million during 2022 compared to 2021. This was driven by a $194.5 million decrease in net proceeds from
the purchase and sale of investments and recognizing $126.0 million in proceeds from the sale of OMIDRIA in 2021.
Financing Activities. Net cash used in financing activities decreased $230.3 million during 2023 compared to the prior year. The decrease was primarily due to
receiving $125.0 million in 2022 in connection with selling a portion of our OMIDRIA royalties to DRI and extinguishing $95.0 million of our 6.25% convertible senior
notes (the "2023 Notes"). In addition, we paid $4.9 million to retire $9.1 million par value of our 2026 Notes and repurchased $4.7 million of our common stock through a
stock repurchase program in 2023.
Net cash provided by financing activities increased $117.9 million during 2022 compared to the prior year. The increase was primarily due to receiving cash proceeds
of $125.0 million in connection with the sale of a portion of our OMIDRIA royalties to DRI, which was partially offset by a reduction in stock option exercises of $8.0
million during 2022.
Contractual Obligations and Commitments
Operating Leases
We lease our office and laboratory space in The Omeros Building under a lease agreement with BMR - 201 Elliott Avenue LLC. The initial term of the lease ends in
November 2027 and we have two options to extend the lease term, each by five years. As of December 31, 2023, the remaining aggregate non-cancelable rent payable
under the initial term of the lease, excluding common area maintenance and related operating expenses, was $26.9 million.
We have finance leases for certain laboratory and office equipment that have lease terms expiring through November 2026.
53
Convertible Notes
For more information regarding the convertible senior notes extinguished in mid-November 2023 and convertible senior notes due in February 2026, see Part II,
Item 8, “Note 6 - Convertible Senior Notes”.
OMIDRIA Royalty Obligation
For more information regarding the OMIDRIA Royalty Obligation, see Part II, Item 8, “Note 8 - OMIDRIA Royalty Obligation”.
Goods & Services
We have certain non-cancelable obligations under other agreements for the acquisitions of goods and services associated with the manufacturing of our drug
candidates, which contain firm commitments. As of December 31, 2023, our aggregate firm commitments were $25.8 million.
We may be required, in connection with in-licensing or asset acquisition agreements, to make certain royalty and milestone payments and we cannot, at this time,
determine when or if the related milestones will be achieved or whether the events triggering the commencement of payment obligations will occur. Therefore, such
payments are not included in the table above. For information regarding agreements that include these royalty and milestone payment obligations, see Part II, Item 8,
“Note 10 - Commitments and Contingencies” to our Consolidated Financial Statements in this Annual Report on Form 10-K.
Critical Accounting Policies and Significant Judgments and Estimates
The preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on
various other factors that we believe are reasonable under the circumstances; however, actual results could differ from those estimates. An accounting policy is
considered critical if it is important to a company’s financial condition and results of operations and if it requires the exercise of significant judgment and the use of
estimates on the part of management in its application. Although we believe that our judgments and estimates are appropriate, actual results may differ materially from
our estimates. For a summary of our critical accounting policies, see Part II, Item 8, “Note 2 - Significant Accounting Policies” to our Consolidated Financial Statements
in this Annual Report on Form 10-K.
We believe the following to be our critical accounting policies because they are both important to the portrayal of our financial condition and results of operations
and they require critical judgment by management and estimates about matters that are uncertain:
● revenue recognition;
● OMIDRIA royalties and contract asset accounting;
● OMIDRIA royalty obligation accounting;
● research and development expenses related to clinical trials;
● accounting for convertible debt issuances, primarily related to fair valuing debt and issuance costs; and
● stock-based compensation, primarily related to our fair value assumptions.
54
If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations for
future periods could be materially affected.
Product Revenue Recognition
Prior to the December 23, 2021 sale of OMIDRIA to Rayner, we recorded revenue from product sales when the product was delivered to our wholesalers and title for
the product was transferred. Product sales were recorded net of wholesaler distribution fees and estimated chargebacks, rebates, returns and purchase-volume
discounts. Accruals or allowances were established for these deductions in the same period when revenue was recognized, and actual amounts incurred were offset
against the applicable accruals or allowances. We reflected each of these accruals or allowances as either a reduction in the related accounts receivable or as an accrued
liability depending on how the amount was expected to be settled.
OMIDRIA Royalties, Milestones and Contract Royalty Assets
We have rights to receive future royalties from Rayner on OMIDRIA net sales at royalty rates that vary based on geography and certain regulatory contingencies.
Therefore, future OMIDRIA royalties are treated as variable consideration. To measure the OMIDRIA contract royalty asset, we used the expected value approach
which is the discounted sum of probability-weighted royalty payments, we would receive using a range of potential outcomes, to the extent that it is probable that a
significant reversal in the amount of cumulative income recognized will not occur. Our calculations take the net present value of the sum to arrive at the OMIDRIA
contract royalty asset stated on the balance sheet. We revalued the contract royalty asset to reduce the applicable royalty percentage from 50% to 30%, as required
under the Asset Purchase Agreement following the occurrence of the December 2022 event triggering the $200.0 million Milestone Payment. Royalties earned will be
recorded as a reduction to the OMIDRIA contract royalty asset. The amount recorded in discontinued operations in future periods will reflect interest earned on the
outstanding OMIDRIA contract royalty asset and any amounts received different from the expected royalties recorded at closing. The OMIDRIA contract royalty asset
is subject to changes in net sales of OMIDRIA. All else being equal, a 10% decrease or increase in net sales results in a $16.8 million change in value of the OMIDRIA
contract royalty asset, resulting in a potential contract royalty asset valued within the range of $151.3 million to $184.9 million. Changes in net sales could occur due to
various risks such as competitors entering the market, changes in the standard of care for cataract patients and loss of separate payment status for OMIDRIA. In
determining the value of the OMIDRIA contract royalty asset, we have considered all of these factors. The OMIDRIA contract royalty asset will be re-measured
periodically using the expected value approach based on actual results and future expectations. Any required adjustment to the OMIDRIA contract royalty asset will be
recorded in discontinued operations.
We receive monthly royalty payments based on Rayner’s OMIDRIA product sales in accordance with the Asset Purchase Agreement. Upon the closing of the
Asset Purchase Agreement, we determined the expected minimum net present value of future OMIDRIA royalty receipts and recognized the amount as a gain on the sale
of OMIDRIA in discontinued operations on our income statement and as an OMIDRIA contract royalty asset on our balance sheet. To determine the OMIDRIA contract
royalty asset, we used the expected value approach which is based on the sum of probability-weighted payments we would receive using a range of potential outcomes
at an effective interest rate of 11%. The contract royalty asset excludes any revenue which potentially may be reversed in the event of an over estimation.
OMIDRIA Royalty Obligations
The sale of any portion of our OMIDRIA royalty receipts is treated as a liability on our consolidated balance sheet to the extent that any of our royalties are capped,
as this does not result in the transfer of a participating interest. We amortize royalty obligation liabilities over the term of the arrangement using the effective interest
method and classify interest expense as a component of continuing operations.
55
To the extent our estimates of future royalties are less than previous estimates, we will adjust the carrying amount of the royalty obligation to the present value of
the revised estimated cash flows, discounted at the original effective interest rate utilizing the cumulative catch-up method. The adjustment would be recognized as a
component of net income (loss) from continuing operations.
Research and Development Expenses
Research and development costs are comprised primarily of:
● contracted research and manufacturing costs;
● clinical study costs;
● costs of personnel, including salaries, benefits and stock compensation;
● consulting arrangements;
● depreciation and an allocation of our occupancy costs; and
● other expenses incurred to sustain our overall research and development programs.
Contracted research and manufacturing costs are primarily incurred in the development and production of our drug candidates. Prior to approval, our estimates are
based on the timing of services provided. We record accrued expenses equal to our estimated expense in excess of amount invoiced by the suppliers.
Clinical trial expenses are estimated on a cost per patient that varies depending on the clinical trial site. As actual costs become known to us, we adjust our
estimates; these changes in estimates may result in understated or overstated expenses at any given point in time.
Convertible Debt Issuances
On January 1, 2021, we adopted Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion Options (Subtopic 470.20 and Derivatives and
Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) on a modified retrospective basis. ASU 2020-06 removes the separate liability and equity accounting for
our convertible senior notes. As of January 1, 2021, we account for our convertible senior notes wholly as debt. Prior to January 1, 2021, we accounted for convertible
debt that may be settled wholly or partially in cash upon conversion as having both a liability component (debt) and an equity component (conversion option). The
cash conversion guidance applies as the embedded conversion features meet the requirements for a derivative scope exception for instruments that are both indexed to
an entity’s own stock and classified in stockholders’ equity in the balance sheet. Principal cash proceeds from the instrument are allocated first to the liability
component based on the fair value of non-convertible debt using the income and market-based approaches to determine an effective interest rate for present valuing the
cash proceeds. For the income-based approach, we use a convertible bond pricing model that includes several assumptions such as volatility and a risk-free rate. For the
market-based approach, we observe the price of derivative price instruments purchased in conjunction with our convertible senior note issuances or evaluate issuances
of convertible debt securities by other companies with similar credit risk ratings at the time of issuance. The amount of the equity component is then calculated by
deducting the fair value of the liability component from the principal amount of the instrument. Issuance costs from the instrument are then allocated to the liability and
equity components in the same proportion as the proceeds. The equity component of the cash principal proceeds and the liability component of the issuance costs
represent a debt discount.
56
Transactions involving contemporaneous exchanges of cash between the same debtor and creditor in connection with the issuance of a new debt obligation and
satisfaction of an existing debt obligation by the debtor are evaluated as a modification or an exchange transaction depending on whether the exchange is determined to
have substantially different terms. We extinguished the 2023 Notes at maturity. The partial repurchase of the 2026 Notes was deemed to be a modification which we
accounted for as a debt extinguishment.
Stock-Based Compensation
Stock-based compensation expense is recognized for all share-based payments made to employees, directors and non-employees based on estimated fair values.
