Omeros Q1 2024 Earnings Call Transcript

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May 15, 2024

There are 8 speakers on the call.

Operator

Good afternoon, and welcome to today's earnings call for Ameris Corporation. At this time, all participants are in a listen only mode. After the company's remarks, we will conduct a question and answer session. Please be advised that this call is being recorded at the company's request. And a replay will be available on the company's website for 1 week from today.

Operator

I'll now turn the call over to Jennifer Williams, Investor Relations for Omeros.

Speaker 1

Good afternoon, and thank you for joining the call today. I'd like to remind you that some of the statements that will be made on the call today will be forward looking. These statements are based on management's beliefs and expectations as of today only and are subject to change. All forward looking statements involve risks and uncertainties that could cause the company's actual results to differ materially. Please refer to the special note regarding forward looking statements in the company's quarterly report on Form 10 Q, which was filed today with the SEC, and the Risk Factors section of the company's most recent annual report on Form 10 ks for a discussion of these risks and uncertainties.

Speaker 1

Now I would like to turn the call over to Doctor. Greg Zumopoulos, Chairman and CEO of Omero.

Speaker 2

Thank you, Jennifer, and good afternoon, everyone. I'm joined on today's call by Mike Jacobson, Nadia Dach, Andreas Grauer, Kathy Melfi and Steve Whitaker, collectively representing our finance, commercial, clinical and regulatory functions. I'll start today with an overview and discussion of our Q1 2024 financial results followed by an update on our ongoing development programs. Mike will then provide a more detailed financial summary before we open the call to questions. Let's now look at our financial results for the Q1.

Speaker 2

Our net loss for the Q1 of 2024 was $37,200,000 or $0.63 per share compared to a net loss of $9,100,000 or $0.15 per share in the Q4 of last year. The difference is driven by 2 factors. In the Q4 of last year, we had a remeasurement adjustment of $26,200,000 to our OMIDRIA contract royalty asset as a result of our OMIDRIA royalty sale to DRI Healthcare and a $4,100,000 gain on early retirement of a portion of our 2026 convertible notes following the 4th quarter open market repurchase of a notional amount of $9,100,000 of those notes at a cost of $4,900,000 or 54% of par value. Excluding these two transactions, our Q4 2023 net loss would have been similar to that of the current quarter. As of March 31, 2024, we had $230,300,000 of cash and investments on hand available to support ongoing operations and debt service, an amount that we expect will be sufficient to fund operations and debt service into 2026.

Speaker 2

In addition, one of our 2 negotiated milestone payments of up to $27,500,000 based on sales milestones of OMIDRIA, if met, becomes payable to Omeros in January 2026 with the 2nd $27,500,000 milestone similarly payable in January 2028. Let's now review our development programs. We provided a comprehensive update on these programs during our earnings call just last month. So today's update will be somewhat brief. We'll start with narsoplimab, our MASP-two inhibitor targeting the lectin pathway of complement.

Speaker 2

As described last month, discussions are ongoing with FDA regarding the resubmission of our biologics license application or BLA or narsoplimab in hematopoietic stem cell transplant associated thrombotic microangiopathy or TATMA. Given the prescribed timelines and rules regarding meetings with FDA, we do not at this time have a firm date for BLA resubmission or the related decision date for approval. As I noted last month, when we do have that information, we'll provide you with an update. We remain optimistic in the approval of Narsopliment. In the meantime, we continue supplying narsoplimab under our expanded access program to TATMA patients and their physicians.

Speaker 2

Although given the program's financial burden on Omeros, we are assessing how much longer we'll be able to maintain that program. Support for narsoplimab within the transplant community is strong and continues to grow. In addition to the recent publications discussed in our last earnings call, a manuscript directed to whom had high risk characteristics is expected to be published soon in Nature's Bone Marrow Transplantation. Let's now turn to OMS906, our MASP 3 inhibitor targeting the alternative pathway of complement. OMS906 is advancing well through multiple ongoing Phase 2 studies in 2 rare disease indications, paroxysmal nocturnal hemoglobinuria or PNH, a life threatening hematologic disorder and complement 3 glomerulopathy or C3 gs, a debilitating and potentially life threatening kidney disease.

