OMEROS CORP [OMER] Filings

10-Q 1 omer-20230630x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023



☐	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		91-1663741
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

201 Elliott Avenue West Seattle, Washington		98119
(Address of principal executive offices)		(Zip Code)
(206) 676-5000 (Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
(Title of each class)	(Trading symbol)	(Name of each exchange on which registered)
Common Stock, par value $0.01 per share	OMER	The Nasdaq Stock Market LLC

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 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 ⌧ No ◻

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 ⌧ No ◻

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	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

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. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

As of August 7, 2023, the number of outstanding shares of the registrant’s common stock, par value $0.01 per share, was 62,855,824.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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,” “look forward to,” “may,” “objective,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “slate,” “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, short-term investments, royalty receipts and potential revenues will fund our anticipated operating expenses, capital expenditures and debt service obligations;

●

our expectations related to future royalties potentially payable to us under the terms of the asset purchase agreement under which we divested 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 (“HSCT-TMA”), immunoglobulin A (“IgA”) nephropathy, atypical hemolytic uremic syndrome (“aHUS”) and COVID-19;

●

whether and when a marketing authorization application (“MAA”) may be filed with the EMA for narsoplimab in any indication, and whether the EMA 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 we will rely on contract manufacturers to manufacture narsoplimab, if approved, for commercial sale and to manufacture our drug candidates for purposes of clinical supply and in anticipation of potential commercialization;

●

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, including for our lead MASP-2 inhibitor narsoplimab and for our other investigational candidates, including OMS906, OMS1029 and OMS527;

●

with respect to our narsoplimab clinical programs, our expectations regarding: whether enrollment in any ongoing or planned clinical trial will proceed as expected; whether we can capitalize on the financial and regulatory incentives provided by orphan drug designations granted by FDA, the European Commission (“EC”), or the EMA; and whether we can capitalize on the regulatory incentives provided by fast-track or breakthrough therapy designations granted by FDA;

●

our ability to raise additional capital through the capital markets or through one or more corporate partnerships, equity offerings, debt financings, collaborations, licensing arrangements or asset sales;

●

our expectations about the commercial competition that our drug candidates, if commercialized, face or may face;

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●

the expected course and costs of existing claims, legal proceedings and administrative actions, our involvement in 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 this Quarterly Report on Form 10-Q under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our other filings with the U.S. Securities and Exchange Commission (the “SEC”). Given these risks, uncertainties and other factors, actual results or anticipated developments may not be realized or, even if substantially realized, 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 Quarterly Report on Form 10-Q. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual results in subsequent periods may differ materially from current expectations. Except as required by applicable law, 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.

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OMEROS CORPORATION

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2023

INDEX


		Page
Part I — Financial Information		5
Item 1.	Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
Part II — Other Information		31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Default Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
Signatures		33

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OMEROS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(unaudited)


	June 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	6,603	$	11,009
Short-term investments		334,680		183,909
OMIDRIA contract royalty asset, short-term		29,084		28,797
Receivables		11,190		213,221
Prepaid expense and other assets		7,001		6,300
Total current assets		388,558		443,236
OMIDRIA contract royalty asset		115,802		123,425
Right of use assets		20,258		21,762
Property and equipment, net		1,749		1,492
Restricted investments		1,054		1,054
Total assets	$	527,421	$	590,969

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	9,552	$	5,989
Accrued expenses		29,793		30,551
Current portion of unsecured convertible senior notes, net		94,730		94,381
Current portion of OMIDRIA royalty obligation		4,777		1,152
Current portion of lease liabilities		4,686		4,310
Total current liabilities		143,538		136,383
Unsecured convertible senior notes, net		221,516		220,906
OMIDRIA royalty obligation		120,939		125,126
Lease liabilities, non-current		20,422		22,426
Other accrued liabilities, non-current		496		444
Commitments and contingencies (Note 10)
Shareholders’ equity:
Preferred stock, par value $0.01 per share, 20,000,000 shares authorized; none issued and outstanding at June 30, 2023 and December 31, 2022.		—		—
Common stock, par value $0.01 per share, 150,000,000 shares authorized at June 30, 2023 and December 31, 2022; 62,848,321 and 62,828,765 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively.		628		628
Additional paid-in capital		726,594		720,773
Accumulated deficit		(706,712)		(635,717)
Total shareholders’ equity		20,510		85,684
Total liabilities and shareholders’ equity	$	527,421	$	590,969