The fair value of our stock options is calculated using the Black-Scholes valuation model, which requires assumptions regarding volatility, risk-free rates, forfeiture rates
and expected option life. We estimate forfeitures for expense recognition based on our historical experience. Groups of employees that have similar historical forfeiture
behavior are considered separately. If any of the assumptions used in the Black-Scholes model change significantly, stock-based compensation expense for new awards
may differ materially from that recorded for existing awards and stock-based compensation for non-employees will vary as the awards are re-measured over the vesting
term.
Recent Accounting Pronouncements
Please refer to Part II, Item 8, “Note 2 - Significant Accounting Policies” to our Consolidated Financial Statements in this Annual Report on Form 10-K for
information regarding recent accounting pronouncements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk is primarily confined to our investment securities. The primary objective of our investment activities is to preserve our capital to fund
operations, and we do not enter into financial instruments for trading or speculative purposes. We also seek to maximize income from our investments without assuming
significant risk. To achieve our objectives, we maintain a portfolio of investments in high-credit-quality securities. As of December 31, 2023, we had cash, cash
equivalents and short-term investments of $171.8 million. In accordance with our investment policy, we invest funds in highly liquid, investment-grade securities. The
securities in our investment portfolio are not leveraged and are classified as held-to-maturity. We currently do not hedge interest rate exposure. Because of the short-
term maturities of our investments, we do not believe that an increase in market rates would have a material negative effect on the realized value of our investment
portfolio. We actively monitor changes in interest rates and, with our current portfolio of short-term investments which we intend to hold to maturity, we are not exposed
to significant loss due to changes in interest rates.
57
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income (Loss)
Consolidated Statement of Shareholders’ Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
58
60
61
62
63
64
58
To the Shareholders and the Board of Directors Omeros Corporation
Opinion on the Financial Statements
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of Omeros Corporation (the Company) as of December 31, 2023 and 2022, the related consolidated
statements of operations and comprehensive income (loss), shareholders' equity (deficit) and cash flows for each of the three years in the period ended December 31,
2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of an expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be
communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account
or disclosures to which it relates.
59
OMIDRIA Contract Royalty Asset
Description of the
Matter
As more fully described in Note 2 of the financial statements, the Company recorded a contract royalty asset in connection with its sale of
OMIDRIA to Rayner Surgical, Inc. on December 23, 2021. To measure that contract royalty asset, the Company used the expected value
approach, which is the discounted sum of the probability-weighted royalty payments using a range of potential outcomes, to the extent that it is
probable that a significant reversal in the amount of cumulative income recognized will not occur.
How We Addressed
the Matter in Our
Audit
Auditing management’s forecasts is complex and requires judgment due to the level of estimation uncertainty and the sensitivity of the asset’s
value to changes in assumptions. In particular, the value of the OMIDRIA contract royalty asset is sensitive to changes in significant
assumptions such as forecasted royalties due from Rayner Surgical, Inc. in various scenarios and the probability-weighting of those scenarios,
which are affected by expectations about future market and regulatory conditions.
To test the measurement of the OMIDRIA contract royalty asset, we performed audit procedures that included, among others, evaluating (1) the
estimated future royalties in various scenarios, and (2) management’s relative weighting of those scenarios. We compared estimated future
royalties to the Company’s historical revenues and royalty rates in the asset purchase agreement. We evaluated the appropriateness and
likelihood of occurrence of the various scenarios included in management’s calculation, given the Company’s experience and industry trends, and
verified the clerical accuracy of the calculation. We also evaluated the Company’s disclosures in the consolidated financial statements related to
these matters.
/s/Ernst & Young LLP
We have served as the Company’s auditor since 1998.
Seattle, Washington
April 1, 2024
60
OMEROS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
$
$
$
Assets
Current assets:
Cash and cash equivalents
Short-term investments
OMIDRIA contract royalty asset, short-term
Receivables
Prepaid expense and other assets
Total current assets
OMIDRIA contract royalty asset
Right of use assets
Property and equipment, net
Restricted investments
Total assets
Liabilities and shareholders’ equity (deficit)
Current liabilities:
Accounts payable
Accrued expenses
Current portion of convertible senior notes, net
Current portion of OMIDRIA royalty obligation
Current portion of lease liabilities
Total current liabilities
Convertible senior notes, net
OMIDRIA royalty obligation
Lease liabilities, non-current
Other accrued liabilities - noncurrent
Commitments and contingencies (Note 10)
Shareholders’ equity (deficit):
Preferred stock, par value $0.01 per share, 20,000,000 shares authorized; none issued and outstanding at December 31,
2023 and December 31, 2022
Common stock, par value $0.01 per share, 150,000,000 shares authorized at December 31, 2023 and December 31, 2022;
61,128,597 and 62,828,765 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively.
Additional paid-in capital
Accumulated deficit
Total shareholders’ equity (deficit)
Total liabilities and shareholders’ equity (deficit)
See accompanying Notes to Consolidated Financial Statements
$
December 31,
2023
December 31,
2022
7,105
164,743
29,373
8,096
8,581
217,898
138,736
18,631
1,950
1,054
378,269
7,712
31,868
—
8,576
5,160
53,316
213,155
116,550
18,143
2,088
—
611
727,936
(753,530)
(24,983)
378,269
$
$
$
$
11,009
183,909
28,797
213,221
6,300
443,236
123,425
21,762
1,492
1,054
590,969
5,989
30,551
94,381
1,152
4,310
136,383
220,906
125,126
22,426
444
—
628
720,773
(635,717)
85,684
590,969
61
OMEROS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except share and per share data)
Costs and expenses:
Research and development
Selling, general and administrative
Total costs and expenses
Loss from operations
Interest expense
Interest and other income
Gain on early extinguishment of convertible senior notes
Net loss from continuing operations
Net income from discontinued operations, net of tax
Net income (loss)
Basic and diluted net income (loss) per share:
Net loss from continuing operations
Net income from discontinued operations
Net income (loss)
2023
Year Ended December 31,
2022
2021
$
$
$
$
114,870 $
49,660
164,530
(164,530)
(30,844)
16,342
4,112
(174,920)
57,107
(117,813) $
(2.79) $
0.91
(1.88) $
112,721 $
50,668
163,389
(163,389)
(22,702)
4,062
—
(182,029)
229,446
47,417 $
(2.90) $
3.66
0.76 $
118,775
54,842
173,617
(173,617)
(19,669)
1,740
—
(191,546)
385,781
194,235
(3.07)
6.19
3.12
Weighted-average shares used to compute basic and diluted net income (loss) per share
62,739,227
62,737,091
62,344,100
See accompanying Notes to Consolidated Financial Statements
62
Total
Deficit
Accumulated Shareholders’
Equity/(Deficit)
(120,752)
8,382
91
(241)
17,539
(75,474)
194,235
23,780
415
—
14,072
47,417
85,684
150
—
(4,654)
11,650
(117,813)
(24,983)
(872,672) $
—
—
—
—
(4,697)
194,235
(683,134)
—
—
—
47,417
(635,717)
—
—
—
—
(117,813)
(753,530) $
751,304 $
8,372
91
(241)
17,539
(70,777)
—
706,288
414
(1)
14,072
—
720,773
150
(1)
(4,636)
11,650
—
727,936 $
OMEROS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
(In thousands, except share data)
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Balance at December 31, 2020
Issuance of common stock upon exercise of stock options
Issuance of common stock upon grant of restricted stock awards
At the market offering fees
Stock-based compensation
Cumulative effect of adopting ASU 2020-06
Net income
Balance at December 31, 2021
Issuance of common stock upon exercise of stock options
Issuance of common stock upon vesting of restricted stock units
Stock-based compensation
Net income
Balance at December 31, 2022
Issuance of common stock upon exercise of stock options
Issuance of common stock upon vesting of restricted stock units
Repurchases of common stock
Stock-based compensation
Net loss
Balance at December 31, 2023
61,671,231 $
945,924
11,700
—
—
—
—
62,628,855
101,160
98,750
—
—
62,828,765
36,726
67,250
(1,804,144)
—
—
61,128,597 $
616 $
10
—
—
—
—
—
626
1
1
—
—
628
—
1
(18)
—
—
611 $
See accompanying Notes to Consolidated Financial Statements
63
OMEROS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
2023
Year Ended December 31,
2022
2021
$
(117,813) $
47,417 $
194,235
Stock-based compensation expense
Non-cash interest expense on convertible senior notes
Depreciation and amortization
Remeasurement on OMIDRIA contract royalty asset
Interest on OMIDRIA contract royalty asset
Accretion on U.S. government treasury bills, net
Gain on early extinguishment of convertible senior notes
Gain on sale of OMIDRIA, gross
Non-cash interest expense on future royalty obligation
Changes in operating assets and liabilities:
Receivables
OMIDRIA contract royalty asset
Accounts payable and accrued expense
Prepaid expenses and other
Net cash provided by (used in) operating activities
Investing activities:
Purchases of investments
Proceeds from the sale and maturities of investments
Purchases of property and equipment
Cash proceeds on sale of OMIDRIA
Net cash provided by (used in) investing activities
Financing activities:
Payments on convertible senior notes
Repurchases on common stock
Principal payments on OMIDRIA royalty obligation
Payments on finance lease obligations
Proceeds upon exercise of stock options
Proceeds upon entering into OMIDRIA royalty obligation
At the market offering costs
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash flow information
Cash paid for interest
Equipment acquired under finance lease
11,650
1,853
920
(41,167)
(15,315)
(8,714)
(4,112)
—
—
205,125
40,595
4,682
(2,978)
74,726
(1,018,602)
1,046,482
(426)
—
27,454
(99,873)
(4,654)
(1,152)
(555)
150
—
—
(106,084)
(3,904)
11,009
7,105 $
29,923 $
952 $
14,072
1,830
952
(14,457)
(18,634)
—
—
—
1,695
(175,066)
65,439
(10,665)
934
(86,483)
(429,045)
301,594
(113)
—
(127,564)
—
—
(417)
(750)
415
125,000
—
124,248
(89,799)
100,808
11,009 $
19,178 $
40 $
17,630
1,696
1,386
—
—
—
—
(310,563)
—
(34,314)
—
14,640
5,568
(109,722)
(32,006)
100,000
(277)
125,993
193,710
—
—
—
(1,823)
8,383
—
(241)
6,319
90,307
10,501
100,808
17,876
289
$
$
$
See accompanying Notes to Consolidated Financial Statements
64
OMEROS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1—Organization and Basis of Presentation
General
Omeros Corporation (“Omeros,” the “Company” or “we”) is a clinical-stage biopharmaceutical company committed to discovering, developing and commercializing
small-molecule and protein therapeutics for large-market as well as orphan indications targeting immunologic disorders including complement-mediated diseases,
cancers, and addictive and compulsive disorders. We marketed our first drug product OMIDRIA® (phenylephrine and ketorolac intraocular solution) 1% / 0.3% for use
during cataract surgery or intraocular lens replacement in the United States (the “U.S.”) until we sold OMIDRIA and related business assets on December 23, 2021 (see
“Sale of OMIDRIA Assets” below for additional information).
