OMEROS CORP

Previous wording

The complement system plays a role in the body’s inflammatory response and becomes activated as a result of tissue damage or trauma or microbial pathogen invasion. Inappropriate or uncontrolled activation of the complement system can cause diseases characterized by serious tissue injury. Three main pathways can activate the complement system: classical, lectin, and alternative. Omeros is focused on development of therapeutics to treat diseases associated with the lectin and/or alternative pathways of complement. Omeros is developing antibodies as well as small-molecule inhibitors of key enzymes known to be centrally involved in the in activation of the targeted pathway of complement.

Current wording

The complement system plays a role in the body’s inflammatory response and becomes activated as a result of tissue damage or trauma or microbial pathogen invasion. Inappropriate or uncontrolled activation of the complement system can cause diseases characterized by serious tissue injury. Three main pathways can activate the complement system: classical, lectin, and alternative. We are focused on development of therapeutics to treat diseases associated with the lectin and/or alternative pathways of complement. We are developing antibodies as well as small-molecule inhibitors of key enzymes known to be centrally involved in the in activation of the targeted pathway of complement.

Previous wording

Mannan-binding lectin-associated serine protease 2 (“MASP-2”) is a novel pro-inflammatory protein target that is the effector enzyme of the lectin pathway and is required for the function of this pathway. Omeros is developing antibodies and small-molecule inhibitors of MASP-2 as potential therapeutics for diseases in which the lectin pathway has been shown to contribute to significant tissue injury and pathology. When not treated, these diseases are typically characterized by significant end-organ damage, such as kidney or central nervous system injury. Importantly, inhibition of MASP-2 has been demonstrated not to interfere with the antibody-dependent classical complement activation pathway, a critical component of the acquired immune response to infection.

Current wording

Mannan-binding lectin-associated serine protease 2 (“MASP-2”) is a novel pro-inflammatory protein target that is the effector enzyme of the lectin pathway and is required for the function of this pathway. We are developing antibodies and small-molecule inhibitors of MASP-2 as potential therapeutics for diseases in which the lectin pathway has been shown to contribute to significant tissue injury and pathology. When not treated, these diseases are typically characterized by significant end-organ damage, such as kidney or central nervous system injury. Importantly, inhibition of MASP-2 has been demonstrated not to interfere with the antibody-dependent classical complement activation pathway, a critical component of the acquired immune response to infection.

Previous wording

We successfully completed a pivotal clinical trial for narsoplimab in TA-TMA and previously submitted to FDA a biologics license application (“BLA”) seeking marketing approval for narsoplimab in this indication. In late 2021, FDA issued a complete response letter (“CRL”) with respect to the BLA in which the agency indicated that additional information would be needed to support regulatory approval. We appealed FDA’s decision to issue the CRL through a formal dispute resolution process that concluded in late 2022. Although our appeal was denied, the decision identified potential paths for resubmission of the BLA based on both response data and survival data from the completed pivotal trial versus a historical control group, with or without an independent literature analysis or based on survival data alone. Consistent with subsequent interactions with FDA’s review division, we submitted to FDA in the fall of 2023 an analysis plan to assess already existing clinical trial data, existing data from a historical control population available from an external source, data from the narsoplimab expanded access program, and data directed to the mechanism of action of narsoplimab. We are having ongoing discussions with the agency regarding the proposed analysis plan. As a result, we are currently unable to estimate when we will submit the BLA or, subsequently, FDA’s timing for a decision regarding approval. There can be no guarantee that FDA’s specific recommendations for resubmission will be acceptable to Omeros in terms of the time and/or expenditure required or that any resubmission of the BLA will result in approval of narsoplimab for TA-TMA.