See accompanying Notes to Condensed Consolidated Financial Statements

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OMEROS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

(unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022

Costs and expenses:
Research and development	$	29,639	$	23,516	$	54,249	$	47,603
Selling, general and administrative		11,260		13,922		22,363		24,881
Total costs and expenses		40,899		37,438		76,612		72,484
Loss from operations		(40,899)		(37,438)		(76,612)		(72,484)
Interest expense		(7,932)		(4,927)		(15,865)		(9,868)
Interest and other income		4,537		670		8,500		1,163
Net loss from continuing operations		(44,294)		(41,695)		(83,977)		(81,189)
Net income from discontinued operations		7,000		10,846		12,982		17,329
Net loss	$	(37,294)	$	(30,849)	$	(70,995)	$	(63,860)

Basic and diluted net income (loss) per share:
Net loss from continuing operations	$	(0.70)	$	(0.66)	$	(1.34)	$	(1.30)
Net income from discontinued operations		0.11		0.17		0.21		0.28
Net loss	$	(0.59)	$	(0.49)	$	(1.13)	$	(1.02)

Weighted-average shares used to compute basic and diluted net income (loss) per share		62,837,125		62,730,015		62,832,991		62,727,395

See accompanying Notes to Condensed Consolidated Financial Statements

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OMEROS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share data)

(unaudited)


				Additional
	Common Stock			Paid-In		Accumulated
	Shares	Amount		Capital		Deficit		Total
Balance at January 1, 2022	62,628,855	$	626	$	706,288	$	(683,134)	$	23,780
Exercise of stock options	101,160		1		413		—		414
Stock-based compensation expense	—		—		3,892		—		3,892
Net loss	—		—		—		(33,011)		(33,011)
Balance at March 31, 2022	62,730,015		627		710,593		(716,145)		(4,925)
Stock-based compensation expense	—		—		3,072		—		3,072
Net loss	—		—		—		(30,849)		(30,849)
Balance at June 30, 2022	62,730,015	$	627	$	713,665	$	(746,994)	$	(32,702)


Balance at January 1, 2023	62,828,765	$	628	$	720,773	$	(635,717)	$	85,684
Stock-based compensation expense	—		—		2,953		—		2,953
Net loss	—		—		—		(33,701)		(33,701)
Balance at March 31, 2023	62,828,765		628		723,726		(669,418)		54,936
Exercise of stock options	19,556		—		97		—		97
Stock-based compensation expense	—		—		2,771		—		2,771
Net loss	—		—		—		(37,294)		(37,294)
Balance at June 30, 2023	62,848,321	$	628	$	726,594	$	(706,712)	$	20,510

See accompanying Notes to Condensed Consolidated Financial Statements

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OMEROS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)


	Six Months Ended June 30,
	2023		2022
Operating activities:
Net loss	$	(70,995)	$	(63,860)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		5,724		6,964
Non-cash interest expense on unsecured convertible debt		959		900
Depreciation and amortization		518		469
Non-cash interest earned on OMIDRIA contract royalty asset		(7,754)		(9,383)
Remeasurement on OMIDRIA contract royalty asset		(4,824)		(7,716)
Accretion on U.S. government treasury bills, net		(5,090)		—
Early termination of operating lease		—		(454)
Changes in operating assets and liabilities:
Receivables		202,031		23,676
Prepaid expenses and other		(1,044)		(3,668)
OMIDRIA contract royalty asset		19,914		31,063
Accounts payable and accrued expense		2,759		(12,653)
Net cash provided by (used in) operating activities		142,198		(34,662)
Investing activities:
Purchases of investments and other		(662,738)		(103,169)
Proceeds from the sale and maturities of investments		517,057		51,200
Purchases of property and equipment		(275)		(103)
Net cash used in investing activities		(145,956)		(52,072)
Financing activities:
Principal payments on OMIDRIA royalty obligation		(467)		—
Principal payments on finance lease obligations		(278)		(352)
Proceeds upon exercise of stock options		97		414
Net cash provided by (used in) financing activities		(648)		62
Net decrease in cash and cash equivalents		(4,406)		(86,672)
Cash and cash equivalents at beginning of period		11,009		100,808
Cash and cash equivalents at end of period	$	6,603	$	14,136