Speaker 2

Across all of our clinical studies to date, OMS906 continues to perform extremely well. On last month's call, I went through a detailed review of the substantial value being built in our OMS906 program, value which we believe remains largely under recognized by the investment community. To summarize, we believe that OMS906 has several distinct and substantial benefits, which make us confident that OMS906 will favorably differentiate compared to other alternative pathway inhibitors currently available or in development. Adding to our confidence, demonstrated efficacy with other alternative pathway inhibitors such as the Factor B inhibitor of takapan further derisk our OMS906 programs by clinically validating alternative pathway inhibition across a list of disease indications including PNH, IgA nephropathy and most recently C3G. While we are targeting Iptacopan as our benchmark to be and we expect that we should.

Speaker 2

If takapan continues to build a roadmap for us to follow with Phase III trials designed to highlight the potential advantages of OMS906 over other alternative pathway inhibitors. We've detailed on previous calls what we see as the major differentiators between MASP-three and OMS906 versus other alternative pathway targets and therapeutics either approved or in development. These include that 1, MASP-three inhibition unlike C3 and C5 inhibitors leave entirely intact the infection fighting lytic arm of the classical pathway of complement, an advantage that could well translate to better safety 2, unlike C3, C5 and Factor B, MASP III when examined has been shown not to be an acute phase reactant, which is thought to be an important advantage in maintaining adequate and consistent dosing to prevent breakthrough of the underlying disease And 3, with once every 2 months to once quarterly dosing, OMS906 is expected to provide superior patient convenience and compliance. Market research to date has demonstrated a consistently favorable response to OMS906 among physicians driven by the drug's database expected efficacy and low treatment burden. Interestingly, physicians have also shown a preference for both the once every 2 months and the once quarterly intravenous dosing of OMS906 over the twice daily oral dosing of iptacapine.

Speaker 2

This is because the dosing regimens of OMS906 coincide with the usual physician follow-up schedule for PNH patients and would allow physicians to oversee drug administration, ensuring patient compliance. From the patient's perspective, the extended interval dosing regimens of OMS906 should allow them to live a more normal life without the daily oral medication reminder that they are sick. Our three trials in our OMS906 Phase 2 clinical program in PNH are progressing well. The first evaluating OMS906 in PNH patients who have not previously been treated with a complement inhibitor, in other words, complement inhibitor naive, has fully enrolled and is in the dose finding stage assessing administration every 8 or every 12 weeks. The second trial has a switchover design enrolling PNH patients who have a suboptimal response to the C5 inhibitor rabulizumab.

Speaker 2

OMS906 is initially administered to these patients in combination with rabulizumab for 24 weeks. And then in those patients who demonstrated hemoglobin response with the combination therapy, OMS906 is delivered as monotherapy. The switchover study is also fully enrolled and we're currently collecting OMS906 monotherapy data. A third Phase 2 PNH trial and extension trial is enrolling patients who have completed either of the other 2 OMS906 PNH studies and is generating long term efficacy and safety data for our program. Results from the combination stage of the Phase 2 switchover trial have been selected for a podium presentation at the Annual Congress of the European Hematology Association next month.

Speaker 2

Doctor. Morag Griffin, an internationally recognized expert in PNH from the St. James Teaching Hospital in Leeds, England will deliver the presentation. The presentation reports the results in PNH patients with 2 different doses of OMS906. All patients in the high dose group achieved clinical response, which is defined as an increase in hemoglobin of at least 2 grams and 6 of 7 patients in the low dose group also achieved the same level of clinical response.

Speaker 2

No patients in either dose group required transfusions following initiation of OMS906. The drug was well tolerated without any safety signal of concern. There will also be 2 poster presentations at directed to the pharmacokinetics and mechanism of action of OMS906. Given the rapid progress and impressive performance of OMS906 in PNH, we remain on track to initiate our OMS906 Phase 3 PNH program in the Q4 of this year. Our Phase 2 clinical trial evaluating OMS906 in C3 gs is enrolling.