Current wording

We successfully completed a pivotal clinical trial for narsoplimab in TA-TMA and previously submitted to FDA a biologics license application (“BLA”) seeking marketing approval for narsoplimab in this indication. In late 2021, FDA issued a complete response letter (“CRL”) with respect to the BLA in which the agency indicated that additional information would be needed to support regulatory approval. We appealed FDA’s decision to issue the CRL through a formal dispute resolution process that concluded in late 2022. Although our appeal was denied, the decision identified potential paths for resubmission of the BLA based on both response data and survival data from the completed pivotal trial versus a historical control group, with or without an independent literature analysis or based on survival data alone. Consistent with subsequent interactions with FDA’s review division, we submitted to FDA an analysis plan to assess already existing clinical trial data, existing data from a historical control population available from an external source, data from the narsoplimab expanded access program, and data directed to the mechanism of action of narsoplimab. We are having ongoing discussions with the agency regarding the proposed analysis plan and FDA's requirements for resubmission of our BLA. As a result, we are currently unable to estimate when we will submit the BLA or, subsequently, FDA’s timing for a decision regarding approval. There can be no guarantee that FDA’s specific recommendations for resubmission will be acceptable to us in terms of the time and/or expenditure required or that any resubmission of the BLA will result in approval of narsoplimab for TA-TMA.

Previous wording

Our lectin pathway program also includes OMS1029, our long-acting antibody targeting MASP-2. This next-generation MASP-2 inhibitor is intended to be complementary to narsoplimab, enabling us to pursue chronic indications in which dosing convenience would be of significant benefit to patients. Dosing of all cohorts in a single-ascending dose Phase 1 clinical trial of OMS1029 was successfully completed in early 2023. Pharmacokinetic (“PK”) and pharmacodynamic (“PD”) data show dose-proportional exposure and sustained lectin pathway inhibition, consistent with dosing of OMS1029 once quarterly, either intravenously or subcutaneously. Dosing has also been completed in both of two planned cohorts of our ongoing Phase 1 multiple-ascending-dose study of OMS1029 in healthy volunteers and we expect the study to conclude in mid-2024. OMS1029 has been well tolerated to date with no safety concerns identified. We continue to evaluate several potential indications for Phase 2 clinical development for OMS1029.

Current wording

Our lectin pathway program also includes OMS1029, our long-acting antibody targeting MASP-2. This next-generation MASP-2 inhibitor is intended to be complementary to narsoplimab, enabling us to pursue chronic indications in which dosing convenience would be of significant benefit to patients. We have completed Phase 1 clinical trials evaluating both single-ascending and multiple-ascending doses of OMS1029. Results of these studies support once-quarterly dosing, administered either intravenously or subcutaneously. OMS1029 has been well tolerated to date with no safety concerns identified. We continue to evaluate several potential indications for Phase 2 clinical development for OMS1029.

Previous wording

Our pipeline of clinical-stage complement-targeted therapeutic candidates also includes OMS906, a proprietary, patented monoclonal antibody targeting MASP-3, the key activator of the alternative pathway of complement. We believe OMS906 has the potential to treat a wide range of alternative pathway-related diseases and that its attributes favorably differentiate OMS906 from other marketed and in-development alternative pathway inhibitors. Clinical development of OMS906 is currently focused on rapidly advancing to Phase 3 clinical trials in multiple alternative pathway-related disorders, including paroxysmal nocturnal hemoglobinuria (“PNH”) and complement 3 glomerulopathy (“C3G”). We have multiple ongoing Phase 2 clinical trials evaluating OMS906 in these indications.

Current wording

Our pipeline of clinical-stage complement-targeted therapeutic candidates also includes OMS906, now known as a “zaltenibart,” a proprietary, patented monoclonal antibody targeting MASP-3, the key activator of the alternative pathway of complement. We believe OMS906 has the potential to treat a wide range of alternative pathway-related diseases and that its attributes favorably differentiate OMS906 from other marketed and in-development alternative pathway inhibitors.

Previous wording

We have three ongoing Phase 2 clinical trials evaluating OMS906 for PNH. The first is in PNH patients who have not previously been treated with a complement inhibitor, and the second in PNH patients who have had an unsatisfactory response to ravulizumab, an inhibitor of complement component 5 (“C5”). The third Phase 2 clinical trial is an open-label extension study to assess the long-term efficacy and safety of OMS906 in patients who have completed either of the other two PNH Phase 2 clinical trials.