Supplemental cash flow information
Cash paid for interest	$	15,865	$	8,998
Equipment acquired under finance lease	$	500	$	557

See accompanying Notes to Condensed Consolidated Financial Statements

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OMEROS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 assets on December 23, 2021 (see “Sale of OMIDRIA Assets” below for additional information).

The lead drug candidate in our pipeline of complement-targeted therapeutics is narsoplimab, a proprietary, patented human monoclonal antibody targeting mannan-binding lectin-associated serine protease 2 (“MASP-2”), the key activator of the lectin pathway of complement. Clinical development of narsoplimab is currently focused primarily on hematopoietic stem cell transplant-associated thrombotic microangiopathy (“HSCT-TMA”) and immunoglobulin A (“IgA”) nephropathy. Our pipeline of clinical-stage development programs includes: our long-acting MASP-2 inhibitor OMS1029, our inhibitor of mannan-binding lectin-associated serine protease-3 (“MASP-3”) OMS906 and our phophodiesterase 7 (PDE7) inhibitor OMS527.

Sale of OMIDRIA Assets

On December 23, 2021, we sold our commercial product OMIDRIA and certain related assets including inventory and prepaid expenses to Rayner Surgical Inc. (“Rayner”). 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.

Under the Asset Purchase Agreement with Rayner (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. In December 2022, the Milestone Event occurred and we recorded a $200.0 million milestone receivable. Upon the achievement of the Milestone Event, our royalties on U.S. net sales were reduced from 50% to 30%, with royalties on any net sales outside the U.S. remaining unchanged at 15%. We received the Milestone Payment together with accrued interest in February 2023.

As a result of the divestiture, the results of OMIDRIA operations (e.g., revenues and operating costs) are included in discontinued operations in our condensed consolidated statements of operations and comprehensive loss and excluded from continuing operations for all periods presented (see “Note 3 – Discontinued Operations”).

Basis of Presentation

Our condensed 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 condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

Liquidity and Capital Resources

As of June 30, 2023, we had cash, cash equivalents and short-term investments of $341.3 million and outstanding accounts receivable of $11.2 million. Our loss for the quarter ended June 30, 2023 was $37.3 million and our cash

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provided by operations for the six months ended June 30, 2023 was $142.2 million, which included collection of the $200.0 million Milestone Payment in the first quarter of 2023.

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 and, therefore, could need 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, royalties from Rayner and our outstanding accounts receivable. If FDA approves narsoplimab for treatment of any indication within the next twelve months, then sales of narsoplimab may also provide funds for our operations. We have a sales agreement in place for 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 also 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 technologies.

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

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 payment 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. Consequently, in December 2022, 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 an effective interest rate of 11.0% and any amounts we receive that are different from the expected royalties. 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.

OMIDRIA Royalty Obligation

On September 30, 2022, we sold to DRI Healthcare Acquisitions LP (“DRI”) an interest in a portion of our future OMIDRIA royalty receipts for a purchase price of $125.0 million in cash (see “Note 8 – OMIDRIA Royalty Obligation”).

The $125.0 million cash consideration obtained is classified as a liability and is recorded as an “OMIDRIA royalty obligation” on our condensed consolidated balance sheet. The liability is being amortized over the term of the arrangement using the implied effective interest rate of 9.4% and interest expense is recorded as a component of continuing operations.

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To the extent our estimates of future royalties differ materially from previous estimates, we will adjust the carrying amount of the liability for future OMIDRIA royalties to the present value of the revised estimated cash flows, discounted at the original effective interest rate of 9.4% utilizing the cumulative catch-up method. The offset to the adjustment would be recognized as a component of net income (loss) from continuing operations.