Speaker 2

Here again, we remain on track and expect to begin a Phase 3 program in C3gs in the Q1 of 2025. In preparation for both the PNH and C3G OMS906 Phase 3 programs, discussions are ongoing with both U. S. And European regulators. So in conclusion, around OMS906 based on data to date, we believe that OMS906 has a high likelihood of success, both with respect to patients' lives and to market impact.

Speaker 2

Let's now discuss OMS-ten twenty nine, our long acting inhibitor of MASP-two targeting the lectin pathway. OMS-ten twenty nine successfully completed a Phase 1 single ascending dose study supporting once quarterly dosing administered either subcutaneously or intravenously. The second half of that Phase a multiple ascending dose study of OMS-ten twenty nine is expected to read out data to our team later this quarter. As previously disclosed, we are evaluating several chronic large value indicators and indications for potential development of OMS-ten twenty nine. Among these is neovascular age related macular degeneration, also known as wet AMD.

Speaker 2

MASP-two inhibition was previously demonstrated to be effective in a preclinical murine model of wet AMD. To further qualify the opportunity, we've initiated evaluation of OMS-ten twenty nine in a primate model of wet AMD. Notably, all approved treatments for wet AMD such as Lucentis and EYLEA require intravitreal injections, meaning injections into the posterior chamber of the eye. These injections are required as frequently as every 4 weeks and obviously are not ideal for patient comfort. Since MASP-two is produced exclusively in the liver, systemic administration alone could block MASP-two 2 providing therapeutic benefit without the need for intravitreal injection.

Speaker 2

Simply put, intravenous or subcutaneous administration of OMS-ten twenty nine could allow patients to maintain their sight and avoid painful injections in their eyes, a potential game changer in a very large market for both patients and their physicians. We continue to target next quarter to select a Phase 2 indication for OMS-ten twenty nine. With less resource intensive work, our ongoing efforts with narsoplimab in both severe acute and long COVID or PASC as well as in acute respiratory distress or ARDS including H1N1 and H5N1 could add meaningful shareholder value in the near term. The international literature, some of that novel work continuing to be generated by our team increasingly support the central role of the lectin pathway in these diseases. As part of our efforts, we've developed an assay that can differentiate based on lectin pathway activation between those patients with mild COVID and those with severe ARDS related COVID requiring hospitalization.

Speaker 2

The assay also has potential applicability to patients with other forms of ARDS and to patients with long COVID as well. In addition to our MASP-two and MASP-three antibody inhibitors, narsoplimab OMS906 and OMS1029, Our complement franchise includes our developing small molecule orally available MASP-two and MASP-three inhibitor programs, both of which are advancing rapidly. Our oral MASP-two inhibitor is further ahead and we are considering well suited indications for clinical trials. Our oral MASP-three inhibitor program is quickly driving toward a drug development candidate, leveraging in good part all that we learned throughout our MASP-two small molecule program. Turning to OMS-five 27, our PDE7 inhibitor program aimed at treating addictions, compulsions and movement disorders at the directed request of the National Institute on Drug Abuse or NIDA.

Speaker 2

We are developing OMS-five twenty seven as a potential treatment for cocaine use disorder. The program is funded by NIDA through a $6,700,000 grant. We anticipate receiving results later this year from a preclinical toxicology study of primates exposed to both cocaine and OMS-five twenty seven. Assuming positive results in the toxicology study, we plan to initiate next year a randomized double blind inpatient clinical trial evaluating OMS-five twenty seven in individuals with cocaine use disorder. Also as referenced in last month's call, we're exploring the potential use of OMS-five twenty seven in movement disorders, specifically levodopa induced dyskinesias or LID.

Speaker 2

This is a major problem in patients treated with levodopa and levodopa being the most common therapeutic used in Parkinson's disease. As such LID represents a large and effectively untapped commercial market. Our set of cellular and biologic immuno oncology platforms also have the potential to generate near term shareholder value. Following the recent generation of a large volume of exciting in vivo data, Our primary focus is on signaling driven immunomodulators, antigen driven immunomodulators that function both as therapeutics and vaccines, oncotoxins and adoptive T cell therapy, which we believe could supersede CAR T. These platforms represent novel approaches to cancer treatment designed to target both cell surface and intracellular cancer targets for broad cancer applicability to increase both CD4 and CD8 levels to mitigate loss of treatment effect seen with other therapies like checkpoint inhibitors, to eliminate the need for costly and time intensive cellular modification or engineering and to create immune memory against future relapse.