Current wording

We have one ongoing Phase 1 study in healthy subjects that is evaluating higher doses than were used in the completed Phase 1 study. We also have three ongoing Phase 2 clinical trials evaluating zaltenibart for PNH. The first is in PNH patients who have not previously been treated with a complement inhibitor and the second in PNH patients who have had an unsatisfactory response to ravulizumab, an inhibitor of complement component 5 (“C5”). The third Phase 2 clinical trial is an open-label extension study to assess the long-term efficacy and safety of zaltenibart in patients who have completed either of the other two PNH Phase 2 clinical trials.

Previous wording

Results from a pre-specified interim analysis of our ongoing Phase 2 clinical trial of OMS906 in complement-inhibitor-naïve adults with PNH were featured in a podium presentation at the annual meeting of the American Society of Hematology in December 2023. The interim analysis results showed statistically significant and clinically meaningful improvements in all measured markers of hemolysis, including hemoglobin and lactate dehydrogenase. No patients were reported to have had a clinical breakthrough of PNH or a thrombotic event, and none were reported to require a transfusion while receiving OMS906 treatment.

Current wording

Results from a pre-specified interim analysis of our ongoing Phase 2 clinical trial of zaltenibart in complement-inhibitor-naïve adults with PNH were featured in a podium presentation at the annual meeting of the American Society of Hematology in December 2023. The interim analysis results showed statistically significant and clinically meaningful improvements in all measured markers of hemolysis, including hemoglobin and lactate dehydrogenase. This study was amended to gather additional data to inform the choice of zaltenibart dose for Phase 3 development. These data have been collected and are being analyzed.

Previous wording

Enrollment is complete and dosing is ongoing in our Phase 2 trial evaluating two doses of OMS906 in PNH patients who have had an unsatisfactory response to the C5 inhibitor ravulizumab. Utilizing a “switch-over” design, this study enrolls PNH patients receiving ravulizumab, adds OMS906 to provide combination therapy with ravulizumab for 24 weeks, and then, in those patients who demonstrate a hemoglobin response with the combination therapy, switches to OMS906 monotherapy. Data from a pre-specified interim analysis showed that the addition of OMS906 therapy to ravulizumab treatment resulted in statistically significant and clinical meaningful improvements in both mean hemoglobin levels and absolute reticulocyte counts by week 4 of combination therapy, with a sustained response demonstrated through week 24 (the latest assessment prior to the interim analysis cutoff). All 13 entrolled patients were included in the interim analysis. All patients in the high-dose group achieved clinical response, defined as an increase in hemoglobin of at least 2 grams, and six of seven patients in the low-dose group achieved this same clinical response. No patients in either dose group required transfusions following initiation of OMS906. As with all other clinical studies with OMS906, the drug was well tolerated without any safety signal of concern. Full details from the interim analysis will be featured in a podium presentation at EHA 2024, the annual congress of the European Hematology Association, to be held in Madrid, Spain in June. Interim analysis data from the monotherapy portion of the trial are expected to be available in late 2024.

Current wording

Enrollment is complete and dosing is ongoing in our Phase 2 trial evaluating two doses of zaltenibart in PNH patients who have had an unsatisfactory response to the C5 inhibitor ravulizumab. Utilizing a “switch-over” design, this study enrolls PNH patients receiving ravulizumab, adds zaltenibart to provide combination therapy with ravulizumab for 24 weeks, and then, in those patients who demonstrate a hemoglobin response with the combination therapy, switches to zaltenibart monotherapy. In June 2024, efficacy data from a pre-specified interim analysis of the combination therapy portion of the trial were featured in a podium presentation at the annual congress of the European Hematology Association held in Madrid, Spain. The interim analysis showed that the addition of zaltenibart therapy to ravulizumab treatment resulted in statistically significant and clinical meaningful improvements in both mean hemoglobin levels and absolute reticulocyte counts by week 4 of combination therapy, with a sustained response demonstrated through week 24 (the latest assessment prior to the interim analysis cutoff). All 13 enrolled patients were included in the interim analysis. All patients in the high-dose group achieved clinical response, defined as an increase in hemoglobin of at least 2 grams, and six of seven patients in the low-dose group achieved this same clinical response. Interim analysis data from the monotherapy portion of the trial showed that clinically meaningful improvements in hemoglobin levels and absolute reticulocyte counts were sustained following transition to zaltenibart monotherapy and prevented both intra-vascular and extra-vascular hemolysis. As with all other clinical studies with zaltenibart, the drug was well tolerated without any safety signal of concern. Full details from the interim analysis in the monotherapy portion of the trial are expected to be presented at a relevant scientific congress in late 2024.