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.

Right-of-Use Assets and Related Lease Liabilities

We record operating leases as right-of-use assets and recognize the related lease liabilities equal to the fair value of the lease payments using our incremental borrowing rate when the implicit rate in the lease agreement is not readily available. We recognize variable lease payments, when incurred. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.

We record finance lease obligations as a component of property and equipment and amortize these assets within operating expenses on a straight-line basis to their residual values over the shorter of the term of the underlying lease or the estimated useful life of the equipment. The interest component of finance lease obligations is included in interest expense and recognized using the effective interest method over the lease term.

We account for leases with initial terms of 12 months or less as an operating expense.

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 valuation model, which requires judgmental assumptions around volatility, risk-free rates, forfeiture rates and expected option life. 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.

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.

Note 3—Discontinued Operations

On December 23, 2021, we sold OMIDRIA and certain related assets including inventory and prepaid expenses to Rayner.

Under the Asset Purchase Agreement, the achievement of the Milestone Event in December 2022 triggered a $200.0 million Milestone Payment from Rayner and 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 2033. The Milestone Event resulted in recognition of the $200.0 million Milestone Payment, which we received in February 2023. Upon the occurrence of certain events described in the Asset Purchase Agreement, including during any

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specific period in which OMIDRIA is no longer eligible for separate payment, the U.S. base royalty rate would be further 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.

The sale of OMIDRIA and related assets was recorded as an asset sale. Additionally, the results of operations related to OMIDRIA are recorded as income from discontinued operations for all periods presented in the condensed consolidated statements of operations and comprehensive loss.

The following schedule presents a rollforward of the OMIDRIA contract royalty asset (in thousands):


OMIDRIA contract royalty asset at December 31, 2022	$	152,222
Royalties earned		(19,914)
Interest earned on OMIDRIA contract royalty asset		7,754
Remeasurement adjustments		4,824
OMIDRIA contract royalty asset at June 30, 2023	$	144,886

Net income from discontinued operations is as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022

	(In thousands)
Interest earned on OMIDRIA contract royalty asset	$	3,829	$	4,545	$	7,754	$	9,383
Remeasurement adjustments		3,147		5,557		4,824		7,716
Other income (expense), net		24		744		404		230
Net income from discontinued operations, net of tax	$	7,000	$	10,846	$	12,982	$	17,329

Cash flow from discontinued operations is as follows:


	Six Months Ended
	June 30,
	2023		2022

	(In thousands)
Net cash provided by discontinued operations from operating activities	$	217,688	$	46,038

Net cash provided by discontinued operations primarily represents royalties received and the $200.0 million Milestone Payment that we collected from Rayner in February 2023.

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Note 4—Net Loss Per Share

Our potentially dilutive securities include potential common shares related to our stock options, RSUs and unsecured convertible senior notes. Diluted earnings per share (“Diluted EPS”) considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. Diluted EPS excludes the impact of potential common shares related to our stock options in periods in which the option exercise price is greater than the average market price of our common stock for the period.

Potentially dilutive securities excluded from Diluted EPS are as follows:


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2023	2022	2023	2022
2026 Notes convertible to common stock ⁽¹⁾	12,172,008	12,172,008	12,172,008	12,172,008
2023 Notes convertible to common stock ⁽¹⁾	4,941,739	4,941,739	4,941,739	4,941,739
Outstanding options to purchase common stock	98,920	88	42,186	1,963
Outstanding restricted stock units	89,750	208,819	89,750	207,736
Total potentially dilutive shares excluded from net loss per share	17,302,417	17,322,654	17,245,683	17,323,446

(1)The 2023 Notes and 2026 Notes (defined below) are subject to capped call arrangements that potentially reduce the dilutive effect as described in “Note 7 — Unsecured Convertible Senior Notes.” Any potential impact of the capped call arrangements is excluded from this table.