Our pipeline of clinical-stage development programs includes: narsoplimab, our antibody targeting mannan-binding lectin-associated serine protease 2 ("MASP-2"),
the effector enzyme of the lectin pathway of complement; OMS1029, our long-acting antibody targeting MASP-2; OMS906, our antibody targeting mannan-binding
lectin-associated serine protease-3 ("MASP-3"), the key activator of the alternative pathway of complement; and OMS527, our phosphodiesterase 7 ("PDE7") inhibitor
program.
Clinical development of narsoplimab is currently focused primarily on hematopoietic stem cell transplant-associated thrombotic microangiopathy ("TA-TMA"). Our
Biologics License Application ("BLA") for narsoplimab in TA-TMA is anticipated to be resubmitted with additional information to support potential approval of
narsoplimab in this indication. In October 2023, we announced the results of a pre-specified interim analysis of our Phase 3 ARTEMIS-IGAN trial evaluating narsoplimab
for the treatment of immunoglobulin A ("IgA") nephropathy. Topline results showed that narsoplimab did not reach statistically significant improvement over placebo
on the primary endpoint of reduction in proteinuria. Based on this result, we have discontinued the ARTEMIS-IGAN clinical trial.
Phase 1 and Phase 2 clinical programs are underway in our other clinical-stage assets.
Sale of OMIDRIA Assets
On December 23, 2021, we closed on an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Rayner Surgical Inc. (“Rayner”) for the sale of our
commercial product OMIDRIA. Rayner paid us $126.0 million in cash at closing, and we retained all outstanding accounts receivable, accounts payable and accrued
expenses as of the closing date. Additionally, we are entitled to future royalty payments on net sales of OMIDRIA.
Under the Asset Purchase Agreement, Omeros is entitled to receive a milestone payment of $200.0 million (the “Milestone Payment”) following an event (the
"Milestone Event") that establishes separate payment for OMIDRIA for a continuous period of at least four years when furnished in the ambulatory surgery center
(“ASC”) setting. In December 2022, the Milestone Event occurred and we recorded a $200.0 million milestone receivable. We received the Milestone Payment in
February 2023.
As a result of the divestiture, the results of OMIDRIA operations (e.g., revenues and operating costs) have been reclassified to discontinued operations in our
consolidated statements of operations and comprehensive income (loss) and excluded from continuing operations for all periods presented (See “Note 7 – Discontinued
Operations – Sale of OMIDRIA ”).
Basis of Presentation
Our consolidated financial statements include the financial position and results of operations of Omeros and our wholly owned subsidiaries. All inter-company
transactions have been eliminated. The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”).
Liquidity and Capital Resources
As of December 31, 2023, we had cash, cash equivalents and short-term investments of $171.8 million. Our cash provided by operations for the year ended
December 31, 2023 was $74.7 million and included our 2023 net loss for the year of $117.8 million and collection of the $200.0 million Milestone Payment in the first
quarter of 2023. We extinguished $95.0 million outstanding of convertible senior notes at maturity in November 2023. In February 2024, we received $115.5 million upon
the sale to DRI Healthcare Acquisition LP ("DRI") of substantially all of our expected remaining U.S.-only Rayner OMIDRIA royalty receipts payable through December
31, 2031 (see “Note 8 - OMIDRIA Royalty Obligation”).
65
Historically, we have incurred net losses from continuing operations and negative operating cash flows. We have not yet established an ongoing source of revenue
sufficient to cover our operating costs; therefore, we potentially need to continue to raise additional capital to accomplish our business plan and to retire our
outstanding convertible senior notes due in 2026. We plan to continue to fund our operations for at least the next twelve months with our existing cash and investments
and the $115.5 million we received in February 2024 from DRI. We have a sales agreement to sell shares of our common stock, from time to time, in an “at the market”
equity offering facility through which we may offer and sell shares of our common stock equaling an aggregate amount up to $150.0 million. Should it be determined to
be strategically advantageous, we could pursue debt financings as well as public and private offerings of our equity securities, similar to those we have previously
completed, or other strategic transactions, which may include licensing a portion of our existing technology. Should it be necessary to manage our operating expenses,
we could also reduce our projected cash requirements by delaying clinical trials, reducing selected research and development efforts, or implementing other
restructuring activities.
Segments
We operate in one segment. Management uses cash flow as the primary measure to manage our business and does not segment our business for internal reporting
or decision-making.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Significant items subject to such estimates include OMIDRIA contract royalty asset valuation, stock-based
compensation expense, and accruals for clinical trials and manufacturing of drug product. We base our estimates on historical experience and on various other factors
that we believe are reasonable under the circumstances; however, actual results could differ from these estimates.
Note 2—Significant Accounting Policies
Discontinued Operations
We review the presentation of planned or completed business dispositions in the consolidated financial statements based on the available information and events
that have occurred. The review consists of evaluating whether the business meets the definition of a component for which the operations and cash flows are clearly
distinguishable from the other components of the business and, if so, whether it is anticipated that after the disposal the cash flows of the component would be
eliminated from continuing operations and whether the disposition represents a strategic shift that has a major effect on operations and financial results.
Planned or completed business dispositions are presented as discontinued operations when all the criteria described above are met. For those divestitures that
qualify as discontinued operations, all comparative periods presented are reclassified in the consolidated balance sheets. Additionally, the results of operations of a
discontinued operation are reclassified to income from discontinued operations, net of tax, for all periods presented in the consolidated statements of operations and
comprehensive income (loss). Results of discontinued operations include all revenues and expenses directly derived from such businesses. General corporate overhead
is not allocated to discontinued operations. The OMIDRIA asset sale to Rayner qualifies as a discontinued operation and has been presented as such for all reporting
periods presented. The Company included information regarding cash flows from discontinued operations (see “Note 7 – Discontinued Operations – Sale of
OMIDRIA”).
66
OMIDRIA Royalties, Milestones and Contract Royalty Assets
We have rights to receive future royalties from Rayner on OMIDRIA net sales at royalty rates that vary based on geography and certain regulatory contingencies.
Therefore, future OMIDRIA royalties are treated as variable consideration. The sale of OMIDRIA qualified as an asset sale under GAAP. To measure the OMIDRIA
contract royalty asset, we used the expected value approach which is the sum of the discounted probability-weighted royalty payments, we would receive using a range
of potential outcomes, to the extent that it is probable that a significant reversal in the amount of cumulative income recognized will not occur. As contemplated by the
Asset Purchase Agreement, the royalty rate applicable to U.S. net sales of OMIDRIA was reduced from 50% to 30% upon the occurrence, in December 2022, of the
event triggering the $200.0 million Milestone Payment. The reduction in our royalty rate to 30% continues until the expiration or termination of the last issued and
unexpired U.S. patent, which we expect to occur no earlier than 2035. Consequently, we revalued the OMIDRIA contract royalty asset using the 30% royalty rate on U.S.
net sales and adjusted the probability weighted outcomes to reflect the occurrence of the Milestone Event. Royalties earned are recorded as a reduction to the
OMIDRIA contract royalty asset. The amount recorded in discontinued operations in future periods will reflect interest earned on the outstanding OMIDRIA contract
royalty asset at 11.0% and any amounts we receive that are different from the expected royalties. The OMIDRIA contract royalty asset is re-measured periodically using
the expected value approach based on actual results and future expectations. Any required adjustment to the OMIDRIA contract royalty asset is recorded in
discontinued operations.
OMIDRIA Royalty Obligation
On September 30, 2022, we sold to DRI an interest in a portion of our future OMIDRIA royalty receipts for a purchase price of $125.0 million and recorded as an
“OMIDRIA royalty obligation” on our consolidated balance sheet. The liability is amortized over the term of the arrangement using the implied effective interest rate
of 9.4%. Interest expense is recorded as a component of continuing operations.
To the extent our estimates of future royalties are less than previous estimates, we will adjust the carrying amount of the OMIDRIA royalty obligation to the present
value of the revised estimated cash flows, discounted at the effective interest rate utilizing the cumulative catch-up method. The adjustment would be recognized as a
component of net income (loss) from continuing operations (see “Note 8 - OMIDRIA Royalty Obligation”).
Cash and Cash Equivalents, Short-Term Investments and Restricted Investments
Cash and cash equivalents include highly liquid investments with a maturity of three months or less on the date of purchase which can be easily converted into
cash without a significant impact to their value. Short-term investment securities are classified as held-to-maturity. Investments classified as held-to-maturity are carried
at cost. Amortization, accretion, interest, and dividends, realized gains and losses and declines in value judged to be other-than-temporary are included in other income.
The cost of securities sold is based on the specific-identification method. Investments with maturities of less than one year, or those for which management intends to
use the investments to fund current operations, are included in current assets. We evaluate whether an investment is other-than-temporarily impaired based on the
specific facts and circumstances. Factors that are considered in determining whether an other-than-temporary decline in value has occurred include: the market value of
the security in relation to its cost basis; the financial condition of the investee; and the intent and ability to retain the investment for a sufficient period of time to allow
for recovery in the market value of the investment. Restricted investments held in money-market funds include security deposits held by our landlord.
