OMEROS CORP

Previous wording

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 diseases, including complement-mediated diseases and cancers related to dysfunction of the immune system, as well as addictive and compulsive disorders.

Current wording

Omeros Corporation (“Omeros,” the “Company” or “we”) is a clinical-stage biopharmaceutical company committed to discovering, developing and commercializing first-in-class small-molecule and protein therapeutics for large-market as well as orphan indications targeting immunologic diseases, including complement-mediated diseases and cancers related to dysfunction of the immune system, as well as addictive and compulsive disorders.

Previous wording

The lead drug candidate in our pipeline of complement-targeted therapeutics is narsoplimab (OMS721), a proprietary, patented human monoclonal antibody targeting 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 (“TA-TMA”).

Current wording

The lead product candidate in our pipeline of complement-targeted therapeutics is narsoplimab (OMS721), a proprietary, patented human monoclonal antibody targeting 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 (“TA-TMA”).

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 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.

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, including paths based on comparison of survival data from the completed pivotal trial versus a historical control group. Consistent with subsequent interactions with FDA’s review division, we previously 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. As a part of our most recent meeting with FDA, in September 2024, we received minor feedback on our proposed statistical analysis plan for the primary endpoint – patient survival in our pivotal narsoplimab trial compared to that in an external registry of TA-TMA patients – which was a limited request to include certain additional sensitivity analyses. Additional sensitivity analyses were quickly incorporated into the plan and sent back to FDA. FDA’s reply is expected in November 2024. We have no other information requests pending and are not aware of any other impediment to resubmitting our narsoplimab BLA. After receiving FDA’s response and, assuming general alignment on the revised plan, we intend to proceed with conducting the primary and secondary efficacy analyses. If the results support resubmission, then we intend to finalize and resubmit our BLA as soon as possible. We are currently unable to provide a specific estimate of when or if we will resubmit the BLA or, subsequently, FDA’s timing for a decision regarding approval. Even if the results of the efficacy analysis are favorable and FDA accepts our resubmitted BLA for review, there can be no guarantee that FDA will approve 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. 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.

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 confirmed by pharmacokinetic and pharmacodynamic modeling and dose simulation, support once-quarterly, low-volume 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 which Phase 2 clinical development of OMS1029 could be pursued, depending on resource availability.

Previous 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.

Current wording

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

Previous 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.

Current wording

Wehave three ongoing 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 is in PNH patients who have had an unsatisfactory response to ravulizumab, an inhibitor of complement component 5 (“C5”). The third clinical trial evaluating zaltenibart in PNH 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 clinical trials.

Previous 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.

Current wording

Results from a pre-specified interim analysis of our ongoing 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. With these data, along with data from our Phase 1 study in healthy subjects evaluating higher dose levels than were used in our first completed Phase 1 study, we have now finalized selection of the zaltenibart dose for Phase 3 development. Zaltenibart has been well tolerated to date with no safety concerns identified.

Previous 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.

Current wording

The last patient visit in our Phase 2 trial evaluating two doses of zaltenibart in PNH patients who have had an unsatisfactory response to the C5 inhibitor ravulizumab occurred in October 2024. Utilizing a “switch-over” design, this study enrolled PNH patients receiving ravulizumab, added zaltenibart to provide combination therapy with ravulizumab for 24 weeks, and then, in those patients who demonstrated a hemoglobin response with the combination therapy, switched 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 observed 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. Data from the monotherapy portion of the trial show that clinically meaningful improvements in hemoglobin levels and absolute reticulocyte counts were sustained following transition to zaltenibart monotherapy and prevented both intravascular and extravascular hemolysis. As with all other clinical studies with zaltenibart, the drug was well tolerated without any safety signal of concern. Full details from interim analysis in the monotherapy portion of the trial will be presented at the annual meeting of the American Society of Hematology in December 2024.

Previous 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.

Current wording

Our third Phase 2 study is 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 are expected to contribute to any future marketing applications for zaltenibart in the treatment of PNH.

Previous 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.

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 two Phase 3 trials with other inhibitors of the alternative pathway that reported positive results in the treatment of C3G. Sites for the zaltenibart Phase 2 trial in C3G are open to enrollment in multiple countries and dosing in the study is ongoing. We are targeting to initiate Phase 3 trials for C3G in the first half 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 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.

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 $1.0 million of funding to date and recognized $0.8 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 by the end of 2024. Assuming positive results, we expect enrollment in the study evaluating OMS527 in adults patients with CUD to begin in 2025, also fully funded by NIDA.

Previous wording

We believe that all five platforms are entirely novel and proprietary. We continue to confirm our results and to generate new data, all of which contribute to our intellectual property position.

Current wording

Our oncology development program is operating in stealth mode as we continue to confirm our results and to generate new data which we expect will contribute to our intellectual property position. We expect to share additional details regarding our oncology programs in coming months, after the relevant intellectual property filings have been completed.