Note 5—Certain Balance Sheet Accounts

OMIDRIA Contract Royalty Asset

The OMIDRIA contract royalty asset consists of the following:


	June 30,		December 31,
	2023		2022

	(In thousands)
Short-term contract royalty asset	$	29,084	$	28,797
Long-term contract royalty asset		115,802		123,425
Total OMIDRIA contract royalty asset	$	144,886	$	152,222

Receivables

Receivables consist of the following:


	June 30,		December 31,
	2023		2022

	(In thousands)
OMIDRIA royalty	$	11,066	$	12,966
Sublease and other		124		255
OMIDRIA milestone		—		200,000
Total receivables	$	11,190	$	213,221

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Property and Equipment, Net

Property and equipment, net consists of the following:


	June 30,		December 31,
	2023		2022

	(In thousands)
Equipment under finance lease obligations	$	6,477	$	6,204
Laboratory equipment		3,385		3,135
Computer equipment		1,101		1,076
Office equipment and furniture		625		625
Total cost		11,588		11,040
Less accumulated depreciation and amortization		(9,839)		(9,548)
Total property and equipment, net	$	1,749	$	1,492

For the three months ended June 30, 2023 and June 30, 2022, depreciation and amortization expense was $0.3 million and $0.2 million, respectively. For the six months ended June 30, 2023 and 2022, depreciation and amortization expense was $0.5 million for each period.

Accrued Expenses

Accrued expenses consists of the following:


	June 30,		December 31,
	2023		2022

	(In thousands)
Employee compensation	$	7,342	$	6,665
Clinical trials		7,272		5,536
Interest payable		6,160		5,172
Contract research and development		4,043		3,209
Consulting and professional fees		2,901		4,425
Income taxes payable		1,228		4,871
Other accrued expenses		847		673
Total accrued expenses	$	29,793	$	30,551

Note 6—Investments and Fair-Value Measurements

All of our investments are held in our name and are classified as short-term and held-to-maturity on the accompanying condensed consolidated balance sheets. Investment income is included as other income. Investment income for the three months ended June 30, 2023 and June 30, 2022 consists primarily of interest earned of $4.2 million and $0.2 million, respectively. Investment income for the six months ended June 30, 2023 and June 30, 2022 consists of interest earned of $7.6 million and $0.2 million, respectively.

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The following tables summarize our investments:


	June 30, 2023
	Amortized Cost		Gross Unrealized Gains/(Losses)		Estimated Fair Value

	(In thousands)

U.S. government securities classified as short-term investments	$	225,983	$	(89)	$	225,894
Money-market funds classified as short-term investments		108,697		—		108,697
Total short-term investments		334,680		(89)		334,591
Certificate of deposit classified as non-current restricted investments		1,054		—		1,054
Total	$	335,734	$	(89)	$	335,645


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains/(Losses)		Estimated Fair Value

	(In thousands)

U.S. government securities classified as short-term investments	$	99,027	$	22	$	99,049
Money-market funds classified as short-term investments		84,882		—		84,882
Total short-term investments		183,909		22		183,931
Certificate of deposit classified as non-current restricted investments		1,054		—		1,054
Total	$	184,963	$	22	$	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

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.

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Our fair value hierarchy for our financial assets and liabilities are as follows:


	June 30, 2023
	Level 1		Level 2		Level 3		Total

	(In thousands)
Assets:
U.S. government securities classified as short-term investments	$	225,894	$	—	$	—	$	225,894
Money-market funds classified as short-term investments		108,697		—		—		108,697
Total short-term investments		334,591		—		—		334,591
Certificate of deposit classified as non-current restricted investments		1,054		—		—		1,054
Total	$	335,645	$	—	$	—	$	335,645


	December 31, 2022
	Level 1		Level 2		Level 3		Total

	(In thousands)
Assets:
U.S. government securities classified as short-term investments	$	99,049	$	—	$	—	$	99,049
Money-market funds classified as short-term investments		84,882		—		—		84,882
Total short-term investments		183,931		—		—		183,931
Certificate of deposit classified as non-current restricted investments		1,054		—		—		1,054
Total	$	184,985	$	—	$	—	$	184,985

Cash held in demand deposit accounts of $6.6 million and $11.0 million is excluded from our fair-value hierarchy disclosure as of June 30, 2023 and December 31, 2022, respectively. The carrying amounts reported in the accompanying condensed consolidated balance sheets for receivables, accounts payable and other current monetary assets and liabilities approximate fair value.