Investment income, which is included as a component of other income, consists primarily of interest earned.
67
Inventory
We expense inventory costs related to product candidates as research and development expenses until regulatory approval is reasonably assured in the U.S. or the
European Union (“EU”). Once approval is reasonably assured, costs, including amounts related to third-party manufacturing, transportation and internal labor and
overhead, will be capitalized.
Receivables
Receivables at December 31, 2023 primarily consist of royalties receivable from Rayner. Receivables at December 31, 2022 also included the $200.0 million Milestone
Payment which we received in February 2023. Considering the nature of our receivables, we concluded an allowance for doubtful accounts was not necessary as of
December 31, 2023 and 2022, respectively.
Property and Equipment, Net
Property and equipment are stated at cost, and depreciation is calculated using the straight-line method over the estimated useful life of the assets, which is
generally three to 10 years. Equipment acquired through finance leases is recorded as property and equipment and is amortized over the shorter of the useful lives of the
related assets or the lease term. Expenditures for repairs and maintenance are expensed as incurred.
Convertible Senior Notes
On January 1, 2021, we adopted Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion Options (Subtopic 470.20 and Derivatives and
Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) on a modified retrospective basis. ASU 2020-06 removed the separate liability and equity accounting for
our convertible senior notes that was required under previous guidance and allows us to account for our convertible senior notes wholly as debt. Upon adoption, we
removed the equity component allocated to debt issuance costs.
Transactions involving contemporaneous exchanges of cash between the same debtor and creditor in connection with the issuance of a new debt obligation and
satisfaction of an existing debt obligation are evaluated as a modification or an extinguishment depending on whether the exchange is determined to have substantially
different terms. We extinguished the 6.25% convertible senior notes (the “2023 Notes”) at par upon maturity on November 15, 2023. In December 2023, we repurchased
$9.1 million par value of our 5.25% convertible senior notes (“2026 Notes”) at a discount, realizing a $4.1 million non-cash gain on extinguishment.
68
Impairment of Long-Lived Assets
We assess the impairment of long-lived assets, whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.
Recoverability of these assets is measured by comparing the carrying value to future undiscounted cash flows that the asset is expected to generate. If the asset is
impaired, the amount of any impairment will be reflected in the results of operations in the period of impairment. We have not recognized any impairment losses for
the years ended December 31, 2023, 2022 and 2021.
Revenue Recognition
When we enter into a customer contract, we perform the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the
contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we
satisfy a performance obligation.
Prior to the sale of OMIDRIA to Rayner, we recorded product sales as revenue when the product was delivered to our wholesalers and title for the product was
transferred. Product sales were recorded net of wholesaler distribution fees and estimated chargebacks, rebates, returns and purchase-volume discounts.
Research and Development
Research and development expenses are comprised primarily of contracted research, clinical trial study and manufacturing costs prior to approval; consulting
services; contract milestones; materials and supplies; costs for personnel, including salaries, benefits and stock compensation; depreciation; an allocation of our
occupancy costs; and other expenses incurred to sustain our overall research and development programs. Advance payments for goods or services that will be used for
future research and development activities are deferred and then recognized as an expense as the related goods are delivered or the services are performed. All other
research and development costs are expensed as incurred.
Selling, General and Administrative
Selling, general and administrative expenses are comprised primarily of marketing and selling expenses; professional and legal services; patent costs; and salaries,
benefits, and stock-compensation costs for sales, marketing, and other personnel not directly engaged in research and development. Additionally, selling, general and
administrative expenses include depreciation; an allocation of our occupancy costs; and other general corporate expenses. Advertising costs are expensed as incurred.
We had no advertising costs during the years ended December 31, 2023 and 2022. For the year ended December 31, 2021, we incurred $0.8 million in advertising costs
related to our sales of OMIDRIA.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which
those temporary differences are expected to be recovered or settled. We recognize the effect of income tax positions only if those positions are more likely than not of
being sustained upon an examination. A valuation allowance is established when it is more likely than not that the deferred tax assets will not be realized.
Stock-Based Compensation
Stock-based compensation expense is recognized for all share-based payments, including grants of stock option awards and restricted stock units (“RSU”) based
on estimated fair values. The fair value of our stock is calculated using the Black-Scholes option-pricing model, which requires judgmental assumptions around
volatility, forfeiture rates, risk-free rate and expected term. Compensation expense is recognized over the requisite service periods, which is generally the vesting period,
using the straight-line method. Forfeiture expense is estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates.
Common Stock Repurchases
We may repurchase shares of our common stock from time to time under authorization made by our Board of Directors. Under applicable Washington State law,
repurchased shares are retired and not presented separately as treasury stock on the consolidated financial statements.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) is comprised of net income (loss) and certain changes in equity that are excluded from net income (loss). There
was no difference between comprehensive income (loss) and net income (loss) for the years ended December 31, 2023, 2022 and 2021.
Financial Instruments and Concentrations of Credit Risk
Cash and cash equivalents, receivables, accounts payable and accrued liabilities, which are recorded at invoiced amount or cost, approximate fair value based on
the short-term nature of these financial instruments. The fair value of short-term investments is based on quoted market prices. Financial instruments that potentially
subject us to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and receivables. Cash and cash equivalents are held
by financial institutions and are federally insured up to certain limits. At times, our cash and cash equivalents balance held at a financial institution may exceeds the
federally insured limits. To limit the credit risk, we invest our excess cash in high-quality securities such as money market mutual funds, certificates of deposit and U.S.
treasury bills.
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board issued ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosure (Topic 740), to enhance
the transparency of income tax disclosures. ASU 2023-09 provides enhancements to the income tax disclosures related to the rate reconciliation and income taxes paid
information. ASU 2023-09 is effective for fiscal years after December 15, 2025 and applied prospectively. The Company is evaluating the impact of this pronouncement
on its consolidated financial statements.
69
Note 3—Net Income (Loss) Per Share
Basic net income (loss) per share ("Basic EPS") is computed by dividing net income (loss) by the weighted average number of common shares outstanding during
the period. Diluted net income (loss) per share (“Diluted EPS”) is computed by dividing net income (loss) by the weighted average number of common shares and
potentially dilutive common shares outstanding during the period. Our potentially dilutive securities include common shares related to our stock options, RSUs and
convertible senior notes calculated using the treasury stock method. In periods where we have a net loss from continuing operations but overall net income, we do not
compute Diluted EPS. Potentially dilutive securities excluded from Diluted EPS are as follows:
2026 Notes convertible to common stock (1)
2023 Notes convertible to common stock (1)(2)
Outstanding options to purchase common stock
Outstanding restricted stock units
Total dilutive shares excluded from net income (loss) per share
2023
Year Ended December 31,
2022
2021
11,132,366
4,318,944
38,462
—
15,489,772
12,172,008
4,941,739
9,488
98,750
17,221,985
12,172,008
4,941,739
1,707,371
2,642
18,823,760
(1) The 2023 Notes were, and the 2026 Notes are subject to a capped call arrangement that potentially reduces the dilutive effect as described in “Note 6 -
Convertible Senior Notes”. Any potential impact of the capped call arrangement is excluded from this table.
(2) The 2023 Notes were fully extinguished on November 15, 2023.
Note 4—Fair-Value Measurements
All of our investments are held in our name and are classified as short-term and held-to-maturity. Interest income from investments for the years ended December 31,
2023 and December 31, 2022 were $14.7 million and $2.2 million, respectively.
The following tables summarize our investments:
U.S. government securities classified as short-term investments
Money-market funds classified as short-term investments
Total short-term investments
Certificate of deposit classified as non-current restricted investments
Total investments
U.S. government securities classified as short-term investments
Money-market funds classified as short-term investments
Total short-term investments
Certificate of deposit classified as non-current restricted investments
Total investments
Amortized Cost
December 31, 2023
Gross Unrealized
Gains/(Losses)
(In thousands)
Estimated Fair Value
102,100 $
62,643
164,743
1,054
165,797 $
19 $
—
19
—
19 $
102,119
62,643
164,762
1,054
165,816
Amortized Cost
December 31, 2022
Gross Unrealized
Gains/(Losses)
(In thousands)
Estimated Fair Value
99,027 $
84,882
183,909
1,054
184,963 $
22 $
—
22
—
22 $
99,049
84,882
183,931
1,054
184,985
$
$
$
$
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, an exit price, in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting standard establishes a fair value
hierarchy that requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required:
Level 1—Observable inputs for identical assets or liabilities, such as quoted prices in active markets;
Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable; and
70
Level 3—Unobservable inputs in which little or no market data exists, therefore they are developed using estimates and assumptions developed by us, which
reflect those that a market participant would use.
Our fair-value hierarchy for our financial assets are as follows:
U.S. government securities classified as short-term investments
Money-market funds classified as short-term investments
Total short-term investments
Money-market funds classified as non-current restricted investments
Total investments
U.S. government treasury bills classified as short-term investments
Money-market funds classified as short-term investments
Total short-term investments
Money-market funds classified as non-current restricted investments
Total investments
Level 1
Level 2
Level 3
Total
December 31, 2023
— $
62,643
62,643
1,054
63,697 $
(In thousands)
102,119 $
—
102,119
—
102,119 $
— $
—
—
—
— $
102,119
62,643
164,762
1,054
165,816
Level 1
Level 2
Level 3
Total
December 31, 2022
— $
84,882
84,882
1,054
85,936 $
(In thousands)
99,049 $
—
99,049
—
99,049 $
— $
—
—
—
— $
99,049
84,882
183,931
1,054
184,985
$
$
$
$
Unrealized gains and losses on our short-term investments were not material for either period presented. Cash held in demand deposit accounts of $7.1 million and
$11.0 million is excluded from our fair-value hierarchy disclosure as of December 31, 2023 and 2022, respectively. The carrying amounts for receivables, accounts payable
and accrued liabilities, and other current monetary assets and liabilities, including lease financing obligations, approximate fair value.
