The Play On Omeros by Bret Jensen Jul. 17, 2020 | OMER Message Board Posts

Omeros Corporation

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Msg  2989 of 2994  at  7/21/2020 7:22:49 PM  by

gena633


The Play On Omeros by Bret Jensen Jul. 17, 2020

The Play On Omeros by Bret Jensen Jul. 17, 2020
Summary

Today, we revisit Omeros.

The company has two potential catalysts on the near term horizon and the stock is a good covered call candidate.

...

Company Overview

Omeros (OMER) is a Seattle, Washington-based biopharmaceutical company that IPO'd in 2009. The firm is somewhat unique in that it's not focusing on a single therapeutic area or drug platform, rather the company is looking to build a robust, diverse pipeline of first-in-class small-molecule and antibody therapeutics. The company is developing drugs for orphan indications, large-market, and where there's no approved treatments. Omeros currently has one approved therapeutic on the market called Omidria. The drug is designed to prevent miosis in cataract surgery and to reduce postoperative pain. Furthermore, the drug has demonstrated the ability to reduce complications, to prevent intraoperative floppy iris syndrome, and to reduce the need for opioids, pupil-expansion devices and postoperative steroids.

The company's pipeline is currently comprised of 7 product candidates, most of which are in the early stages of development. The lead product candidate is called Narsoplimab, which is being tested in a variety of indications. Omeros has a market capitalization of roughly $800 million and trades for around $14.50 a share.

Pipeline

Narsoplimab

Narsoplimab is a human monoclonal antibody targeting mannan-binding lectin-associated serine protease-2, aka MASP-2. MASP-2 is the effector enzyme of the lectin pathway of the complement system. The lectin pathway is one of the principal pathways of the complement system and is triggered mainly by tissue damage and microbial infection. Critically, inhibition of MASP-2 does not affect the classical complement pathway, which is a critical component of the immune response to infection. This means that the drug can prevent complement-mediated inflammation and endothelial damage while leaving entirely intact the important functions of the other pathways of innate immunity. The drug is being evaluated in a variety of indications: hematopoietic stem cell transplant-associated TMA, IgA nephropathy, atypical hemolytic uremic syndrome, and lupus nephritis/other renal diseases. In the United States, Narsoplimab has been granted FDA Breakthrough Therapy designation in patients who have high-risk HSCT-TMA, and for igA nephropathy; Orphan Drug designation for the prevention of complement-mediated TMAs, for the treatment of HSCT-TMA, and for igA nephropathy; and the drug has received FDA Fast Track designation for the treatment of aHUS. In the European Union, Narsoplimab has been designated an Orphan Medicinal Product for treatment in hematopoietic stem cell transplantation, and for IgA nephropathy. Recently, the company submitted the second part of their rolling BLA for Narsoplimab for the treatment of hematopoietic stem cell transplant-associated thrombotic microangiopathy. The submission was comprised of information on the chemistry, manufacturing and controls of Narsoplimab.

Source: Company Presentation

On March 3rd, the company reported clinical data from their pivotal trial of Narsoplimab for the treatment of hematopoietic stem cell transplant-associated thrombotic microangiopathy. The drug significantly exceeded the FDA-agreed upon threshold for the primary efficacy endpoint of a 15% complete response rate. Furthermore, the drug was well tolerated with adverse events comparable to those typically seen in the post-transplant population.

Source: Company Presentation

In addition to its HSCT-TMA lead program, Omeros is conducting ongoing Phase 3 clinical trials of Narsoplimab for immunoglobulin A nephropathy and atypical hemolytic uremic syndrome. However, due to COVID-19, enrollment has slowed while previously enrolled patients are continuing in the trials. Despite this, Omeros recently reaffirmed that they are targeting next year for the IgA nephropathy trial readout.

Source: Company Presentation

Looking ahead, Omeros believes that they will complete their BLA sometime this quarter. Given the Breakthrough Therapy designation, it's expected that the FDA will grant the BLA priority review. After FDA approval, the company will submit their European marketing authorization application. Commercial preparations are underway. The company is busy finalizing distribution, pricing, their launch strategy, hiring team members, and performing market research. Also, Omeros is assessing expansion of Narsoplimab into other endothelial injury syndromes, like diffuse alveolar hemorrhage and Graft-versus-host disease.

Source: Company Presentation

Analyst Commentary & Balance Sheet

As of March 31st, 2020, Omeros had cash, cash equivalents and short-term investments of $53.9 million, compared to $60.7 million on December 31st, 2019. Research and development expenses for the first quarter were $28.9 million, compared to $26.2 million in Q1 of 2019. Selling, general and administrative expenses were $18 million in the quarter, compared to $14.6 million in the same quarter of 2019. Product sales came in at $23.5 million, compared to $21.7 million in Q1 of 2019. Record sales of $33.4 million were hit in Q4 of 2019, but they have since declined due to inventory utilization by ASCs and hospitals in anticipation of the COVID-19-related shutdown of elective surgical procedures. Overall, the company reported a net loss of $29 million for Q1 of 2020, compared to a net loss of $24.3 million for Q1 of 2019. The last time the company raised money was when they launched an equity offering in December of 2019.

Analysts are mixed on Omeros at the moment with three Buy ratings and two Holds over the past few months. The consensus price target on Wall Street is just north of $25.00, however. The latest rating comes from Wedbush on June 9th. The firm reiterated their hold rating and placed a $17 price target on the name. On May 12th, Needham & Company reiterated their hold rating. Lastly, on the same day as Needham & Company, HC Wainwright reiterated their buy rating and $34 price target. HC Wainwright has long had a price target in the $30's. In the analyst's valuation model, Omidria makes up roughly a third of the value and Narsoplimab makes up the other two thirds. Risks to the $34 price target, as outlined by the analyst at HC Wainwright, include: "(1) trial delays; (2) adverse clinical results; (3) inability to obtain approval for OMS721 and other candidates; (4) inability to achieve more OMIDRIA market traction; and (5) earlier-than-anticipated introduction of OMIDRIA generics in the U.S."

Verdict

There are a couple of near term potential catalysts on the horizon. The first is completion of the company's rolling BLA on Narsoplimab for its first of hopefully many indications. The second is getting pass through status for Omidria past September 30th when it expires. Management sounded very confident this was going to happen by summer through a legislative effort that would garner Omidria the coveted status for an additional five years. The stock should get a boost from both of these events.

I think the company could then raise additional capital via a secondary offering to fund the rollout of Narsoplimab which I still believe has blockbuster potential.

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