Previous wording

We have initiated an open-label extension study to assess the long-term efficacy and safety of OMS906 in patients with PNH. In the extension study, PNH patients who have completed a previous study evaluating OMS906 roll directly into the extension study without a break in OMS906 treatment. Data from this study will contribute to a planned BLA for OMS906 in the treatment of PNH. Based on PK data from a successful Phase 1 single-ascending-dose study of OMS906 in healthy subjects and interim data from our ongoing clinical trials in PNH patients, we are exploring two different dosing frequencies - once every eight weeks and once every 12 weeks - for the Phase 3 studies and commercialization, if approved.

Current wording

We have initiated an open-label extension study to assess the long-term efficacy and safety of zaltenibart in patients with PNH. In the extension study, PNH patients who have completed a previous study evaluating zaltenibart roll directly into the extension study without a break in zaltenibart treatment. Data from this study will contribute to a planned BLA for zaltenibart in the treatment of PNH. Selection of the dose level and frequency for the Phase 3 studies and commercialization, if approved, is being informed by PK data from the two Phase 1 single-ascending-dose studies of zaltenibart in healthy subjects and interim data from our ongoing clinical trials in PNH patients.

Previous wording

In February 2024 we met with FDA to discuss our development program for OMS906 in PNH. We presented clinical and nonclinical data and requested input on expectations for Phase 3 studies and BLA submission. FDA confirmed that the scope of our nonclinical program is sufficient to support Phase 3 clinical studies and provided input on dosing and design of the proposed Phase 3 program to support a BLA in PNH. We expect to meet again with FDA later this year to discuss further details of the design of our Phase 3 studies. Phase 3 clinical trials evaluating OMS906 in PNH are targeted to begin in late 2024.

Current wording

In February 2024, we met with FDA to discuss our development program for zaltenibart in PNH. We presented clinical and nonclinical data and requested input on expectations for Phase 3 studies and BLA submission. FDA confirmed that the scope of our nonclinical program is sufficient to support Phase 3 clinical studies and provided input on dosing and design of the proposed Phase 3 program to support a BLA in PNH. We expect to meet again with FDA as well as European regulators later this year to discuss further details of our planned Phase 3 studies. Phase 3 clinical trials evaluating zaltenibart in PNH are targeted to begin in late 2024.

Previous wording

We also have an ongoing Phase 2 clinical program evaluating OMS906 for the treatment of C3G, a rare and debilitating renal disease driven by complement dysregulation. Notably, the relevance of the alternative pathway to C3G has been clinically validated in a Phase 3 trial with another inhibitor of the alternative pathway that reported positive results in the treatment of C3G. Sites are now open in multiple countries and patients are being screened for enrollment. We are targeting to initiate Phase 3 development for C3G in the first part of 2025, after Phase 2 results are available and discussions occur with regulators.

Current wording

We also have an ongoing Phase 2 clinical program evaluating zaltenibart for the treatment of C3G, a rare and debilitating renal disease driven by complement dysregulation. Notably, the relevance of the alternative pathway to C3G has been clinically validated in a Phase 3 trial with another inhibitor of the alternative pathway that reported positive results in the treatment of C3G. Sites are now open in multiple countries and enrollment has begun. We are targeting to initiate Phase 3 development for C3G in the first quarter of 2025.

