OMER - Omeros: Betting Big On Narsoplimab We Are Still A Buyer

2023-08-23 07:30:49 ET

Summary

• Omeros' "Buy" stance is based on upcoming developments in the second half of 2023-2024 around narsoplimab.
• OMER is expected to present a detailed analysis strategy for the narsoplimab BLA's reapplication for HSCT-TMA, leading to a potential PDUFA by mid-2024.
• The phase 3 ARTEMIS-IGAN trial in 3Q23 will assess narsoplimab's efficacy in treating IgA nephropathy. We believe the data will be positive.
• Robust cash runway until 2025 is reassuring.
• We maintain a non-consensus buy rating on OMER stock.

OMER 2Q23 update: Sustaining a "Buy" Stance Rooted in Key 2H23 Developments

Drawing upon the 2Q23 earnings , our continued "Buy" stance on Omeros (OMER) is predominantly based on forthcoming developments in the second half of 2023, with the linchpin being the prospective success of narsoplimab in two indications.

At September's outset, OMER is projected to present a detailed analysis strategy, marking a pivotal step towards the narsoplimab BLA's reapplication for HSCT-TMA. Anticipating constructive insights from the regulatory body, a trajectory leading to a BLA resubmission emerges, bolstered by aspirations of securing a PDUFA by mid-2024 which should meaningfully change the trajectory of the stock price. Furthermore, we believe an additional monumental event on the horizon is the anticipated phase 3 ARTEMIS-IGAN trial's top-line disclosure in 3Q23, which probes narsoplimab's efficacy in treating IgA nephropathy.

Elucidating on the BLA resubmission trajectory for Narsoplimab in 2H23, OMER’s discourse with the FDA in the bygone May has yielded directionality on assimilating and dissecting external survival metrics into the NDA reapplication. Barring unforeseen hurdles, post a green signal from the FDA—anticipated within a two-month frame post submission—OMER is set to embark on a data review, subsequently leading to a BLA resubmission in the latter half of 2023, and potentially culminating in a PDUFA by mid-2024.

Segueing into the imminent phase 3 ARTEMIS readout in 3Q23, all eyes are fixated on narsoplimab's performance in IgAN. We are positive on the phase 3 data looking at the robust phase 2 study that showed impressive eGFR (the most important marker for the FDA, as we have seen with Tarpeyo's approval ) and proteinuria improvement even in a highly refractory segment (data below). Furthermore, we believe the bar for approval is low considering that the only available disease-modifying treatment, Tarpeyo, is a steroid based therapeutic that cannot be taken chronically due to long- term side effects. Furthermore, we believe RASi, like Sparsentan , should not compete with disease-modifying treatments that can actually slow down the ESRD progression like Narso.

BTVI phase 2 data key point summary :

Omeros has announced the publication of results from the Phase II trial of Narsoplimab in in the medical journal Kidney International Reports (KIREPORTS) . The article entitled "Safety, Tolerability and Efficacy of Narsoplimab, a Novel MASP-2 Inhibitor for the Treatment of IgA Nephropathy" was published on August 13, 2020.

Context: Narsoplimab is a human monoclonal antibody against mannan-associated lectin-binding serine protease?2 (MASP-2). Now in a Phase III study, narsoplimab was evaluated in a staged Phase II study assessing safety and effectiveness in high-risk patients with IgA nephropathy (IgAN).

Design: Substudy 1 was a single-arm open-label study of 12 weekly infusions and tapered corticosteroids, with 6 weeks of follow-up. In substudy 2, patients were randomized 1:1 to receive a course of treatment consisting of once-weekly narsoplimab or vehicle infusions for 12 weeks. After 6 weeks of follow-up, both substudy 2 groups could continue in an open-label extension, receiving 1 or more narsoplimab courses at the investigator’s discretion.

Results: All 4 patients who were enrolled in substudy 1 had reductions in 24-hour urine protein excretion (UPE) at week 18, ranging from 54% to 95% compared with baseline. In substudy 2, the vehicle and narsoplimab groups had similar proteinuria reductions at week 18. Eight patients (3 vehicle, 5 narsoplimab) continued in the dosing extension; all received narsoplimab. Median reduction in 24-hour UPE in these 8 patients was 61.4% at 31 to 54 weeks postbaseline. Estimated glomerular filtration rates (eGFR) remained stable in both substudies.