Speaker 2

We continue building out a broad intellectual property position and expect to share more of our data later this year. I'll now turn the call over to Mike Jacobson, our Chief Accounting Officer, to go through a more detailed discussion of our financial results. Mike?

Speaker 3

Thanks, Greg. Our net loss for the Q1 of 2024 was $37,200,000 or $0.63 per share compared to a net loss of $9,100,000 or $0.15 per share in last year's Q4. As Greg mentioned in the Q4 of last year, we had a remeasurement adjustment of $26,200,000 to our OMIDRIA contractor royalty asset due to the OMIDRIA royalty sale to BRI Healthcare and also a $4,100,000 being on the early extinguishment of a portion of our 2026 notes. Looking only at continuing operations, our net loss in the current quarter was 43,900,000 dollars or $0.75 per share compared with $39,300,000 or $0.63 per share in the prior year quarter. The prior year 4th quarter benefited from the $4,100,000 gain on the early extinguishment of the portion of the 26 notes.

Speaker 3

Without this extinguishment transaction, our loss from continuing operations for Q4 and Q1 would have been within $450,000 of each other. As of March 31, we had $230,000,000 of cash and investments on hand, an increase of $58,000,000 from year end. The 2 first quarter transactions significantly affected our Q1 ending cash balance, both on a positive basis for the DRI deal, which brought in $115,000,000 of non diluted capital with the opportunity to earn up to an additional total of $55,000,000 in 2 more sales related milestone payments of $27,500,000 each. And then secondly, the repurchase of the 3,200,000 shares of our common stock for aggregate purchase price of $11,900,000 decreased our cash balance. Combined with our common stock purchases in the Q4 of 2023, our total common stock repurchases to date are 5,000,000 shares or 8% of our outstanding common stock for an aggregate purchase price of $16,500,000 or $3.30 per share.

Speaker 3

Cost and expenses from continuing operations for the Q1 was $39,000,000 which was a decrease of $700,000 from the Q4 of last year. The decrease was driven by lower expenditures on the iGant clinical trial as we closed down the trial and by lower manufacturing costs. These decreases were partially offset by higher compensation costs recorded in the Q1. Interest expense for the Q1 was $8,200,000 which is $1,200,000 higher than the Q4 of last year due to increased interest associated with the DRI transaction that was finalized in February of 2024. The primary drivers of interest expense again are the 2026 notes and the DRI OMIDRIA royalty obligation.

Speaker 3

Interest and other income for the Q1 was $3,400,000 which was comparable to the Q4 of last year. Income from discontinued operations for this quarter was $6,700,000 and includes 2 primary components. $4,300,000 of interest earned on the OMIDRIA contract royalty asset and then $2,300,000 of remeasurement adjustments related to the OMIDRIA contract royalty asset. As I've mentioned previously, royalties earned are recorded as a reduction in the OMIDRIA contract royalty asset on our balance sheet. OMIDRIA royalties for the first quarter were $9,400,000 on OMIDRIA net sales of $31,200,000 This is compared to net sales in the 4th quarter of $35,700,000 or a $4,500,000 decrease in the current quarter compared to the previous 4th quarter.

Speaker 3

But it's a $500,000 increase over the prior year Q1. The decrease in net sales is expected given that Q1 historically represents the lowest quarter annually for OMIDRIA net sales while Q4 is generally 1 of the. As Greg mentioned, in February this year, we entered into an amended agreement with the DRI by which they acquired the right to receive all U. S. And Midland royalties payable by Raynor through December 31, 2001.

Speaker 3

We continue to hold all royalty rights to ex U. S. Sales of OMIDRIA and after December 31, 2021. All U. S.

Speaker 3

Royalty payments will also accrue to Omeros. The U. S. Royalty rate is generally 30% of net sales and extends for the duration of the relevant patent terms, which we expect to be at least into 2,035. As I mentioned, we are also entitled now and going forward to any non U.