Previous wording

Our PDE7 inhibitor program, which we refer to as OMS527, comprises multiple PDE7 inhibitor compounds and is based on our discoveries of previously unknown links between PDE7 and any addiction or compulsive disorder, and between PDE7 and any movement disorders. In April 2023, we were awarded a grant from the National Institute on Drug Abuse (“NIDA”), part of the National Institutes of Health, and requested by NIDA to develop our lead orally administered PDE7 inhibitor compound, for which we have successfully completed a Phase 1 study, for the treatment of cocaine use disorder (“CUD”). NIDA awarded the grant to Omeros for a total of $6.69 million over three years, of which we have claimed and received $0.7 million of funding to date and recognized $0.2 million into Other Income in our condensed consolidated statement of operations and comprehensive loss. The grant is intended to support preclinical cocaine interaction/toxicology studies to assess safety of the therapeutic candidate in the presence of concomitant cocaine administration, as well as an in-patient, placebo-controlled clinical study evaluating the safety and effectiveness of OMS527 in adults with CUD who receive concurrent intravenous cocaine. The preclinical study is intended to provide the toxicology data necessary to support the human study of OMS527 in CUD. The toxicology study is underway and is expected to be completed in late 2024.

Current wording

Our PDE7 inhibitor program, which we refer to as OMS527, comprises multiple PDE7 inhibitor compounds and is based on our discoveries of previously unknown links between PDE7 and any addiction or compulsive disorder, and between PDE7 and any movement disorders. In April 2023, we were awarded a grant from the National Institute on Drug Abuse (“NIDA”), part of the National Institutes of Health, and requested by NIDA to develop our lead orally administered PDE7 inhibitor compound, for which we have successfully completed a Phase 1 study, for the treatment of cocaine use disorder (“CUD”). NIDA awarded the grant to us for a total of $6.69 million over three years, of which we have claimed and received $0.9 million of funding to date and recognized $0.6 million into Other Income in our condensed consolidated statement of operations and comprehensive loss. The grant is intended to support preclinical cocaine interaction/toxicology studies to assess safety of the therapeutic candidate in the presence of concomitant cocaine administration, as well as an in-patient, placebo-controlled clinical study evaluating the safety and effectiveness of OMS527 in adults with CUD who receive concurrent intravenous cocaine. The preclinical study is intended to provide the toxicology data necessary to support the human study of OMS527 in CUD. The toxicology study is underway and is expected to be completed in late 2024.

Previous wording

Under the Asset Purchase Agreement, we were entitled to receive a $200.0 million 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 setting. The Milestone Event occurred in December 2022 and we recorded a $200.0 milestone receivable. We received the Milestone Payment together with accrued interest in February 2023.

Current wording

On December 23, 2021, we closed an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Rayner Surgical Inc. (“Rayner”) for the sale of OMIDRIA and related business assets. Under the Asset Purchase Agreement, we were entitled to receive a $200.0 million milestone payment (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 setting. The Milestone Event occurred in December 2022 and we recorded a $200.0 milestone receivable. We received the Milestone Payment together with accrued interest in February 2023.

Previous wording

On September 30, 2022, we sold to DRI Healthcare Acquisition LP (“DRI”) an interest in a portion of our future OMIDRIA royalty receipts and received $125.0 million in cash consideration which we recorded as an OMIDRIA royalty obligation on our condensed consolidated balance sheet. DRI was entitled under that arrangement to receive royalties on OMIDRIA net sales between September 1, 2022 and December 31, 2030, subject to certain annual caps. The liability is being amortized over the term of the arrangement using the implied effective interest rate of 10.3%. Interest expense on the royalty obligation is recorded as a component of continuing operations.

Current wording

On September 30, 2022, we sold to DRI Healthcare Acquisition LP (“DRI”) an interest in a portion of our future OMIDRIA royalty receipts and received $125.0 million in cash consideration which we recorded as an OMIDRIA royalty obligation on our condensed consolidated balance sheet. DRI was entitled under that arrangement to receive royalties on OMIDRIA net sales between September 1, 2022 and December 31, 2030, subject to certain annual caps. The liability is being amortized over the term of the arrangement using the implied effective interest rate of 10.27%. Interest expense on the royalty obligation is recorded as a component of continuing operations.