See “Note 6 - Convertible Senior Notes” and “Note 8 – OMIDRIA Royalty Obligation” for the carrying amount and estimated fair value of our 2023 Notes, 2026
Notes and the OMIDRIA royalty obligation.
Note 5—Certain Balance Sheet Accounts
Receivables
Receivables consists of the following:
OMIDRIA milestone receivable
OMIDRIA royalty receivables
Other receivables
Total receivables
Property and Equipment, Net
Property and equipment, net consists of the following:
Equipment under finance leases
Laboratory equipment
Computer equipment
Office equipment and furniture
Total cost
Less accumulated depreciation and amortization
Total property and equipment, net
December 31,
2023
December 31,
2022
(In thousands)
— $
6,724
1,372
8,096 $
200,000
12,966
255
213,221
December 31,
2023
December 31,
2022
(In thousands)
6,929 $
3,525
1,113
624
12,191
(10,241)
1,950 $
6,204
3,135
1,076
625
11,040
(9,548)
1,492
$
$
$
$
For the years ended December 31, 2023, 2022 and 2021, depreciation and amortization expenses were $0.9 million, $1.0 million and $1.4 million, respectively.
71
Accrued Expenses
Accrued expenses consist of the following:
Clinical trials
Employee compensation
Contract research and development
Interest payable
Consulting and professional fees
Other accrued expenses
Total accrued expenses
Note 6—Convertible Senior Notes
December 31,
2023
December 31,
2022
(In thousands)
10,168 $
7,380
6,223
4,242
3,539
316
31,868 $
5,536
6,665
3,209
5,172
4,425
5,544
30,551
$
$
On January 1, 2021, we adopted ASU 2020-06, Debt—Debt with Conversion Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own
Equity (Subtopic 815-40) on a modified retrospective basis. ASU 2020-06 removes the separate liability and equity accounting for our convertible senior notes.
Consequently, we now account for our convertible senior notes wholly as debt. Upon adoption, we removed the equity component allocated to debt issuance costs
increasing convertible senior notes and shareholders’ equity by $75.5 million.
In December 2023, we repurchased $9.1 million par value of our 2026 Notes realizing a non-cash gain on debt extinguishment of $4.1 million to our consolidated
statement of operations and comprehensive loss in the current year. On November 15, 2023, we also extinguished at par the $95.0 million outstanding principal amount
on our 2023 Notes.
Convertible senior notes outstanding at December 31, 2023 and 2022, respectively, are as follows:
Principal amount
Unamortized debt issuance costs
Total convertible senior notes, net
Fair value of outstanding convertible senior notes (1)
Principal amount
Unamortized debt issuance costs
Total convertible senior notes, net
Fair value of outstanding convertible senior notes (1)
2023 Notes
Balance as of December 31, 2023
2026 Notes
(In thousands)
Total
— $
—
— $
— $
215,924 $
(2,769)
213,155 $
131,444
2023 Notes
Balance as of December 31, 2022
2026 Notes
(In thousands)
Total
95,000 $
(619)
94,381 $
92,031 $
225,030 $
(4,124)
220,906 $
118,141
215,924
(2,769)
213,155
320,030
(4,743)
315,287
$
$
$
$
$
$
(1) The fair value is classified as Level 3 due to the limited trading activity for the convertible senior notes.
72
2023 Convertible Senior Notes
The 2023 Notes accrued interest at an annual rate of 6.25% per annum. The 2023 Notes matured on November 15, 2023, and the $95.0 million outstanding principal
and related accrued interest were paid at that time.
The following table sets forth total interest expense recognized in connection with the 2023 Notes:
Contractual interest expense
Amortization of debt issuance costs
Total interest expense
2026 Convertible Senior Notes
2023
Year Ended December 31,
2022
(In thousands)
2021
$
$
5,195 $
619
5,814 $
5,938 $
663
6,601 $
5,938
618
6,556
The 2026 Notes are unsecured and accrue interest at an annual rate of 5.25% per annum, payable semi-annually in arrears on February 15 and August 15 of each
year. The 2026 Notes mature on February 15, 2026, unless earlier purchased, redeemed or converted in accordance with their terms.
The initial conversion rate is 54.0906 shares of our common stock per $1,000 of note principal (equivalent to an initial conversion price of approximately $18.4875 per
share of common stock), which equals approximately 12.2 million shares issuable upon conversion, subject to adjustment in certain circumstances.
The 2026 Notes are convertible at the option of the holders on or after November 15, 2025 at any time prior to the close of business on February 12, 2026, the second
scheduled trading day immediately before the stated maturity date of February 15, 2026. Additionally, holders may convert their 2026 Notes at their option at specified
times prior to the maturity date only if:
(1) during any calendar quarter, beginning after September 30, 2020, that the last reported sale price per share of our common stock exceeds 130% of the
conversion price of the 2026 Notes for each of at least 20 trading days in the period of 30 consecutive trading days ending on, and including, the last
trading day of the immediately preceding calendar quarter;
(2) during the five consecutive business days immediately after any five-consecutive-trading-day period (such five-consecutive-trading-day period, the
“measurement period”) in which the trading price per $1,000 principal amount of 2026 Notes for each trading day of the measurement period was less
than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;
(3) there is an occurrence of one or more certain corporate events or distributions of our common stock; or
(4) we call the 2026 Notes for redemption.
73
We will settle any conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock,
at our election, based on the applicable conversion rate(s).
Subject to the satisfaction of certain conditions, we may redeem in whole or in part the 2026 Notes at our option beginning August 15, 2023 through the 50th
scheduled trading day immediately before the maturity date at a cash redemption price equal to the principal amount of the 2026 Notes to be redeemed plus any accrued
and unpaid interest to, but excluding, the redemption date. The 2026 Notes are subject to redemption only if certain requirements are satisfied, including that the last
reported sale price per share of our common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during
the 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice and (ii) the trading day
immediately before the date we send such notice.
In order to reduce the dilutive impact or potential cash expenditure associated with the conversion of the 2026 Notes, we entered into capped call transactions in
connection with the issuances of the 2026 Notes (the "2026 Capped Call"). The 2026 Capped Call will cover, subject to anti-dilution adjustments substantially similar to
those applicable to the 2026 Notes, the number of shares of common stock underlying the 2026 Notes when our common stock is trading within the range of
approximately $18.49 and $26.10. However, should the market price of our common stock exceed the $26.10 cap, then the conversion of the 2026 Notes would have an
additional dilutive impact or may require a cash expenditure to the extent the market price exceeds the cap price. The 2026 Capped Call will expire on various dates over
the 50-trading-day period ranging from December 2, 2025 to February 12, 2026, if not exercised earlier. The 2026 Capped Call is a separate transaction and not part of the
terms of the 2026 Notes and was executed separately from the issuance of the 2026 Notes. The amount paid for the 2026 Capped Call was recorded as a reduction to
additional paid-in capital in the consolidated balance sheet. As of December 31, 2023, approximately 12.2 million shares remained outstanding under the 2026 Capped
Call.
Further, we concluded the 2026 Capped Call qualifies for a derivative scope exception for instruments that are both indexed to an entity’s own stock and classified in
stockholders’ equity in its balance sheet. Consequently, the fair value of the 2026 Capped Call of $23.2 million is classified as equity, not accounted for as derivatives,
and will not be subsequently remeasured.
The unamortized debt issuance costs of $2.8 million as of December 31, 2023 will be amortized to interest expense at an effective interest rate of 5.9% over the
remaining term.
The following table sets forth interest expense recognized related to the 2026 Notes:
Contractual interest expense
Amortization of debt issuance costs
Total interest expense
2023
Year Ended December 31,
2022
(In thousands)
2021
$
$
11,774 $
1,355
13,129 $
11,814 $
1,167
12,981 $
11,814
1,078
12,892
74
Note 7—Discontinued Operations - Sale of OMIDRIA
On December 23, 2021, we closed the sale of OMIDRIA and related assets, which is reported as discontinued operations in our consolidated statements of operations
and comprehensive income. Upon closing, we received an up-front cash payment from Rayner of $126.0 million, and we retained the outstanding receivables and
liabilities related to OMIDRIA as of the closing date.
The year ended December 31, 2021, included a gain on the sale of OMIDRIA comprised as follows (in thousands):
Cash proceeds
OMIDRIA contract royalty asset
Gain on sale of OMIDRIA, gross
Transaction and closing costs
RSUs granted to transferred employees
Prepaid assets and inventory at cost
Gain on sale of OMIDRIA
$
$
125,993
184,570
310,563
(1,972)
(1,419)
(1,524)
305,648
In December 2022, the achievement of the Milestone Event triggered a $200.0 million Milestone Payment from Rayner which we received in February 2023. The
Milestone Event also resulted in a reduction in the U.S. royalty rate from 50% to 30% on OMIDRIA net sales.
The results of operations for OMIDRIA are recorded as income from discontinued operations for all periods presented in the consolidated statements of operations
and comprehensive income (loss).
2023
Year Ended December 31,
2022
(In thousands)
2021
Product sales, net
Costs and expenses
Gross margin
Gain on sale of OMIDRIA
Milestone income
Interest on OMIDRIA contract royalty asset
Remeasurement adjustments
Other income
Income before income tax
Income tax expense (1)
Net income from discontinued operations, net of tax
$
$
— $
—
—
—
—
15,315
41,167
1,087
57,569
(462)
57,107 $
(1) For further discussion of income tax expense refer to “Note 13 – Income Taxes”.
