Good afternoon. And welcome to today’s Call for Omeros Corporation. At this time, all participants are in listen-only mode. After the company’s remarks, we will conduct a question-and-answer session. Please be advised that this call is being recorded at the company’s request and a replay will be available on the company’s website for a week from today. I will turn over the call to Jennifer Williams, Investor Relations of Omeros. Ma’am, please go ahead.

Good afternoon and thank you for joining the call today. I’d like to remind you that some of the statements that will be made on the call today will be forward-looking. These statements are based on management’s beliefs and expectations as of today only and are subject to change. All forward-looking statements involve risks and uncertainties that could cause the company’s actual results to differ materially. Please refer to the Risk Factor section of the company’s quarterly report on Form 10-Q, which was filed today with the SEC for a discussion of these risks and uncertainties. Dr. Greg Demopulos, Chairman and CEO of Omeros will take you through a corporate update and then Mike Jacobsen, our Chief Accounting Officer will provide an overview of our second quarter financial results. We have some time reserved for questions after the financial overview. Now, I would like to turn the call over to Dr. Demopulos.

Thank you, Jennifer and good afternoon, everyone. And we appreciate you taking the time to join us on the call today. We're pleased to report that our net revenues for the second quarter were $17.2 million, all of which resulted from sales of OMIDRIA, our FDA approved product for cataract surgery. OMIDRIA revenues in the second quarter increased $4.9 million, or 40% over the prior quarter. On a year-over-year basis, second quarter revenues increased 71% over the same period in 2016. In the second quarter, sell through, or unit vial shipped from our wholesalers to our hospital customers and ambulatory surgery centers or ASCs grew 34% over Q1, and 113% year-over-year. In addition, inventories at the wholesalers at the end of June were at historically normal levels. The increase in second quarter revenues and sell through was a result of substantial acceleration of OMIDRIA adoption across all sectors of our market. In every region of the country, sales grew in ambulatory surgery centers and hospital outpatient departments, including national and regional ASC chains, as well as academic centers. With growth driven by both an 11% increase in a number of purchasing accounts, and a 20% increase in vials consumed per purchasing facility. The Market Scope 2017 annual cataract surgery survey report, the survey of practicing ophthalmologists conducted in the March of this year, found that OMIDRIA was being used in approximately 8% of cataract procedures performed in the US. OMIDRIA revenue growth has continued into the third quarter, based on recent weekly sell through data, our current annualized revenue run rate is approximately $75 million. With expanding utilization of OMIDRIA, more and more surgeons, nurses, administrators and patients are experiencing firsthand, the clinical benefits that the drug provides. The growing enthusiasm for OMIDRIA within the ophthalmic surgery community is palpable.…

Thanks, Greg. As Greg noted, revenues for the second quarter were $17.2 million, all from OMIDRIA product sales. And our net loss was $14.4 million or $0.33 per share, which includes non-cash expenses of $4.3 million or $0.10 per share. There are some specifics regarding the second quarter versus the first quarter of the year. Our reported revenue for the quarter increased by 40% or $4.9 million from the first quarter, while unit sales of OMIDRIA by our wholesalers to the ASCs and hospitals, or sell-through increased by 34%. The difference between reported revenue growth and sell-through unit growth was primarily attributable to increased wholesaler buying during the second quarter. As you may have recall from our first quarter earnings call, the March 31 wholesale inventories were below historical norms. In the 1st week of April, approximately $750,000 of incremental wholesale orders were received, which replenished the March 31st wholesaler inventory shortfall. At the end of the second quarter, wholesaler inventories had returned to historical norms. As expected, our overall gross to net deductions were 25.4% during the quarter. This is a 4 percentage point reduction in the overall amount that we received per unit of OMIDRIA sold from the prior quarter. This is due primarily to the continued expansion of our volume discount program for ASCs, that reach OMIDRIA utilization levels qualifying them for rebates and to increases in our OMIDRIA share [ph] we pay the difference program as ASCs sales continue to expand. We expect the overall revenue that we received for OMIDRIA vial by sold in Q3 will be similar to that in Q2. As the rebate program was further implemented for the majority of Q2. Cost and expenses for the second quarter were $29.1 million, a $4.1 million increase from the first quarter. Specific variations from…

Thanks, Mike. Let's open the call to questions.