Previous wording

On February 1, 2024, we entered into amended and restated royalty purchase agreement pursuant to which we sold to DRI an expanded interest in our OMIDRIA royalties (the “Amendment”). We received $115.5 million in cash consideration, which we recorded as an addition to the OMIDRIA royalty obligation. The Amendment eliminated the previously existing annual caps on royalty payments effective beginning in the first quarter of 2024 and entitled DRI to receive all royalties on U.S. net sales of OMIDRIA payable between January 1, 2024 and December 31, 2031. DRI is entitled to payment only to the extent of royalty payments that are payable on U.S. net sales of OMIDRIA on or before December 31, 2031 and DRI has no recourse to our assets other than its interest in the OMIDRIA royalties. Omeros retains the right to receive all royalties payable by Rayner on any net sales of OMIDRIA outside the U.S. payable from and after January 1, 2024, as well as all royalties on global net sales of OMIDRIA payable from and after December 31, 2031. In addition to the cash consideration received at closing, the Amendment also entitles us to receive two milestone payments of up to $27.5 million each, payable in January 2026 and January 2028, respectively, based on achievement of certain threshholds for U.S. net sales of OMIDRIA. See “Note 8— OMIDRIA Royalty Obligation” in the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

On February 1, 2024, we entered into amended and restated royalty purchase agreement pursuant to which we sold to DRI an expanded interest in our OMIDRIA royalties (the “DRI Amendment”). We received $115.5 million in cash consideration, which we recorded as an addition to the OMIDRIA royalty obligation. The DRI Amendment eliminated the previously existing annual caps on royalty payments effective beginning in the first quarter of 2024 and entitled DRI to receive all royalties on U.S. net sales of OMIDRIA payable between January 1, 2024 and December 31, 2031. DRI is entitled to payment only to the extent of royalty payments that are payable on U.S. net sales of OMIDRIA on or before December 31, 2031 and DRI has no recourse to our assets other than its interest in the OMIDRIA royalties. We retain the right to receive all royalties payable by Rayner on any net sales of OMIDRIA outside the U.S. payable from and after January 1, 2024, as well as all royalties on global net sales of OMIDRIA payable from and after December 31, 2031. In addition to the cash consideration received at closing, the DRI Amendment also entitles us to receive two milestone payments of up to $27.5 million each, payable in January 2026 and January 2028, respectively, based on achievement of certain thresholds for U.S. net sales of OMIDRIA. See “Note 8 — OMIDRIA Royalty Obligation” in the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

Our loss for the quarter ended March 31, 2024 was $37.2 million. As of March 31, 2024, we had cash, cash equivalents and short-term investments of $230.3 million available to fund operations and debt service. Our cash used in operations for the three months ended March 31, 2024 was $41.8 million.

Current wording

Our loss for the three and six months ended June 30, 2024 was $56.0 million and $93.2 million, respectively. As of June 30, 2024, we had cash, cash equivalents and short-term investments of $158.9 million available to fund operations and to service debt.

Previous wording

Clinical research and development expenses increased $0.2 million compared to the prior year quarter due primarily to increased OMS906 clinical and manufacturing activities, partially offset by decreased expenditure on narsoplimab due to termination of our IgA nephropathy program following analysis of our Phase 3 clinical trial results.

Current wording

For the three and six months ended June 30, 2024, clinical research and development expenses increased $14.7 million and $14.9 million, respectively, compared to the prior year periods. The increases were primarily due to increased narsoplimab drug substance manufacturing andzaltenibart clinical research costs, partially offset by decreased clinical expenditures on narsoplimab due to the termination of our IgA nephropathy program following analysis of our Phase 3 clinical trial results. Our accounting policy is to expense all manufacturing costs related to drug candidates until regulatory approval is reasonably assured in either the U.S. or European Union.

Previous wording

Internal overhead and other expenses increased $1.5 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to receipt of an Employee Retention Credit in the prior year that was recorded as an offset to expense.

Current wording

For the three and six months ended June 30, 2024, internal overhead and other expenses increased $0.8 million and $2.3 million, respectively, as compared to the same periods in the prior year. The increases were primarily due to additional employee related costs and receipt of an Employee Retention Credit received in the second quarter of the prior year that was recorded as an offset to expense.