See “Note 7—Unsecured Convertible Senior Notes” and “Note 8—OMIDRIA Royalty Obligation” for the carrying amount and estimated fair value of our outstanding convertible senior notes and the OMIDRIA royalty obligation.

Note 7—Unsecured Convertible Senior Notes

We carry $95.0 million in aggregate principal on our 6.25% Convertible Senior Notes (the “2023 Notes”) and $225.0 million in aggregate principal on our 5.25% Convertible Senior Notes (the “2026 Notes”) as shown below:


	Balance as of June 30, 2023
	2023 Notes		2026 Notes		Total

	(In thousands)
Principal amount	$	95,000	$	225,030	$	320,030
Unamortized debt issuance costs		(270)		(3,514)		(3,784)
Total unsecured convertible senior notes, net	$	94,730	$	221,516	$	316,246

Fair value of outstanding unsecured convertible senior notes (1)	$	93,575	$	157,359


	Balance as of December 31, 2022
	2023 Notes		2026 Notes		Total

	(In thousands)
Principal amount	$	95,000	$	225,030	$	320,030
Unamortized discount		(619)		(4,124)		(4,743)
Total unsecured convertible senior notes, net	$	94,381	$	220,906	$	315,287

Fair value of outstanding unsecured convertible senior notes (1)	$	92,031	$	118,141

(1)

The fair value is classified as Level 3 due to the limited trading activity for the unsecured convertible senior notes.

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2023 Unsecured Convertible Senior Notes

Our 2023 Notes are unsecured and accrue interest at an annual rate of 6.25% per annum, payable semi-annually in arrears on May 15 and November 15 of each year. The 2023 Notes mature on November 15, 2023 unless earlier purchased, redeemed or converted in accordance with their terms.

The unamortized debt issuance costs of $0.3 million as of June 30, 2023 will be amortized to interest expense at an effective interest rate of 7.0% over the remaining term.

Subject to the satisfaction of certain conditions, the 2023 Notes are convertible into cash, shares of our common stock or a combination thereof, as we elect at our sole discretion. The initial conversion rate is 52.0183 shares of our common stock per $1,000 of note principal (equivalent to an initial conversion price of approximately $19.22 per share of common stock), which equals approximately 4.9 million shares of common stock issuable upon conversion, subject to adjustment in certain circumstances.

To reduce the dilutive impact or potential cash expenditure associated with the conversion of the 2023 Notes, we entered into a capped call transaction (the “2023 Capped Call”), which covers the number of shares of our common stock underlying the 2023 Notes when our common stock share price is trading between the initial conversion price of $19.22 and $28.84. However, should the market price of our common stock exceed the $28.84 cap, then the conversion of the 2023 notes could have a dilutive impact or may require a cash expenditure to the extent the market price exceeds the cap price. As of June 30, 2023, approximately 4.9 million shares remained outstanding on the 2023 Capped Call.

The following table sets forth total interest expense recognized in connection with the 2023 Notes:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022

	(In thousands)				(In thousands)
Contractual interest expense	$	1,484	$	1,484	$	2,969	$	2,969
Amortization of debt issuance costs		176		164		349		325
Total	$	1,660	$	1,648	$	3,318	$	3,294

2026 Unsecured Convertible Senior Notes

Our 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 unamortized debt issuance costs of $3.5 million as of June 30, 2023 will be amortized to interest expense at an effective interest rate of 5.9% over the remaining term.

Subject to the satisfaction of certain conditions, the 2026 Notes are convertible into cash, shares of our common stock or a combination thereof, as we elect at our sole discretion. 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 of common stock issuable upon conversion, subject to adjustment in certain circumstances.