[Operator Instructions] First question comes from the line from Liana Moussatos with Wedbush. Your line is open. Please go ahead.

Congratulations on your progress. You mentioned that there is a chance that OMIDRIA reimbursement could extend for Medicare in 2018? Can you compare how the reimburse versus the current pass-through? My second question is how long do you anticipate it would take to enrol the Phase III for IgA end? And what's the regulatory path after that how long it takes of a single trial. You mentioned that there were multiple new sites that could be open. And then my third question, you mentioned OMS721 for lupus nephritis, are there particular subset of lupus patients that you think 721 would work the best in?

Hi, Liana, thanks for those questions. The first one was directed to long-term or permanent reimbursement of OMIDRIA and I think you asked specifically if I could run through, how that would be paid? There are really several options. And I am going to address this at a high level, just simply because we're in the midst of this now and I think probably best not to go into too much detail, but let me answer your question, which I think will satisfy. First, there is the potential here that the product is reimbursed at ASP plus 6. As you know before 2014, that's how these products use during surgical procedures were reimbursed. It was only in 2014 that there was a change where products used during surgical procedures were characterized as supplies and then in that way, packaged. Now as an orthopaedic surgeon, I can tell you that I don't think of a therapeutic drug with a therapeutic indication as a supply, its discretionary, it's not a supply. The supply is a gown, a drape, a glove, a sponge, a lap. Those are supplies. Things you have to use all the time with the surgical procedure. Discretionary drugs with therapeutics indications, not so. So one option is that it is just reimbursed today ASP plus 6, as all drugs were and as most drugs currently are. The second option is that there are really 2 separate APCs or Ambulatory Payment Classifications that are structured one APC that is reimbursed at a higher rate than the other that one at a higher rate reimbursement is one that contains drug or has used drug and the other APC for the procedure when the drug is not used. Again, none of these fixes, I want to be very clear, are specific only…

Thank you.

Thanks, Liana.

Thank you. And our next question comes from the line of Steve Brozak with WBB. Your line is open. Please go ahead.

Hey. Good afternoon, Greg and congrats obviously on the OMIDRIA sales. It’s really something that obviously people have been waiting for and I'm delighted to see its taking place right now. Can we go back to the topic on your latest IgA nephropathy development? You had intimated on some of the particular parts of the 721 program and how it fits into your regulatory strategy. But can you itemize as much detail as possible as to how it fits in as a whole. And I know you can't talk – you said you cannot really about timelines, but can you talk about how would envision the program going forward and obviously not just for US, but globally? And basically I'll jump back in the queue. Thank you.

Yes, I think, if I'm understanding Steve, you're asking me sort of can I sketch out for you how the multiple trials would fit together and…

Yes.

With respect to sort of design, is that correct? I just want to make sure I am answering your question.

Yes, both design and how they would support each other or how you could basically go up there and leverage each other and what you see the advantages would be there?

Well, I think the most straightforward answer with respect to leverage is using each program to support the safety population required for any other program. So I think that that's a clear lever that will benefit all 3 programs, or all 3 current programs. We've spoken publicly about what the Phase III aHUS clinical trial look like. Its single armed, uncontrolled. It is enrolling, both Solaris naive patients, as well as those patients who have previously been treated with C5 inhibitor. It is an international study. We are able, again, to cross-reference the safety data from the other studies that we are conducting. For EMA, based on scientific advised received from EMA, 40 patients is what we expect would be required for full approval. That same number, based on our discussions with FDA, we expect would be required for accelerated approval in the US, 80 patients for full approval as it currently stands in the US. We do as we have said publicly intend to pursue accelerated approval. So our initial tranche of patients that we are focused on running through the trial is 40. When you turn to the IgA nephropathy program, we have been discussing whether that would be better as a single arm or a controlled trial. As we currently stand and I don't want to be held to this, we can always change your mind and again all of these discussions need to be finalized with FDA. But we're currently considering a controlled study. So treatment arm, control arm, we frankly think that could be a more efficient approach and one of the reasons for that is a potential design would be 12 weeks of treatment in the treatment arm, 12 weeks of treatment in the control arm, again, double blinded, but any patients that do…

It actually then brings up a second question about, do you or have you guys studied any other program where you’d have this many opportunities for potential approval? Or is there any example of something like this from before or you guys unique to this? And I’ll hop back in the queue.