Previous wording

Stock-based compensation expenses decreased $0.3 million for thethree months ended March 31, 2024 as compared to the same period in the prior year, primarily due to the valuation and timing of the vesting of employee stock options.** **

Current wording

Stock-based compensation expenses decreased $0.3 million for the six months ended June 30, 2024 as compared to the same period in the prior year, primarily due to the valuation and timing of the vesting of employee stock options.

Previous wording

We expect research and development expenses in the second quarter of 2024 to be higher than those in the first quarter of this year primarily due to increased manufacturing costs associated with narsoplimab. Our accounting policy is to expense all manufacturing costs related to drug candidates until regulatory approval is reasonably assured in either the U.S. or European Union.

Current wording

We expect research and development expenses in the third quarter of 2024 to be substantially lower than those in the second quarter of this year primarily due to the manufacturing costs associated with narsoplimab that were expensed in the second quarter.

Previous wording

For the three months ended March 31, 2024, selling, general and administrative expenses, excluding stock-based compensation expense, increased$1.2 million compared to the prior year quarter. The increase was primarily due to the receipt of an Employee Retention Credit in the first quarter of 2023 and increased patent and other legal costs in the first quarter of this year.

Current wording

For the three and six months ended June 30, 2024, selling, general and administrative expenses, excluding stock-based compensation expense, increased $2.5 million and $3.8 million, respectively, as compared to the same periods in the prior year. The increase was primarily due to legal and financial advisory expenses incurred in the connection with the 2026 Note Repurchase Transaction, receipt of an Employee Retention Credit in the second quarter of 2023 (that was recorded as an offset to expense) andpatent related expenses.

Previous wording

We expect selling, general and administrative expenses in the second quarter of 2024 to be similar to those in the first quarter of this year.

Current wording

We expect selling, general and administrative expenses in the third quarter of 2024 to be lower compared to those in the second quarter of this year.

Previous wording

Interest expense is primarily comprised of interest and amortization of debt discount and issuance costs on our convertible senior notes maturing in February 2026 as well as interest on our DRI royalty obligation (see “Note 6—Convertible Senior Notes” and “Note 8— OMIDRIA Royalty Obligation” in the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q).

Current wording

Interest expense is primarily comprised of interest and amortization of debt discount and issuance costs on our 2026 Notes as well as interest on our DRI royalty obligation (see “Note 6— Debt” and “Note 8— OMIDRIA Royalty Obligation” in the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q).

Previous wording

We expect that interest expense for the second quarter of 2024 will increase from the first quarter due the $115.5 million additional payment that we received from DRI in February 2024.

Current wording

We expect that interest expense for the third quarter of 2024 will decrease from the second quarter due to the net reduction of debt resulting from the 2026 Note Repurchase Transaction.

Previous wording

Interest and other income decreased$0.5 million for the three months ended March 31, 2024 as compared to the same period in 2023 due to holding a lower average cash and investment balances than in the prior year.

Current wording

Interest and other income decreased$1.3 million and $1.8 million for the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023 primarily due to holding a lower average cash and investment balance than in the prior year.

Previous wording

We expect interest and other income for the second quarter of 2024 to be slightly lower compared to those in the first quarter of this year.

Current wording

We expect interest and other income for the third quarter of 2024 to be lower compared to those in the second quarter of this year due to lower average cash and investment balances.

Previous wording

Interest is earned on the OMIDRIA contract royalty asset at an implied effective interest rate of 11.0%. The $0.4 million increase in interest earned is due to a higher OMIDRIA contract royalty asset balance during the first quarter of 2024 than in the first quarter of 2023. The increased balance in the OMIDRIA contract royalty asset resulted from remeasurements made throughout 2023.

Current wording

Interest is earned on the OMIDRIA contract royalty asset at an implied effective interest rate of 11.0%. The $0.4 million and $0.9 million increase in interest earned for the three and six months ended June 30, 2024, respectively, were due to a higher OMIDRIA contract royalty asset balance in 2024 than during the same periods in 2023. The increased balance in the OMIDRIA contract royalty asset resulted from periodic remeasurements made during 2023.