Most Common Adverse Events: The most commonly reported adverse events ((AES)) included headache, upper respiratory infection, and fatigue. Most AEs were mild or moderate and transient. No treatment-related serious AEs were reported.

Conclusion: This interim analysis suggests that narsoplimab treatment is safe, is well tolerated, and may result in clinically meaningful reductions in proteinuria and stability of eGFR in high-risk patients with advanced IgAN.

IgAN market landscape summary table

Drug

Company

Description

Status

Reduction in proteinuria

Tarpeyo

Calliditas

Oral formulation of budesonide

Approved (accelerated); eGFR data reported Mar 2023

34% (31% pbo-adjusted) in ph3 Nefigard

Filspari (sparsentan)

Travere

Oral endothelin type A & angiotensin II type 1 inhibitor

Approved (accelerated); eGFR data due Q4 2023

50% (35 points adjusted for irbesartan control) in ph3 Protect

Narsoplimab (OMS721)

Omeros

Anti-MASP2 antibody

Ph3 Artemis-IgAN ; proteinuria data due mid-2023

64% (no control arm) in ph2

Atrasentan

Chinook

Oral endothelin A receptor inhibitor

Ph3 Align ; proteinuria data due H2 2023

55% (no control arm) in ph2 Affinity

Iptacopan (LNP023)

Novartis

Oral complement factor B inhibitor

Ph3 Applause-IgAN ; proteinuria data due H2 2023

23% pbo-adjusted in ph2 *

Sibeprenlimab (VIS649)

Otsuka

Anti-April antibody

Ph3 Visionary ends Dec 2026

43% pbo-adjusted in ph2 **

*At highest dose (200mg BID); **pooled data with IV doses 2mg, 4mg & 8mg monthly. Source: Evaluate Pharma & CTG Labs - NCBI .

Source: Evaluate Pharma

Pivoting to the OMS906 Program , a phase 2 trial with treatment-accustomed PNH patients is in progress, recruiting 7 out of 12 participants, while another phase 2 study targets naïve PNH patients. Concurrently, a phase 2 trial for C 3-glomerulopathy patients is slated for commencement, with collective findings projected for late 2023 or early 2024. We believe OMS906 is not appreciated by the market, and any positive newsflow here can move the price meaningfully.

Robust cash runway

Examining OMER's financial positioning , they rounded off 2Q23, boasting a cash reserve of approximately $342MM. Closing with OMER's fiscal health, the 2Q23 period witnessed a loss of $37.3MM. Yet, with a cash influx of approximately $341MM, the enterprise is well-equipped to navigate through to 2025, which is highly reassuring as a smid cap biotech that is not cashflow positive yet.

Risks to our thesis

Investing in OMER is not without its risks. First and foremost, the anticipated success of narsoplimab forms the backbone of the company's prospective growth, meaning any setback in its development or regulatory approval can significantly undermine OMER's valuation. Past hiccups with narsoplimab, especially its phase 2 IgAN trial, signify potential challenges in subsequent studies. Regulatory uncertainties loom large, particularly given the impending BLA resubmission for HSCT-TMA. A delay or denial from the FDA, especially post the submission, could have adverse implications for investor sentiment. Financially, despite a robust cash position as of 2Q23, OMER's continued operational burn, underscored by the recent loss of $37.3MM, could heighten if there are any unforeseen R&D expenses or if revenue generation faces impediments. Lastly, the early-stage nature of other assets in OMER's pipeline could introduce further volatility, especially if clinical results don't align with investor expectations.

Conclusion: maintaining a buy rating

Rooted in 2Q23 outcomes, the rationale behind our sustained "Buy" recommendation for OMER hinges on expected pivotal events in 2H23, with narsoplimab's potential approval acting as the linchpin. OMER's upcoming intricate analysis strategy, tailored towards narsoplimab BLA's reapplication for HSCT-TMA, coupled with positive regulatory feedback, paves the path for a potential PDUFA by mid-2024. The phase 3 ARTEMIS-IGAN trial, anticipated in 3Q23, will further spotlight narsoplimab's capabilities, despite historical setbacks (which may be over-punishing the stock). Additionally, OMER's financial war chest, approximated at $342MM as of 2Q23, is projected to buttress its operations till 2025. This robust financial stance, intertwined with anticipated regulatory and clinical milestones, underpins our bullish outlook for OMER.

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