Yeah. This is a good question, one that I'm not equipped to accurately answer. I don't know of all the drugs that have been approved across multiple indications. I can point to one other that has the potential for the same kind of broad approval across multiple indications and that would be the drug that we're going to be bringing into the clinic in 2018, which is OMS721. I mean, there you’re looking at really potentially if you believe or buy into the animal data, which we do, because the mechanism is highly conserved, between rodent and human with respect to PDE7. You could be holding a treatment for pan addiction, meaning we have generated really stellar data across nicotine, cocaine, alcohol, opioids and binge eating. So we're not just talking about substance abuse addiction, but compulsive disorders as well. So I think that certainly, I would point as self serving as this sounds. I'd point to our own product and say, Gee, those indications could broad and then I'd also point the 906, and make the same argument, OMS906 where again we control the key activator of the alternative pathway. So think about all the alternative pathway disorders, think about the multiple indications, I can tell you we are and I think you have the same scenario.

Again, congrats obviously on the OMIDRIA sales and look forward to obviously the details that comes in this next quarter. Thank you.

Thanks, Steve.

Thank you. And our next question comes from the line of Jason Kolbert with Maxim Group. Your line is open. Please go ahead.

Hi, Greg. Congratulations. Yeah, very strong quarter. What I’d like to ask…

Hi, Jason.

Hi. How are you? Thank you. So one of things that we - I've been talking a little bit about the international markets for OMIDRIA and I wondered if you could just touch on that and what’s the plans are there? Thanks.

Thank you, Jason. Yes, obviously, we're looking at those, and we don't talk about our partnering efforts. But one would have to assume that we are evaluating those options. And we do expect that OMIDRIA will enter the European market. As you know, we held back for a while. So that we could establish the US market, establish the data supporting the product, the data beyond just the Phase III program. But really the real world data that we have mentioned, time and again, which point to how the drugs being used by physicians in surgical centers today, and the benefits that we're seeing. We think that helps drive value for Europe, and I think that we have demonstrated those benefits, and their related value, pretty well to date. We’ll continue to do that, but our objective, certainly, is to have OMIDRIA in international markets. You know, it's already in the Middle East, but our objective also in Asia and in Europe.

And you know, switching gears to the pipeline and talking a little bit about OMS721, you're building a lot case studies evidence around 721. So help me understand kind of how that’s going to continue, especially as you look forward to a pivotal program and additional discussions with regulators about the approval process?

Yeah, I hear you. I challenged the characterization just a bit as case studies. We’ve run a Phase II program. While let me backup, we’ve run the Phase I program, in fact, multiple trials of Phase I with 721. We have run a Phase II program in aHUS. We are in a Phase III program clinical trial for aHUS. On IgA, the patient numbers were small in that initial study. It was a 4 by 4 design for patients in IgA for membranous for in lupus, for in C3 glomerulopathy. But the data are what the data are. And not only did to we see a precipitous and rapid drop in proteinuria in the IgA patients and frankly and in 80% of lupus patients and 50% of the membranous patients. But what we saw was also a legacy affect. So once the drug stopped, these patients continue to improve. So that we're really thinking with IgA that we're going to - or these nephropathies in general that we're really thinking about treating episodically. So treat for 12 weeks and then treat probably the next year for 12 weeks. You know, the data, again, 4 by 4, not an enormous number of patients, but the data speak for themselves and I think they speak loudly enough, certainly spoke loudly enough for the FDA to provide us to grant us breakthrough designation and again 721 being as far as we know, the only product, the only drug that has received breakthrough designation for IgA nephropathy. So that has propelled us into a Phase III program. We expect to push hard on that program as I said. So these are a little more than case studies. These are really programs in orphan diseases.

I mean, all I was really trying to say was that the data we’ve seen from individual patients has actually been very compelling. And that gives me confidence that a relatively moderate Phase III trial gets you where you need to be in terms of the approval cycle.

I would agree with you there. I agree 100% with that characterization. You know, look, I think clearly we believe in the efficacy of the product. I think data speaks to that. We feel pretty good about the safety of the product, as we’ve said we have administered to over 150 subjects and we haven't seen any real safety concern. And then you look at the CMC piece which is the other way that these programs can derail. And we got that, we believe well under control. Our internal group working with outside contract manufacturers, we have done well in hand, both the IV and the subcutaneous formulation. So lightning can always strike. But I would be surprised if it struck 3 times, meaning across all 3 of the programs or hit the drug in such a way that we couldn't advance any of them.