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 “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.

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. To date, international royalties have not been significant, but are expected to increase in 2025. DRI has no recourse to our assets other than its interest in OMIDRIA royalties. 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

On June 3, 2024 (the “Closing Date”), we, with certain subsidiaries, as guarantors, entered into a Credit and Guaranty Agreement (the “Credit Agreement”) with certain funds managed by Athyrium Capital Management, LP (collectively, “Athyrium”) and certain funds managed by Highbridge Capital Management, LLC (collectively, “Highbridge”) as lenders (together with additional lenders from time to time, the “Lenders”) and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent. The Credit Agreement provides for a senior secured term loan facility initially of up to $92.1 million consisting of (i) an initial term loan of $67.1 million (the “Initial Term Loan”), which was fully funded on the Closing Date, and (ii) a $25.0 million delayed draw term loan (the “Delayed Draw Term Loan”), which may be drawn once in full on or prior to June 3, 2025, provided that the we have received FDA approval of narsoplimab in TA-TMA. Proceeds of the Delayed Draw Term Loan, if borrowed, must be used to fund the commercialization of narsoplimab and to pay transaction costs associated with the Delayed Draw Term Loan. The Initial Term Loan has no original issue discount, while the Delayed Draw Term Loan would be issued with an original issue discount of 3.00%. Neither the Initial Term Loan nor the Delayed Draw Term Loan include any equity consideration for the Lenders (i.e., the transaction is non-dilutive to the Company’s shareholders).

Current wording

On June 3, 2024 (the “Closing Date”), we, with certain subsidiaries, as guarantors, entered into a Credit and Guaranty Agreement (the “Credit Agreement”) with certain funds managed by Athyrium Capital Management, LP (collectively, “Athyrium”) and certain funds managed by Highbridge Capital Management, LLC (collectively, “Highbridge”) as lenders (together with additional lenders from time to time, the “Lenders”) and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent. The Credit Agreement provides for a senior secured term loan facility initially of up to $92.1 million consisting of (i) an initial term loan of $67.1 million (the “Initial Term Loan”), which was fully funded on the Closing Date, and (ii) a $25.0 million delayed draw term loan (the “Delayed Draw Term Loan”), which may be drawn once in full upon notice delivered on or prior to June 3, 2025, conditioned on receipt of FDA approval of narsoplimab in TA-TMA within 30 days of the notice. Proceeds of the Delayed Draw Term Loan, if borrowed, must be used to fund the commercialization of narsoplimab and to pay transaction costs associated with the Delayed Draw Term Loan. The Initial Term Loan has no original issue discount, while the Delayed Draw Term Loan would be issued with an original issue discount of 3.00%. Neither the Initial Term Loan nor the Delayed Draw Term Loan include any equity consideration for the Lenders (i.e., the transaction is non-dilutive to the Company’s shareholders).

Previous wording

On the Closing Date, we used the $67.1 million Initial Term Loan, along with $21.2 million of cash on hand, subject to certain post-closing adjustments, to repurchase from the Lenders $118.1 million aggregate principal amount of the Company’s existing 5.25% convertible senior notes due on February 15, 2026 (the “2026 Notes,” and such repurchase the “2026 Note Repurchase Transaction” ). The principal amount retired in the 2026 Note Repurchase Transaction represents a 55% reduction of the outstanding principal balance of the 2026 Notes at a purchase price of approximately 75% of par value. We paid accrued and unpaid interest on the repurchased 2026 Notes through the Closing Date. As of June 30, 2024, we accrued $0.6 million in post-closing adjustments to certain Lenders and paid them in July 2024.

Current wording

On the Closing Date, we used the $67.1 million Initial Term Loan, along with $21.2 million of cash on hand, subject to certain post-closing adjustments, to repurchase from the Lenders $118.1 million aggregate principal amount of the Company’s existing 5.25% convertible senior notes due on February 15, 2026 (the “2026 Notes,” and such repurchase the “2026 Note Repurchase Transaction” ). The principal amount retired in the 2026 Note Repurchase Transaction represents a 55% reduction of the outstanding principal balance of the 2026 Notes at a purchase price of approximately 75% of par value. We paid accrued and unpaid interest on the repurchased 2026 Notes through the Closing Date. In July 2024, we paid $0.6 million in post-closing adjustments to certain Lenders.

Previous 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.

Current wording

Our loss for the three and nine months ended September 30, 2024 was $32.2 million and $125.5 million, respectively. As of September 30, 2024, we had cash, cash equivalents and short-term investments of $123.2 million available to fund operations and to service debt.