The following schedule is a rollforward of the OMIDRIA contract royalty asset (in thousands):
Balance at December 31, 2021
Royalties earned
Interest on OMIDRIA contract royalty asset
Remeasurement adjustments
Balance at December 31, 2022
Royalties earned
Interest on OMIDRIA contract royalty asset
Remeasurement adjustments
Balance at December 31, 2023
— $
—
—
—
200,000
18,634
14,457
307
233,398
(3,952)
229,446 $
$
$
110,735
30,631
80,104
305,648
—
—
—
1,035
386,787
(1,006)
385,781
184,570
(65,439)
18,634
14,457
152,222
(40,595)
15,315
41,167
168,109
75
Cash flow from discontinued operations is as follows:
2023
Year Ended December 31,
2022
(In thousands)
2021
Net cash provided by discontinued operations from operating activities
Net cash provided by discontinued operations from investing activities
$
$
241,317 $
— $
78,082 $
— $
55,380
125,993
Note 8—OMIDRIA Royalty Obligation
In September 2022, we sold to DRI an interest in our future OMIDRIA royalty receipts and received $125.0 million in cash consideration which was recorded as an
OMIDRIA royalty obligation on our consolidated balance sheet. DRI is entitled to receive royalties on OMIDRIA net sales between September 1, 2022 and December 31,
2030, subject to annual caps. DRI receives their prorated monthly cap amount before we receive any royalty proceeds. DRI is not entitled to carry-forward nor recoup
any shortfall if the royalties paid by Rayner for an annual period are less than the cap amount applicable to each discrete calendar year. Additionally, DRI has no
recourse to or security interest in our assets other than our OMIDRIA royalty receipts.
The changes in the OMIDRIA royalty obligation during the year ended December 31, 2023 are as follows (in thousands):
Balance at December 31, 2022
Principal payments
Balance at December 31, 2023
$
$
126,278
(1,152)
125,126
The OMIDRIA royalty obligation is classified as a Level 3 liability as its valuation requires substantial judgment and estimation of factors that are not currently
observable in the market. As of December 31, 2023, the approximate fair value of our obligation was $116.3 million.
For the years ended December 31, 2023 and December 31, 2022, we incurred interest expense of $11.8 million and $2.9 million, respectively, on the OMIDRIA royalty
obligation.
As of December 31, 2023, the maximum scheduled principal and interest payments (based on an implied effective interest rate of 9.4%) are as follows:
2024
2025
2026
2027
2028
Thereafter
Total scheduled payments
Subsequent Event
Principal
Interest
(In thousands)
Total
Annual Cap
$
$
8,576 $
14,641
16,081
17,664
19,402
48,762
125,126 $
11,424 $
10,359
8,919
7,336
5,598
4,988
48,624 $
20,000
25,000
25,000
25,000
25,000
53,750
173,750
In February 2024, Omeros and DRI expanded their royalty purchase agreement, resulting in Omeros receiving $115.5 million in cash consideration from DRI upon
closing. The Amended and Restated Royalty Purchase Agreement ("RPA") eliminated the caps on royalty payments effective in the first quarter of 2024 and provides
that DRI will now receive all royalties on U.S. net sales of OMIDRIA payable between January 1, 2024 and December 31, 2031. DRI is entitled to payment only to the
extent of royalty payments that are payable in the respect of U.S. net sales of OMIDRIA on or before December 31, 2031 and DRI has no recourse to our assets other
than its interest in OMIDRIA royalties. Omeros retains the right to receive all royalties payable by Rayner on any net sales of OMIDRIA outside the U.S. payable from
and after January 1, 2024, as well as royalties on global net sales of OMIDRIA payable from and after December 31, 2031. To date, international royalties have not been
significant. We are also entitled to receive a milestone ranging between $10.0 million and $27.5 million if U.S. net sales of OMIDRIA reach applicable thresholds ranging
between a total of $156.0 million and $160.0 million for any period of four consecutive quarters prior to January 1, 2026. In addition, we are entitled to receive a separate
milestone ranging between $8.0 million and $27.5 million if U.S. net sales of OMIDRIA reach applicable thresholds ranging between a total of $181.0 million and $185.0
million for any period of four consecutive quarters prior to January 1, 2028.
76
Note 9—Lease Liabilities
We have operating leases related to our office and laboratory space. The initial term of the leases is through November 2027 and we have two options to extend the
lease term, each by five years. We have finance leases for certain laboratory and office equipment that have lease terms expiring through November 2026.
Lease-related assets and liabilities recorded on our consolidated balance sheet are as follows:
December 31,
2023
December 31,
2022
(In thousands)
Assets
Operating lease assets
Finance lease assets, net
Total lease assets
Liabilities
Current:
Operating leases
Finance leases
Non-current:
Operating leases
Finance leases
Total lease liabilities
Weighted-average remaining lease term
Operating leases (years)
Finance leases (years)
Weighted-average discount rate
Operating leases
Finance leases
The components of total lease costs are as follows:
Lease cost
Operating lease cost
Finance lease cost:
Amortization
Interest
Variable lease cost
Sublease income
Net lease cost
The supplemental cash flow information related to leases is as follows:
Cash paid for amounts included in the measurement of lease liabilities
Cash payments for operating leases
Cash payments for financing leases
$
$
$
$
18,631
1,220
19,851
$
$
$
4,590
570
17,424
719
23,303
$
3.8
2.3
12.81%
8.57%
Year Ended
December 31,
2023
2022
(In thousands)
$
6,464 $
677
174
3,160
(1,500)
8,975 $
21,762
945
22,707
3,888
422
21,971
455
26,736
4.8
2.3
12.81%
10.44%
6,152
812
174
3,191
(1,755)
8,574
Year Ended
December 31,
2023
2022
(In thousands)
7,144 $
655 $
7,072
790
$
$
$
77
The future maturities of our lease liabilities as of December 31, 2023 are as follows:
2024
2025
2026
2027
Total undiscounted lease payments
Less interest
Total lease liabilities
Note 10—Commitments and Contingencies
Contracts
Operating
Leases
Finance
Leases
(In thousands)
Total
$
$
8,528 $
7,088
6,870
5,950
28,436
(6,422)
22,014 $
684 $
517
258
—
1,459
(170)
1,289 $
9,212
7,605
7,128
5,950
29,895
(6,592)
23,303
We have various agreements with third parties that collectively require payment of termination fees totaling $25.8 million as of December 31, 2023 if we cancel the
work within specific time frames, either prior to commencing or during performance of the contracted services.
Development Milestones and Product Royalties
We have entered a variety of development, collaboration, licensing or similar agreements with third parties under which we have accessed technology or services in
connection with our development assets and programs. Some of these agreements require milestone payments based on achievements of development, regulatory or
sales milestones, and/or low-single to low-double digit royalties on net income or net sales of the relevant product. For the years ended December 31, 2023, 2022 and
2021, we paid $5.0 million, $0.3 million and $0.5 million, respectively in development milestones.
Note 11—Shareholders’ Equity (Deficit)
Common Stock
As of December 31, 2023, we had reserved shares of common stock under our equity plans as follows:
Stock options outstanding
Awards available to issue under the 2017 Plan
Total shares reserved
15,255,154
8,802,249
24,057,403
At the Market Sales Agreement – We have a sales agreement to sell shares of our common stock having an aggregate offering price of up to $150.0 million, from
time to time, through an “at the market” equity offering program.
Amendment of 2017 Omnibus Incentive Compensation Plan - At our June 23, 2023 annual meeting, our shareholders approved a 5,000,000 share increase in the
number of shares of common stock available for grant under the 2017 Omnibus Incentive Compensation Plan, as amended and restated.
Share Repurchase Program - On November 9, 2023, the Board of Directors approved an indefinite-term share repurchase program under which we may repurchase
from time to time up to $50.0 million of our common stock in the open market or through privately negotiated transactions. For the year ended December 31, 2023, we
repurchased and retired 1.8 million shares of common stock at an average share price of $2.54, for an aggregate repurchase price of $4.7 million.
78
Note 12—Stock-Based Compensation
Our equity plans provide for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units,
performance units, performance shares and other stock and cash awards to employees and consultants. Stock options are granted with an exercise price not less than
the fair market value of Omeros’ common stock on the date of the grant. Any unexercised options expire 10 years from grant date, and any unvested stock options
granted which are subsequently canceled become available for future reissuance.
Vesting schedules for our equity plans generally are as follows:
Grant Type
Employee initial options grants
Employee recurring options grants
Non-employee consultant options grants
Employee RSUs
Stock-based compensation expense is as follows:
Vesting Schedule
25% at one-year anniversary, 1/48 monthly thereafter
1/48 monthly
1/12 or 1/48 monthly
50% after one year, 50% after two years
Continuing operations:
Research and development
Selling, general and administrative
Total stock-based compensation in continuing operations
Discontinued operations
Total stock-based compensation
2023
Year Ended December 31,
2022
(In thousands)
2021
$
$
4,754 $
7,140
11,894
(244)
11,650 $
6,123 $
8,042
14,165
(93)
14,072 $
6,791
8,154
14,945
2,685
17,630
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following assumptions were applied to stock
option grants during the periods ended:
Estimated weighted-average fair value
Weighted-average assumptions:
Expected volatility
Expected life, in years
Risk-free interest rate
Expected dividend yield
2023
$
Year Ended December 31,
2022
2021
2.44
$
93%
7.2
3.97%
—%
2.94
$
10.54
90%
6.0
2.83%
—%
81%
6.0
1.06%
—%
Expected volatility is based on the historical volatility of our stock price weighted by grant issuances over the reporting period. We estimated the expected life of
the stock options granted using the historical exercise behavior of option holders. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the
time of grant. Forfeiture expense is estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates.
79
Stock option activity for all stock option plans is as follows:
Balance at December 31, 2022
Granted
Exercised
Forfeited
Balance at December 31, 2023
Vested and expected to vest at December 31, 2023
Exercisable at December 31, 2023
Weighted-
Average
Exercise Price
per Share
Options
Outstanding
Remaining
Contractual Life
(In years)
Aggregate
Intrinsic Value
(In thousands)
13,872,973 $
3,153,200
(36,726)
(1,734,293)
15,255,154 $
14,762,090 $
10,554,140 $
11.02
3.01
4.10
9.96
9.50
9.65
11.50
6.2 $
6.0 $
4.7 $
1,388
1,272
217
Of the 15.3 million common stock options outstanding as of December 31, 2023, 12.3 million have an exercise price above the $3.27 closing price of our stock on the
Nasdaq exchange on December 31, 2023. The total intrinsic value of stock options exercised during the years ended December 31, 2023, 2022 and 2021 was $0.1 million,
$0.2 million and $7.8 million, respectively.