To reduce the dilutive impact or potential cash expenditure associated with the conversion of the 2026 Notes, we entered into capped call transactions (the “2026 Capped Calls”), which cover the number of shares of our common stock underlying the 2026 Notes when our common stock share price is trading between the initial conversion price of $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 a dilutive impact or may require a cash expenditure to the extent the market price exceeds the cap price. As of June 30, 2023, approximately 12.2 million shares remained outstanding on the 2026 Capped Call.

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The following table sets forth interest expense recognized related to the 2026 Notes:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2022		2021

	(In thousands)				(In thousands)
Contractual interest expense	$	2,954	$	2,954	$	5,907	$	5,907
Amortization of debt issuance costs		307		290		610		575
Total	$	3,261	$	3,244	$	6,517	$	6,482

Future Minimum Principal Payments

Future minimum principal payments for the 2023 Notes and 2026 Notes as of June 30, 2023 are as follows (in thousands):


2023	$	95,000
2024		—
2025		—
2026		225,030
Total future minimum principal payments under the 2023 Notes and 2026 Notes	$	320,030

Note 8—OMIDRIA Royalty Obligation

On September 30, 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 condensed consolidated balance sheet. DRI is entitled to receive royalties on OMIDRIA net sales through 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, and we retain all royalty receipts in excess of the respective cap in any given calendar year. At June 30, 2023, the maximum remaining amount that DRI is entitled to receive through the term of the agreement (December 31, 2030) is $180.3 million, which, if fully paid, would be at an implied effective interest rate of 9.4% over the entire payment period.

For the three months and six months ended June 30, 2023, we incurred $3.0 million and $5.9 million, respectively, of cash interest expense.

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We consider our OMIDRIA royalty obligation to be a Level 3 Held-to-Maturity obligation as its valuation relies on factors that are not easily observable in the market. As of June 30, 2023, the approximate fair value of our obligation is $117.1 million.

As of June 30, 2023, the maximum remaining scheduled principal and interest payments (based on an implied effective interest rate of 9.4%) are as follows:


					Total
	Principal		Interest		Annual Cap

	(In thousands)
2023	$	589	$	5,911	$	6,500
2024		8,576		11,424		20,000
2025		14,641		10,359		25,000
2026		16,081		8,919		25,000
2027		17,664		7,336		25,000
Thereafter		68,164		10,586		78,750
Total scheduled payments	$	125,715	$	54,535	$	180,250

Note 9—Leases

We have an operating lease for our office and laboratory facilities with an initial term that ends in November 2027 and

OMEROS CORP [OMER] Filings
10-Q	[2023-08-09]
10-Q	[2023-05-09]
10-K	[2023-03-13]
10-Q	[2022-11-09]
10-Q	[2022-08-09]
10-Q	[2022-05-10]
10-K	[2022-03-01]
10-Q	[2021-11-09]
10-Q	[2021-08-09]
10-Q	[2021-05-10]
10-K	[2021-03-01]
10-Q	[2020-11-09]
10-Q	[2020-08-10]
10-Q	[2020-05-11]
10-K	[2020-03-02]
10-Q	[2019-11-12]
10-Q	[2019-08-08]
10-Q	[2019-05-09]
10-K	[2019-03-01]
10-Q	[2018-11-08]
10-Q	[2018-08-09]
10-Q	[2018-05-10]
10-K	[2018-03-01]
10-Q	[2017-11-09]
10-Q	[2017-08-08]
10-Q	[2017-05-10]
10-K	[2017-03-16]
10-Q	[2016-11-09]
10-Q	[2016-08-09]
10-Q	[2016-05-10]
10-K	[2016-03-15]
10-Q	[2015-11-09]
10-Q	[2015-08-10]
10-Q	[2015-05-11]
10-K	[2015-03-16]
10-Q	[2014-11-10]
10-Q	[2014-08-11]
10-Q	[2014-05-12]
10-K	[2014-03-13]
10-Q	[2013-11-07]
10-Q	[2013-08-09]
10-Q	[2013-05-09]
10-K	[2013-03-18]
10-Q	[2012-11-09]
10-Q	[2012-08-07]
10-Q	[2012-05-10]
10-K	[2012-03-15]