Perfect. Thank you, Greg.

Thanks, Jason.

Thank you. And our next question comes from the line of Serge Belanger with Needham and Company. Your line is open. Please go ahead.

Hi, good afternoon. Just a couple of questions for me. I was bouncing on a couple - between a couple of calls, so I may have missed this. But on OMIDRIA, clearly, you put up a very nice number this quarter. How much of that was due to inventory changes between the first and second quarter? And then I guess, can you talk about some of the - what you're seeing in the early third quarter trends that give us confidence that will continue seeing strong growth in the second half of the year?

Yes. Thanks, Serge. I'll answer quickly because it sounds like you're in between calls. Here, the amount that - and what you're referencing is, is some of the lumpy distribution that we had at the end of Q1, where just for everyone's benefit, where about 2.1 in net sales came in the first week of April. Roughly about when we look closely at that, roughly 750 of that 750,000 we can probably attribute to the last week in Q1, the rest of that, remaining $1.4 million $1.5 million of that were bona fide sales in Q2. How things are progressing in Q3, I did mention on the call and you're probably off it at that time, but we have seen continued growth. In fact, over the recent weeks we're running at about $75 million annualized run rate. And we're excited about the growth that we're seeing in OMIDRIA, the uptake, the adoption and frankly the acceptance. As I said in the prepared comments, it's really been a pretty dramatic change when you attend ASCRs this year, relative to last year or the ACOS meeting this year, relative to last year. And you see the difference in just the way the drug is accepted or perceived by the surgeons and administrators, its completely different field. And even the ones who were opposed a year ago or even more recently than that once they’ve used the product, they are saying that they need the product. They’ve got to use the product and guys who were opposed are now coming and saying, look, the only ones who speak negatively of the drug are docs who haven't used it. So it's a very different - just a completely different feel and reception that the drug I think is receiving. So we're really quite excited about it.

Okay. And then jus a couple of questions on OMS721. Clearly that the focus has shifted to the Phase III programs that are ongoing or initiating. Just wanted to know where you are with a couple of Phase IIs, I think they are still ongoing. Will they be completed or is everything kind of rolling over the Phase III and when I guess, could we see additional data from Phase II [ph]

Yes. Well, let's talk about each one in order. The TMA study city continues. We continue to enrol stem cell patients and we will do that. There may be additional data. In fact, I would expect that we'll see additional data coming out of that trial as we move that into a Phase III program. The IgA trial, the 4 by 4 is completed. That has been wrapped up data analyzed and we’ve shared all those data I think in pretty excruciating detail. We still may have some additional data to release around that program. So I'd look for that. But we do have another Phase II IgA trial that is running. And this is a double-blind controlled trial. The origin of that study was when we initially went into FDA requesting breakthrough designation, this was sometime in the latter part of last year. We went in with the preliminary data on only 2 patients. This discussion with the FDA at that time was very exciting data. But we need to see more. Can you show us a few more patients? And then the suggestion came, how about setting it up as a double-blind placebo control run 5 in 1 arm, 5 in the treatment arm and then bring those data back. We did initiate that trial and we have been enrolling that trial and. In the interim, we completed the 4 by 4 study and those data were so compelling, we decided gee, we really don't need to wait for the controlled 5 and 5 study. Let's bring the IgA data from the 4 by 4 study to FDA which we did, that resulted in the breakthrough designation. We decided to keep that IgA Phase II running, could be data from that or that may just run until the first part of 2018. We're not waiting for that trial by any means to start the Phase III. So, I hope that answers your question. Phase III is going to run as quickly as we can get it going.

Okay. Thanks for the additional details.

Thanks, Serge.

Thank you. And our next - and I'm showing no further questions at this time. I would like to turn the conference back over Dr. Demopulos for any further remarks.

Well, that wraps up the call. Thank you again, everyone, for joining us today. We expect to provide as I think we've talked about additional information on a number of our programs as we start to close out the year. As always, we appreciate your continued interest, your continued support. Have a good day, everyone. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone, have a great day.