Speaker 3

S. Royalties which are paid, which are generally 15% of net sales. In the Q1 of 2024, we recorded the $115,500,000 we received from DRI as incremental OMIDRIA royalty obligation on our balance sheet. So this is consistent with the accounting of the initial transaction with DRI. Now let's take a look at our expected second quarter results.

Speaker 3

We expect overall operating costs from continuing operations in the Q1. Our operations in the Q2 increased by about $16,000,000 to $17,000,000 in the Q1. The increase is primarily due to the expected receipt of drug substance manufactured from our 3rd party vendor, which is expensed upon delivery to us. As you may recall, we expense all manufacturing costs until we are reasonably assured of approval in the U. S.

Speaker 3

And the European Union. Interest income for the 2nd quarter should be nearly $3,000,000 and interest expense should be approximately $9,000,000 which is an increase of $800,000 over the Q1. The increase in interest expense is due to incremental interest recorded as a result of completing the DRI transaction. Income from discontinued operations should be in the $7,000,000 to $8,000,000 range. With that, I'll turn the call back over to Greg.

Speaker 3

Greg? Okay. Thanks, Mike.

Speaker 2

Operator, let's please open the call to questions.

Operator

Certainly. Our first question comes from the line of Steve Brozak from WBB Securities. Your question please.

Speaker 2

Hi, Greg. Thank you for taking the call. Just one question. On 906, you were pretty extensive in how you described the therapeutic window and how it would work. But tell me something, what are the KOLs giving you in terms of information on what they see and how important this will be?

Speaker 2

And then I've got one follow-up after that. Thank you. Okay. Well, let me first take that and then I think I'll hand it off to clinical and commercial as well. But I think as we said in the prepared comments that the response with the market research done to date, which has included physicians and within that physician group, key opinion leaders has been consistently positive.

Speaker 2

And as I mentioned, that's really been driven by 2 primary factors. 1 is the data to date. And based on the data to date, the anticipated efficacy of OMS906 in patients. And the second is its dosing ability, meaning every other month to once quarterly dosing. That represents a significant reduction in patient burden.

Speaker 2

It coincides with how physicians follow their patients so that physicians can then administer the drug. And the importance of that is physicians then are comfortable, they're confident, they know that the patients are in fact complying with treatment. They know it because they're administering the treatment. So those are all seen as I think very positive attributes. I think that certainly also when you think about how patients would view this, taking some sort of infusion, whether it's subcu, whether it's IV, once every other month, once quarterly, they're not consistently and repeatedly reminded that they're sick.

Speaker 2

Instead they go and have the infusion, they walk away, they live their lives as they otherwise would live. And taking an oral medication once daily, certainly twice daily is a constant reminder, I think to patients that, gee, there's a problem here with which I have to deal for my whole life. And we think the response also from physicians has been that's a positive. But let me stop there. And I think first, let me ask clinical and then follow-up with commercial, Andreas.

Speaker 2

What do you have anything to add or Steve anything to add to that?

Speaker 4

I think the consideration you mentioned the oral treatment that is obviously great as convenient for many, but I think you have gastrointestinal upset, you have diarrhea, you travel different time zones. There are complications that make this simple supposedly simple regimen not quite as simple. So taking something every other month or every quarter and not having to worry about it in the meantime is attractive for a significant number of patients and physicians because they will know that they have given it.

Speaker 2

Did you have anything to add from clinical on that?

Speaker 5

I think everything's been well said. I haven't encountered anything but enthusiasm when talking to KOLs and talking to physicians who treat these patients. Potential clinical sites are seeing no problems with this regimen and think it will be attractive to trial participants.

Speaker 2

Nadia?

Speaker 1

Yes. What I'll add is that we are in the middle of extensive market research and it's so exciting to hear the reactions to the product profile for 906. Bottom line, the doctors are telling us patients need options and they're very encouraged by what they're seeing, both efficacy, but delivered with a low treatment burden, essentially moving to 4 times a year. So we're also excited about the opportunity to meet with patients in a market research capacity later this month and continue this work.

Speaker 4

Thank you. Thank you.

Speaker 2

So Steve, I think you said you had a follow-up, but I don't know we may have answered that already for you, but let us know. You actually did ask and answer it, but I appreciate the detail and the depth that you went into. Let me hop back into the queue. Thanks very much. Okay.

