XLV - Omeros Q4: Strong Financials And IgAN Pipeline Readout In Q3 23

2023-03-27 08:19:05 ET

Summary

• Omeros Corp's Q4 2022 earnings show a cash runway extending into 2025 and anticipation of Phase 3 trial readout of Narsoplimab in IgAN during 3Q23.
• The ARTEMIS Phase 3 trial in IgAN remains on track, and positive trial data could make Narsoplimab the first complement inhibitor approved for the condition.
• Risks include regulatory, pipeline, competition, and financial risks.
• Based on OMER's strong financial position and Narsoplimab's potential in IgAN, we reiterate a strong buy rating.

Q4 2022 Earnings Update

On March 13th , Omeros Corporation ( OMER ) reported the company's Q4 2022 earnings and updates on its ongoing clinical trials. The company ended Q4 2022 with a cash runway extending into 2025 (with ~$408 million in cash on hand) and the anticipation of the Phase 3 trial readout of Narsoplimab in IgAN during the third quarter of 2023. OMER also expects to meet with the FDA in the second quarter to finalize the work needed to resubmit the company's new drug application for Narsoplimab in TA-TMA. At this time, I see TA-TMA as more of a free option.

For Q4, the company earned $17.9M in royalties from eye therapy Omidria, on Rayner's U.S. net sales of $35.8M, an all-time high for quarterly net sales of Omidria, according to Omeros.

Phase ARTEMIS phase 3 trial is the key catalyst to focus on in Q3 2023

The ARTEMIS Phase 3 trial in IgAN remains on track to read out nine-month proteinuria data in 3Q23, which could form the basis of a biologics license application filing (BLA) four to six months after data. If the trial data is positive, Narsoplimab could be the first complement inhibitor approved for IgAN. We believe Travere's ( TVTX ) sparsentan and Chinook's ( KDNY ) atrasentan should be complementary to Narsoplimab rather than a competitor considering the difference in mechanism of action and the fact that Narsoplimab would more likely be a disease-modifying treatment (that can slow down IgAN) than a symptomatic agent.

Risks

1. Regulatory Risk: OMER's drug candidates are subject to regulatory approval, which involves extensive clinical trials, and the FDA or other regulatory bodies may refuse to approve them. Failure to obtain regulatory approval could result in significant delays or even total abandonment of the programs, leading to loss of investment.
2. Pipeline Risk: OMER's pipeline is at an early stage of development, and the success of its drug candidates is uncertain. While the company has promising Phase 3 data for Narsoplimab in IgAN, the drug has yet to be approved for any indication. Additionally, the success of the company's other pipeline programs remains uncertain and could lead to a lack of growth.
3. Competition Risk: The pharmaceutical industry is highly competitive, with established players, such as Roche and Novartis, competing with smaller companies like OMER. These larger companies have greater financial resources, research and development capabilities, and marketing expertise, which could hinder OMER's success in the market.
4. Financial Risk: OMER has a history of operating losses and may need to raise additional funds through debt or equity offerings to fund its operations, including its pipeline programs. This could dilute the value of existing shares and negatively impact the stock price. Additionally, the company has significant debt obligations, and failure to meet these obligations could lead to insolvency.

Conclusion

OMER's strong financial position and the anticipation of the Phase 3 trial readout of Narsoplimab in IgAN during the third quarter of 2023 bode well for the company's stock in 2023. As discussed in detail in our initiation article, we are a big fan of Narsoplimab's potential in IgAN based on its strong phase 2 data in highly refractory patient populations (showing compelling eGFR and proteinuria benefit) and logical mechanism of action in targeting complement systems. We reiterate a strong buy rating on OMER.

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