At December 31, 2023, there were 4.7 million unvested stock options outstanding that vest over a weighted-average period of 2.1 years. The remaining estimated
compensation expense to be recognized in connection with these unvested stock options is $14.5 million.
RSU activity for all stock plans is as follows:
Balance at December 31, 2022
Vested and released
Forfeited
Balance at December 31, 2023
RSUs Outstanding
Weighted- Average
Grant Date Fair
Value Per Share
98,750 $
(67,250)
(31,500)
— $
7.53
7.53
7.53
—
80
Note 13—Income Taxes
The components of income tax benefit from continuing and discontinued operations were as follows:
Continuing operations:
Current income tax expense:
Federal
State
Total current income tax expense
Deferred income tax benefit:
Federal
State
Total deferred income tax benefit
Income tax benefit in continuing operations
Income tax expense as a component of discontinued operations
2023
December 31,
2022
(In thousands)
2021
$
$
$
— $
—
—
—
—
—
— $
462 $
— $
—
—
—
—
—
— $
—
—
—
—
—
—
—
3,952 $
1,006
For the years ended December 31, 2023, 2022 and 2021, for federal and state income tax purposes, we had net losses from continuing operations and net income from
discontinued operations, which resulted in an overall tax loss. At December 31, 2023, 2022 and 2021, we had federal net operating loss ("NOL") carryforwards of
approximately $398.6 million, $361.4 million and $630.6 million, respectively, for all periods. At December 31, 2023, 2022 and 2021, we had state NOL carryforwards of
approximately $245.8 million, $226.3 million and $245.1 million, respectively. In 2023, we had a net loss for federal income tax purposes and in 2022 and 2021, we utilized
existing net operating loss carryforwards of $268.6 million and $245.1 million, respectively to fully offset our federal tax liability for both periods. We recorded state
income tax expense of $0.5 million, $4.0 million and $1.0 million in discontinued operations in 2023, 2022 and 2021, respectively as we did not have adequate net operating
losses and tax credits to fully offset our state tax liability.
Deferred income tax assets and liabilities reflect the tax effect of net operating loss and tax credit carryforwards and the net temporary difference between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
81
Significant components of deferred income taxes were as follows:
Deferred tax assets:
Net operating loss carryforwards
Research and development tax credits
Capitalized research and development
OMIDRIA royalty obligation
Stock-based compensation
Lease liability
Other
Total deferred tax assets
Deferred tax liabilities:
OMIDRIA contract royalty asset
Right of use assets
Property and equipment
Total deferred tax liabilities
Net deferred tax assets before valuation allowance
Less valuation allowance
Net deferred tax liabilities
December 31,
2023
2022
(In thousands)
95,183 $
92,837
39,318
28,903
10,132
5,085
10,283
281,741
(38,832)
(4,304)
(122)
(43,258)
238,483
(238,483)
— $
85,887
78,992
21,864
28,938
12,517
5,926
9,234
243,358
(34,883)
(4,987)
(288)
(40,158)
203,200
(203,200)
—
$
$
As of December 31, 2023, we had federal net operating loss carryforwards of approximately $398.6 million and state net operating loss carryforwards of
approximately $245.8 million. Pre-2018 federal net operating losses of $109.8 million expire between 2035 and 2037. Post-2018 federal net operating losses of $288.8 million
do not expire. Research and development tax credit carryforwards of $93.0 million expire between 2024 and 2043.
The Tax Cuts and Jobs Act was enacted on December 22, 2017 and includes the requirement to capitalize and amortize research and experimental expenditures
beginning in 2022. Prior to 2022, we expensed these costs as incurred for tax purposes.
Reconciliation of income tax computed at federal statutory rates to the reported provisions for income taxes from continuing operations are as follows:
U.S. Federal statutory rate on net loss
State tax, net of federal tax benefit
Change in valuation allowance
Tax credits
Stock compensation
Other
Effective tax rate
2023
Year ended December 31,
2022
2021
(21.0)%
(2.1)%
27.7%
(8.0)%
1.5%
1.9%
0.0%
(21.0)%
(1.7)%
28.3%
(6.8)%
1.4%
(0.2)%
0.0%
(21.0)%
(0.6)%
26.9%
(5.5)%
0.3%
(0.1)%
0.0%
We file federal and certain state income tax returns, which provides varying statutes of limitations on assessments. However, because of net operating loss
carryforwards, substantially all our tax years remain open to federal and state tax examination.
82
As of December 31, 2023 and 2022, the total amount of gross unrecognized tax benefits was $2.0 million and $0.2 million, respectively. We recognized $0.3 million of
interest and penalties at December 31, 2023 as an unrecognized tax benefit. As of December 31, 2023, $1.8 million of the total unrecognized tax benefits, if recognized,
would have an impact on our effective tax rate. We estimate that there will be no material changes in this uncertain tax position for the next 12 months. Our policy is to
recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
The following table summarizes the activities related to our gross unrecognized tax benefits (in thousands):
Balance at December 31, 2022
Increase in balance related to tax positions taken during prior years
Decrease in balance related to tax positions during prior years
Decrease in balance as a result of a lapse of the applicable statute of limitations
Balance at December 31, 2023
Note 14—401(k) Retirement Plan
$
$
212
1,796
(30)
(12)
1,966
Our 401(k) retirement plan provides for an annual company discretionary match on employee contributions. For the years-ended December 31, 2023, 2022 and 2021,
Omeros' 401(k) match expense was $0.6 million, $0.6 million and $0.8 million, respectively. We match up to 4.0% of each participating employee’s eligible earnings, with a
maximum company match of $4,000 per employee per year. All employees are eligible to participate.
83
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2023. Management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in
evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31,
2023, our principal executive and principal financial officers concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable
assurance level.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act
Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal
control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human
failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that
material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Our management, with the participation of our principal executive and principal financial officers, conducted an assessment of the effectiveness of our internal
control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 framework). Based on the results of this assessment and on those criteria,
our management concluded that our internal control over financial reporting was effective as of December 31, 2023.
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the
Exchange Act that occurred during our fourth fiscal quarter of 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
84
ITEM 9B. OTHER INFORMATION
(a) None.
(b) During the three months ended December 31, 2023, none of our directors or officers adopted or terminated any contract, instruction or written plan for the
purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1
trading arrangement” (as defined in Item 408(c) of Regulation S-K).
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item will be contained in our definitive proxy statement issued in connection with the 2024 Annual Meeting of Shareholders and is
incorporated herein by reference. Certain information required by this item concerning executive officers is set forth in Part I of this Annual Report on Form 10-K under
the heading “Business - Information About Our Executive Officers and Significant Employees.”
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be contained in our definitive proxy statement issued in connection with the 2024 Annual Meeting of Shareholders and is
incorporated herein by reference.
85
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
Except for the information set forth below, the information required by this item will be contained in our definitive proxy statement issued in connection with the
2024 Annual Meeting of Shareholders and is incorporated herein by reference.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides certain information regarding our equity compensation plans in effect as of December 31, 2023:
Equity compensation plans approved by security holders:
2017 Omnibus Incentive Compensation Plan (1)
2008 Equity Incentive Plan (2)
Total
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
Weighted-Average Exercise
Price of Outstanding
Options, Warrants and
Rights
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
11,201,040 $
4,054,114 $
15,255,154 $
8.82
11.37
9.50
8,802,249
—
8,802,249
(1) Our 2017 Plan provides for the grant of incentive and non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance
units and performance shares to employees, directors and consultants and subsidiary corporations’ employees and consultants. The 2017 Plan replaced the 2008
Plan, and as a result we will not grant any new awards under the 2008 Plan. Any stock option awards granted under the 2008 Plan that were outstanding as of the
effective date of the 2017 Plan remained in effect pursuant to their terms and, if the award is canceled or is repurchased, the shares underlying such award become
available for grant under the 2017 Plan.
(2) The 2008 Plan provided for the grant of incentive and non-statutory stock options, restricted stock, stock appreciation rights, performance units and performance
shares to employees, directors and consultants and subsidiary corporations’ employees and consultants.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item will be contained in our definitive proxy statement issued in connection with the 2024 Annual Meeting of Shareholders and is
incorporated herein by reference.
86
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item will be contained in our definitive proxy statement issued in connection with the 2024 Annual Meeting of Shareholders and is
incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
1. Financial Statements
See the Index to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
2. Financial Statement Schedules
All schedules have been omitted as the required information is either not required, not applicable or otherwise included in the Financial Statements and notes
thereto.
3. Exhibits
The following list of exhibits includes exhibits submitted with this Form 10-K as filed with the SEC and those incorporated by reference to other filings.
EXHIBIT INDEX
Exhibit
No.
Exhibit Description
Form
File No.
Incorporated by Reference
Exhibit
No.
Filing Date
Filed
Herewith
1.1
3.1
3.2
4.1
4.2
Sales Agreement, dated March 1, 2021, between Omeros
10-K
001-34475
Corporation and Cantor Fitzgerald & Co.