Previous wording

Our research and development expenses can be divided into three categories: direct external expenses, which include clinical research and development and preclinical research and development activities; internal overhead and other expenses; and stock-based compensation expense. Direct external expenses consist primarily of expenses incurred pursuant to agreements with third-party manufacturing organizations prior to receiving regulatory approval for a drug candidate, contract research organizations, clinical trial sites, collaborators, licensors and consultants. Pre-clinical research and development includes costs prior to beginning Phase 1 studies in human subjects. Internal overhead and other expenses primarily consist of costs for personnel, overhead, rent, utilities and depreciation. The following table illustrates our expenses associated with these activities:

Current wording

Our research and development expenses can be divided into three categories: direct external expenses, which include clinical research and development and preclinical research and development activities; internal overhead and other expenses; and stock-based compensation expense. Direct external expenses consist primarily of expenses incurred pursuant to agreements with third-party manufacturing organizations prior to receiving regulatory approval for a product candidate, contract research organizations, clinical trial sites, collaborators, licensors and consultants. Preclinical research and development includes costs prior to beginning Phase 1 studies in human subjects. Internal overhead and other expenses primarily consist of costs for personnel, overhead, rent, utilities and depreciation. Our accounting policy is to expense all manufacturing costs related to product candidates until regulatory approval is reasonably assured in either the U.S. or European Union.

Previous 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.

Current wording

Internal overhead and other expenses increased $2.8 million for the nine months ended September 30, 2024 primarily due to additional employee related costs and having received an Employee Retention Credit in the prior year that was recorded as an offset to expense.

Previous 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.

Current wording

Stock-based compensation expenses decreased $0.2 million and $0.6 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods 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 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.

Current wording

We expect research and development expenses in the fourth quarter of 2024 to be similar to those in the third quarter of this year.

Previous wording

At this time, we are unable to estimate with certainty the longer-term costs we will incur in the continued development of our drug candidates due to the inherently unpredictable nature of our preclinical and clinical development activities. Clinical development timelines, the probability of success and development costs can differ materially as new data become available and as expectations change. Our future research and development expenses will depend, in part, on the preclinical or clinical success of each drug candidate as well as ongoing assessments of each program’s commercial potential. In addition, we cannot forecast with precision which drug candidates, if any, may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

Current wording

At this time, we are unable to estimate with certainty the longer-term costs we will incur in the continued development of our product candidates due to the inherently unpredictable nature of our preclinical and clinical development activities. Clinical development timelines, the probability of success and development costs can differ materially as new data become available and as expectations change. Our future research and development expenses will depend, in part, on the preclinical or clinical success of each product candidate as well as ongoing assessments of each program’s commercial potential. In addition, we cannot forecast with precision which product candidates, if any, may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

Previous wording

We are required to expend substantial resources in the development of our drug candidates due to the lengthy process of completing clinical trials and seeking regulatory approval. Any failure or delay in completing clinical trials, or in obtaining regulatory approvals, could delay our generation of product revenue and increase our research and development expenses.

Current wording

We are required to expend substantial resources in the development of our product candidates due to the lengthy process of completing clinical trials and seeking regulatory approval. Any failure or delay in completing clinical trials, or in obtaining regulatory approvals, could delay our generation of product revenue and increase our research and development expenses.

Previous 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.

Current wording

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

Previous 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).

Current wording

Interest expense is comprised of interest and amortization of debt discount and issuance costs on our Initial Term Loan, 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

Interest expense for the three and six months ended June 30, 2024 increased $1.3 million and $1.6 million, respectively, due to a $115.5 million of borrowing under our royalty obligation with DRI in February 2024. These increases were partially offset by a reduction in interest expense from the retirement at maturity in November 2023 of our 6.25% convertible senior notes, which had a par value of $95.0 million, and the partial repurchase of our 2026 Notes in December 2023 and in June 2024, which had a collective par value of $127.2 million.

Current wording

Interest expense for the three and nine months ended September 30, 2024 decreased $3.9 million and $2.3 million, respectively, primarily due to retirement at maturity in November 2023 of our 6.25% convertible senior notes, which had a par value of $95.0 million. For the nine months ended September 30, 2024, interest expense also decreased due to the partial repurchase of our 2026 Notes in December 2023 and June 2024, which had a collective par value of $127.2 million. The decrease was partially offset by an increase in interest expense related to the OMIDRIA Royalty Obligation with DRI and interest under our Credit Agreement.

Previous 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.

Current wording

We expect that interest expense for the fourth quarter of 2024 will increase from the third quarter due to the higher interest associated with the OMIDRIA Royalty Obligation.

Previous 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.

Current wording

Interest and other income decreased $2.1 million and $3.9 million for the three and nine months ended September 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. Included with other income for the current year is our grant from NIDA for which we have recognized $0.8 million in the nine months ended September 30, 2024.

Previous 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.

Current wording

We expect interest and other income for the fourth quarter of 2024 to be lower compared to those in the third 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 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.