Speaker 2

Thank you.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Olivia Brayer from Cantor Fitzgerald. Your question please.

Speaker 6

Hey, good afternoon guys. Thank you for the question. For the OMS906 update coming, I wanted to clarify that the data we'll see at EHAI is just through week 24 and that final switchover portion of the trial is later in the year. Is that right? And then maybe just help frame what level of efficacy you're looking to see later in the year from that monotherapy portion specifically?

Speaker 2

Sure. First, in answer to your initial question, yes, it's through the 1st 24 weeks. So it's through the combination therapy portion of the clinical trial. We are still collecting monotherapy data and we expect to have those data later in the year. With respect to what specifically we're targeting on the monotherapy side, I think that and again, I'll turn this to clinical, but I can tell you what my target there is that certainly what we're seeing is a meaningful improvement in hemoglobin in these patients on monotherapy over what they were receiving on rabiulizumab.

Speaker 2

But let me look to clinical and see if they have other things to add to that.

Speaker 3

I think that we are looking for data that are

Speaker 5

at least comparable to those of other switch studies that have been reported. The EHA abstract, I'm sure you know is now available online. I think it came out yesterday or the day before it was made public. And in that abstract, we note that the in our high dose group in that study, we looked at 2 different dose groups, dose escalation study. But in the high dose group, all of the patients treated at the high dose achieved clinical response of that's 100%.

Speaker 5

That's a 2 gram per deciliter increase in hemoglobin, which was one of the primary or co primary endpoints, the atacopan trials and that certainly compares favorably to other switch studies.

Speaker 2

And even in the low dose, I think 607 achieved that, right? So no, we're quite happy with how the data are looking with how 906 is looking generally. We're we think the data are impressive. They continue to be impressive. And we're just looking forward to initiating Phase 3 and frankly completing our Phase 3 program and bringing OMS906 to market.

Speaker 6

Thank you both. Looking forward to those updates.

Speaker 2

All right. Thank you, Olivia.

Operator

Thank you. One moment for our next question. And our next question comes from the line of John Chienko from Needham and Company. Your question please.

Speaker 7

Hi everyone. Thanks for taking my questions. I'm on for Serge today. First regarding the OMS906 trials, can you provide any color on what we can expect after the data is released and particularly whether we can expect meetings with the FDA ahead of the Phase 3 initiation? And then second, regarding the narsoplimab BLA resubmission, obviously, you mentioned updates are soon to come.

Speaker 7

Can you give any context to progress made with the FDA since you last received an update in April, or kind of if the ball is in their hands at this time? Thanks.

Speaker 2

Yes. In answer to your first question, discussions, interactions are ongoing with both U. S. And European regulators as we prepare for the Phase 3 trial or Phase 3 program. So let me just turn to Kathy and see Kathy, can you add more color to that?

Speaker 1

Yes. I mean, it really is fairly standard and we are making sure that we are keeping the communication lines open in both the U. S. And Europe and trying to harmonize those as much as we can so that we have a very efficient Phase 3 program.

Speaker 2

Okay. Thank you. And in answer to your second question, we really are not and have not, do not provide sort of running commentary on our interactions with regulators. So there's not much that I have to say there other than we clearly are comfortable, confident in the data that we have. We believe the drug certainly warrants approval and that is our objective.

Speaker 2

When you look at the utilization of the drug across the compassionate use or what is more formally called the expanded access program. The data are really very clear. And we're eager to get the drug approved. There no drug approved for this indication. We think it compares very favorably to other agents that are currently being used off label in this indication.

Speaker 2

And we're hearing similar things quite widely from physicians both in the U. S. And international. So it's been a long time. We recognize that, but our expectation certainly our strong hope and expectation is that we will get this approved.

Speaker 2

It certainly warrants it.

Operator

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Doctor. Demopulos for any further remarks.

Speaker 2

Thank you, operator, and again, thank you all for joining this afternoon. We're pleased with our Q1 progress across our programs and believe that we are well positioned for continued success throughout the remainder of 2024 and beyond. So we look forward to bringing you future updates. And as always, we appreciate your continued support. Have a good afternoon.

Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

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