Amended and Restated Articles of Incorporation of
10-K
001-34475
Omeros Corporation
Amended and Restated Bylaws of Omeros Corporation
10-K
001-34475
Description of Common Stock
10-K
001-34475
Form of Omeros Corporation common stock certificate
S-1/A
333-148572
1.1
3.1
3.2
4.1
4.1
03/01/2021
03/31/2010
03/31/2010
03/01/2021
10/02/2009
87
4.3
4.4
Indenture, dated as of August 14, 2020, between Omeros
Corporation and Wells Fargo Bank, National Association,
as trustee
8-K
001-34475
First Supplemental Indenture, dated as of August 14,
2020, between Omeros Corporation and Wells Fargo
Bank, National Association, as trustee (including the form
of 5.25% Convertible Senior Notes due 2026)
8-K
001-34475
10.1*
Form of Indemnification Agreement entered into between
S-1
333-148572
Omeros Corporation and its directors and officers
10.2*
10.3*
2008 Equity Incentive Plan (as amended)
Form of Stock Option Award Agreement under the 2008
Equity Incentive Plan
10-K
10-Q
001-34475
001-34475
10.4*
2017 Omnibus Incentive Compensation Plan (as amended
8-K
001-34475
and restated effective as of June 23, 2023)
10.5*
Form of Stock Option Award Agreement under the 2017
S-8
333-218882
Omnibus Incentive Compensation Plan
4.1
4.2
10.1
10.6
10.2
10.1
4.4
08/14/2020
08/14/2020
01/09/2008
03/16/2017
11/07/2013
06/28/2023
06/21/2017
88
10.6*
Second Amended and Restated Employment Agreement
8-K
001-34475
10.1
04/12/2010
between Omeros Corporation and Gregory A. Demopulos,
M.D. dated April 7, 2010
10.7*
Omeros Corporation Non-Employee Director
10-K
001-34475
10.11
03/13/2023
10.8
10.9
10.10
10.11
10.12
10.13
10.14
Compensation Policy
Lease dated January 27, 2012 between Omeros
Corporation and BMR-201 Elliott Avenue LLC
First Amendment to Lease dated November 5, 2012
between Omeros Corporation and BMR-201 Elliott
Avenue LLC
Second Amendment to Lease dated November 16, 2012
between Omeros Corporation and BMR-201 Elliott
Avenue LLC
Third Amendment to Lease dated October 16, 2013
between Omeros Corporation and BMR-201 Elliott
Avenue LLC
Fourth Amendment to Lease dated September 8, 2015
between Omeros Corporation and BMR-201 Elliott
Avenue LLC
Fifth Amendment to Lease dated September 1, 2016
between Omeros Corporation and BMR-201 Elliott
Avenue LLC
Sixth Amendment to Lease dated October 18, 2018
between Omeros Corporation and BMR-201 Elliott
Avenue LLC
8-K
001-34475
10-Q
001-34475
10.1
10.2
02/01/2012
11/09/2012
10-K
001-34475
10.18
03/18/2013
10-K
001-34475
10.18
03/13/2014
10-Q
001-34475
10.3
11/09/2015
10-Q
001-34475
10.1
05/10/2017
10-K
001-34475
10.19
03/01/2019
89
10.15
10.16
10.17
10.18
10.19
10.20
10.21
Seventh Amendment to Lease dated April 15, 2019
between Omeros Corporation and BMR-201 Elliott
Avenue LLC
Eighth Amendment to Lease dated October 18, 2019
between Omeros Corporation and BMR-201 Elliott
Avenue LLC
Ninth Amendment to Lease dated January 15, 2020
between Omeros Corporation and BMR-201 Elliott
Avenue LLC
Tenth Amendment to Lease dated September 15, 2020
between Omeros Corporation and BMR-201 Elliott
Avenue LLC
Eleventh Amendment to Lease dated October 23, 2020
between Omeros Corporation and BMR-201 Elliott
Avenue LLC
Twelfth Amendment to Lease dated January 1, 2021
between Omeros Corporation and BMR-201 Elliott
Avenue LLC
Thirteenth Amendment to Lease dated January 1, 2021
between Omeros Corporation and BMR-201 Elliott
Avenue LLC
10-Q
001-34475
10.1
08/08/2019
10-K
001-34475
10.20
03/02/2020
10-Q
001-34475
10.1
05/11/2020
10-Q
001-34475
10.1
11/09/2020
10-K
001-34475
10.23
03/01/2021
10-K
001-34475
10.24
03/01/2021
10-Q
001-34475
10.1
08/09/2021
10.22
Fourteenth Amendment to Lease dated January 14, 2022
10-Q
001-34475
10.1
05/10/2022
between Omeros Corporation and BMR-201 Elliott
Avenue LLC
90
10.23†
License Agreement between Omeros Corporation and
Daiichi Sankyo Co., Ltd. (successor-in-interest to Asubio
Pharma Co., Ltd.) dated March 3, 2010
10.24†
10.25†
Amendment No. 1 to License Agreement with an effective
date of January 5, 2011 between Omeros Corporation and
Daiichi Sankyo Co., Ltd.
Amendment No. 2 to License Agreement with an effective
date of January 25, 2013 between Omeros Corporation
and Daiichi Sankyo Co., Ltd.
X
X
X
91
10.1
10.1
10.1
10.1
08/14/2020
11/12/2019
03/13/2023
03/01/2022
10.26
Form of capped call transaction confirmation, in reference
8-K
001-34475
to the 5.25% Convertible Senior Notes due 2026
10.27†
10.28†
10.29†
10.30†
23.1
31.1
Master Services Agreement, dated July 28, 2019, between
Omeros Corporation and Lonza Biologics Tuas Pte. Ltd.
10-Q
001-34475
Technology License Agreement, effective August 28,
2020 between Omeros Corporation and Xencor, Inc.
10-K
001-34475
Asset Purchase Agreement, dated as of December 1, 2021
among Omeros Corporation, Rayner Surgical Inc. and
Rayner Surgical Group, Limited, as Parent Guarantor
10-K
001-34475
Amended and Restated Royalty Purchase Agreement
between Omeros Corporation and DRI Healthcare
Acquisitions LP dated February 1, 2024
Consent of Independent Registered Public Accounting
Firm
Certification of Principal Executive Officer Pursuant to
Rule 13-14(a) or Rule 15d-14(a) of the Securities Exchange
Act of 1934 as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2
Certification of Principal Financial Officer Pursuant to
Rule 13-14(a) or Rule 15d-14(a) of the Securities Exchange
Act of 1934 as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1
32.2
Certification of Principal Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
97.1
Omeros Corporation Compensation Clawback Policy
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
101.DEF
101.LAB
Inline XBRL Taxonomy Extension Calculation Linkbase
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Inline XBRL Taxonomy Extension Definition Linkbase
Document
Inline XBRL Taxonomy Extension Labels Linkbase
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101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase
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104.1
Cover Page Interactive Data File, formatted in Inline XBRL
(included in Exhibit 101)
X
X
*
†
Indicates management contract or compensatory plan or arrangement.
Certain identified information has been excluded from the exhibit because it both (A) is not material and (B) would be competitively harmful if publicly disclosed.
ITEM 16. FORM 10-K SUMMARY
Not included.
93
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
SIGNATURES
OMEROS CORPORATION
/s/ GREGORY A. DEMOPULOS, M.D.
Gregory A. Demopulos, M.D.
President, Chief Executive Officer
and Chairman of the Board of Directors
Dated: April 1, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature
Title
Date
/s/ GREGORY A. DEMOPULOS, M.D.
Gregory A. Demopulos, M.D.
/s/ MICHAEL A. JACOBSEN
Michael A. Jacobsen
/s/ THOMAS F. BUMOL, PH.D.
Thomas F. Bumol, Ph.D.
/s/ THOMAS J. CABLE
Thomas J. Cable
/s/ PETER A. DEMOPULOS, M.D.
Peter A. Demopulos, M.D.
/s/ ARNOLD C. HANISH
Arnold C. Hanish
/s/ LEROY E. HOOD, M.D., PH.D.
Leroy E. Hood, M.D., Ph.D.
/s/ DIANA PERKINSON, M.D.
Diana Perkinson, M.D.
Rajiv Shah, M.D.
April 1, 2024
April 1, 2024
April 1, 2024
April 1, 2024
April 1, 2024
April 1, 2024
April 1, 2024
April 1, 2024
April 1, 2024
President, Chief Executive Officer and Chairman of the Board of Directors
(Principal Executive Officer)
Vice President, Finance, Chief Accounting Officer and Treasurer (Principal
Financial Officer and Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
94
C O N T A C T S + I N F O R M A T I O N
Inc.
Transfer Agent and Registrar
Computershare
P.O. Box 43078
Providence, RI 02940-3078
Toll Free Number: 866.282.4938 (U.S.) Outside the
U.S.: 201.680.6578
TDD for Hearing Impaired: 800.490.1493(cid:1)(U.S.)(cid:1)(cid:1)
Outside the U.S.: 781.575.4592
www.computershare.com/investor
Independent Registered Public
Accounting Firm
Ernst(cid:1) & Young LLP
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SIGNIFICANT EMPLOYEES
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Mariana N. Dimitrova , Ph.D.(cid:1)
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Corporate(cid:1)Headquarters
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www.omeros.com
202(cid:21) Annual Meeting
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Investor Relations
Investors can contact Omeros Investor(cid:1)(cid:1)
Relations by email at ir@omeros.com, by(cid:1)(cid:1)
calling 206.676.5000(cid:13) or by writing to(cid:1)Investor
Relations at Omeros' corporate(cid:1)headquarters.
Copies of Omeros’ Annual Report on Form 10-(cid:44)(cid:1)(cid:1)
for the fiscal year ended December 31,(cid:1)202(cid:20),(cid:1)
including financial statements, as well(cid:1)as other
Omeros public documents, are(cid:1)available on the
Omeros investor relations(cid:1)website at
investor.omeros.com or by written(cid:1)or
telephonic request to Investor Relations at(cid:1)(cid:1)
Omeros’ corporate headquarters.
EXECUTIVE OFFICERS
Gregory A. Demopulos, M.D.
Chairman and President
Chief Executive Officer
Michael A. Jacobsen
Vice President, Finance
Chief Accounting Officer and Treasurer
Peter B. Cancelmo, J.D.
Vice President,
General Counsel and Secretary
BOARD OF DIRECTORS
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Chief Executive Officer
Phenome Health
Diana T. Perkinson, M.D.
Physician
MD International LLC
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FORWARD-LOOKING STATEMENTS
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THE OMEROS BUILDING
201 ELLIOTT AVENUE WEST
SEATTLE, WA 98119
OMEROS.COM