Previous wording

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; therefore, we potentially need to continue to raise additional capital to accomplish our business plan and to retire our outstanding convertible senior notes due in February 2026. We plan to continue to fund our operations for at least the next twelve months with our existing cash and investments. We have a sales agreement to sell shares of our common stock, from time to time, in 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 pursue debt financings as well as public and private offerings of our equity securities, or other strategic transactions, which may include licensing or selling a portion or all of one or more of our existing technologies. Should it be necessary to manage our operating expenses, we could also reduce our projected cash requirements by delaying clinical trials, reducing selected research and development efforts, or implementing other restructuring activities.

Current wording

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; therefore, we potentially need to continue to raise additional capital to accomplish our business plan. We have a sales agreement to sell shares of our common stock, from time to time, in 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. In addition, our Delayed Draw Term Loan of $25.0 million may be drawn once in full on or prior to June 3, 2025 at our election, but it is conditioned on the approval by FDA of narsoplimab in TA-TMA. Proceeds of the Delayed Draw Term Loan may only be used toward any related transaction costs and for commercialization efforts of TA-TMA.

Previous wording

Operating Activities. Net cash used in operating activities for thethree months ended March 31, 2024 increased by$216.3 million as compared to the same period in 2023. The increase was primarily due to a $202.7 million decrease in receivables due to the receipt of the $200.0 million OMIDRIA milestone received in February 2023, a $5.7 million decrease in funds provided by accounts payable and accrued expenses, and a $4.5 million increase in funds used for prepaids and other assets. Additionally, Omeros incurred a $3.5 million increase in net loss compared to the same period a year ago.

Current wording

Operating Activities. Net cash used in operating activities for thesix months ended June 30, 2024 increased by$230.0 million compared to the same period in 2023. This change was primarily due to collecting a $200.0 million Milestone Payment from Rayner in the prior year, a $22.2 million increase in net loss, a $9.1 million decrease in accounts payable and accrued expenses, and a $2.9 million decrease in prepaid expenses.

Previous wording

Investing Activities. Cash flows used in investing activities primarily reflect cash used to purchase short-term investments and proceeds from the sale of short-term investments, thus causing a shift between our cash and cash equivalents and short-term investment balances. Because we manage our cash usage with respect to our total cash, cash equivalents and short-term investments, we do not consider fluctuations in cash flows from investing activities to be important to the understanding of our liquidity and capital resources.

Current wording

Investing Activities. Cash flows provided by investing activities primarily reflects cash used to purchase short-term investments and proceeds from the sale of those investments. This frequently causes a shift between our cash, cash equivalents and short-term investment balances. As we manage our usage with respect to total cash, cash equivalents and short-term investments, we do not consider fluctuations in cash flows from investing activities to be important to the understanding of our liquidity and capital resources.

Previous wording

Financing Activities. Net cash provided by financing activities during thethree months ended March 31, 2024 increased $98.8 million compared to the same period in 2023. This was primarily due to the $115.5 million we received from DRI in February 2024 related to the Amendment, partially offset by $11.9 million in expenditures related to repurchasing 3.2 million shares of our common stock.

Current wording

Financing Activities. Net cash provided by financing activities during thesix months ended June 30, 2024 increased $72.2 million compared to the same period in 2023. The increase was primarily due to receiving the $115.5 million related to the sale of future OMIDRIA royalties in February 2024 from DRI offset by $10.7 million of principal payments on the OMIDRIA royalty obligation. Additionally, we paid $21.2 million to the Lenders in the 2026 Note Repurchase Transaction and repurchased 3.2 million shares of our common stock for $11.9 million.

Previous wording

Our lease for our office and laboratory space ends in November 2027. We have two options to extend the lease term by five years each. In addition, we carry various finance lease obligations for laboratory and office equipment. As of March 31, 2024, the remaining aggregate non-cancelable rent payable under the initial term of the lease, excluding common area maintenance and related operating expenses, is $25.1 million.

Current wording

Our lease for our office and laboratory space ends in November 2027. We have two options to extend the lease term by five years each. In addition, we carry various finance lease obligations for laboratory and office equipment. As of June 30, 2024, the remaining aggregate non-cancelable rent payable under the initial term of the lease, excluding common area maintenance and related operating expenses, is $23.4 million.