Current wording

Interest is earned on the OMIDRIA contract royalty asset at an implied effective interest rate of 11.0%. The $0.5 million and $1.3 million increase in interest earned for the three and nine months ended September 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 and 2024.

Previous wording

As of June 30, 2024, we had cash, cash equivalents and short-term investments of $158.9 million. Our loss for the three and six months ended June 30, 2024 was $56.0 million and $93.2 million, respectively. Cash used in operations for the six months ended June 30, 2024 was $87.8 million. The second quarter of 2024 includes a $17.6 million charge for delivery of narsoplimab drug substance. In addition, we made a $21.2 million payment for term loan-related debt repurchase and incurred $1.9 million of term loan-related transaction costs. Pursuant to a covenant in the Credit Agreement entered on June 3, 2024, we must maintain at all times unrestricted cash and cash equivalents of at least $25.0 million.

Current wording

As of September 30, 2024, we had cash, cash equivalents and short-term investments of $123.2 million. Our loss for the three and nine months ended September 30, 2024 was $32.2 million and $125.5 million, respectively. Cash used in operations for the nine months ended September 30, 2024 was $119.8 million, which includes an $18.4 million charge for delivery of narsoplimab drug substance and a $21.2 million payment related to our 2026 Note Repurchase Transaction. Pursuant to a covenant in the Credit Agreement entered on June 3, 2024, we must maintain at all times unrestricted cash and cash equivalents of at least $25.0 million.

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. 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.

Current wording

In recent years, Omeros has incurred net losses from continuing operations and negative cash flows from operations. The recurring losses, in combination with our cash and investment balances as of September 30, 2024, and an expected repayment of a portion of our outstanding debt on or prior to November 2025, raise substantial doubt about our ability to continue as a going concern for the twelve-month period ending November 13, 2025. As we currently do not have an ongoing source of revenue sufficient to cover our operating costs, we will need 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 amount up to $150.0 million. In addition, our Delayed Draw Term Loan of $25.0 million may be drawn once in full upon notice delivered on or prior to June 3, 2025, conditioned on receipt of FDA approval of narsoplimab in TA-TMA within 30 days of the notice. Proceeds of the Delayed Draw Term Loan may only be used towards any related transaction costs and for commercialization of narsoplimab efforts of TA-TMA.

Previous wording

We may pursue additional debt financings to retire the 2026 Notes that remain outstanding and to fund operations. Should it be determined to be strategically advantageous, we could pursue 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. However, pursuing debt financings, certain equity offerings or other strategic transactions may result in mandatory prepayments of the Initial Term Loan to the Credit Agreement. (See “Note 6 — Debt” for further details). We expect to continue to fund our operations and service our debt for at least the next twelve months with our existing cash and investments. We plan to manage our operating expenses and reduce our cash requirements by reducing or delaying selected research and development efforts and by managing operating expenses.

Current wording

We may pursue additional debt financings to retire the 2026 Notes that remain outstanding and to fund operations. Should it be necessary or determined to be strategically advantageous, we also could pursue public and private offerings of our equity securities, additional debt transactions/restructuring, future royalty sales, or other strategic transactions, which may include licensing or selling a portion or all of one or more of our existing technologies. However, pursuing debt financings, certain equity offerings or other strategic transactions may result in mandatory prepayments of the Initial Term Loan to the Credit Agreement. (See “Note 6 — Debt” in the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for details).

Previous 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.

Current wording

Operating Activities. Net cash used in operating activities for the nine months ended September 30, 2024 increased by $229.4 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, the 2024 net loss increasing by $16.7 million, and accounts payable and accrued expenses decreasing by $15.0 million in the current year.

Previous wording

Net cash provided by investing activities during the six months ended June 30, 2024 increased by $157.2 million as compared to the same period in 2023. The increase was due to the timing of purchasing investments and of maturities of investments. Significant initial investment purchases during the periods were the investment of the $200.0 million Milestone Payment we received from Rayner in February 2023 and the $115.5 million we received from DRI related to the sale of future OMIDRIA royalties in February 2024.

Current wording

Net cash provided by investing activities during the nine months ended September 30, 2024 increased by $136.1 million as compared to the same period in 2023. The increase was due to the timing of investment maturities and purchases. Significant initial investment purchases during the periods were the investment of the $200.0 million Milestone Payment we received from Rayner in February 2023 and the $115.5 million we received from DRI related to the sale of future OMIDRIA royalties in February 2024.

Previous 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.

Current wording

Financing Activities. Net cash provided by financing activities during the nine months ended September 30, 2024 increased $68.1 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. This was offset by $21.2 million we paid in 2024 for the 2026 Note Repurchase Transaction, a $14.3 million increase in 2024 principal payments paid to DRI on the OMIDRIA royalty obligation and $11.9 million paid in 2024 to repurchase 3.2 million shares of our common stock.

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 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.

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 September 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 $20.8 million.