Good afternoon and welcome to today's earnings call for Omeros Corporation. At this time, all participants are in a 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 one week from today. I'll turn over the call over to Jennifer Williams, Investor Relations for Omeros.

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 special note regarding forward-looking statements and the company's quarterly report on Form 10-Q, which was filed today with the SEC and the risk factors section of the company's annual report on Form 10-K for a discussion of these risks and uncertainties. Now, I would like to turn the call over to Dr. Greg Demopulos, Chairman and CEO of Omeros.

Thank you, Jennifer. And good afternoon, everyone. We appreciate you joining us for today's call. We'll start with a corporate update, and an overview of our third quarter 2022 financial results followed by a more detailed financial summary. Joining me on the call today are Mike Jacobsen, Nadia Dac, Cathy Melfi, and Steve Whitaker, our respective heads of Finance, Commercial, Regulatory, and Clinical. Let’s start with narsoplimab in transplant-associated thrombotic microangiopathy or TA-TMA. We now have the decision from FDA's office of new drugs on our appeal of the Complete Response Letter, or CRL, that we earlier received from the office of cardiology, nonmalignant hematology, endocrinology and nephrology. It proposes a path forward based on historical survival data, specifically the designer proposed a resubmission. That includes comparing response from our completed pivotal trial to a threshold derived from an independent literature analysis and evidence of increased survival from patients in our completed trial compared to an appropriate historical control group. It also notes that persuasive evidence of superior survival versus a well matched historical control group could be sufficient even in the absence of the independent literature analysis. Given it's very recent receipt, we're working through the details of the decision with our team of regulatory and legal advisers. We will update our shareholders once we have completed our analysis and have determined our preferred path forward. Elsewhere in our narsoplimab development program, our Phase 3 ARTEMIS-IGAN trial evaluating narsoplimab for the treatment of IgA nephropathy, remains on track to read out nine-month proteinuria data in mid-2023. For narsoplimab in acute and long COVID-19, discussions continue with the US government regarding the preparedness strategy for current and potential future pandemics and upcoming funding pathways and programs. These represent multiple opportunities for both the COVID-related assays that we are developing as…

Yes. Thanks, Greg. As Greg briefly discussed in December of last year, Rayner acquired OMIDRIA and associated business operations. The sale required us to restate our financial statements for all the prior periods into continuing operations and discontinued operations, which means that for all of 2021 OMIDRIA revenue and operating expenses are shown in a single line on our income statement as discontinued operations. In addition, for 2022 any OMIDRIA related activities are also included in discontinued operations. All of our other activities are included in continuing operations. We received royalties of 50% of the net sales of OMIDRIA in the US, until the earlier of either January 1, 2025, or the payment of the $200 million milestone. The milestones to be paid by Rayner in the event and a separate payment is secure for OMIDRIA for a continuous period of at least four years. Thereafter, we'll receive a 30% royalty on US net sales for the duration of the relevant patent terms, which extends to at least 2033. We will also receive a 50% royalty on any non-U.S. net sales of OMIDRIA over the life of the relevant patents. From an overall standpoint, considering US royalties and the reduction in our operating expenses, we received nearly 80% of the US operating profit when royalties are 50% and then over 40%, when the royalty is 30%. Looking -- turning to our actuary sales. Our net loss for the third quarter was $15.5 million or $0.28 per share. This compares to a $30.8 million loss or reporting $0.09 per share for the second quarter of this year. Our non-ash expenses for this quarter were $4.6 million or $0.07 per share. As of September 30, 2022, we had $221 million of cash, cash equivalents and short-term investments available for our general operations.…

All right. Thanks, Mike. Operator, let's open the call to questions.

Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions] Our first question comes from Colin Bristow with UBS.

Hey good afternoon, and thanks for taking my question. So on the HSCT-TMA indication. Just curious, is there an outcome here where you would ultimately abandon taking this forward? And then in terms of the comparable historic data set FDA wants this compared to. It seems likely that FDA presumably already performed some sort of similar internal reviewed versus what they're asking you to do? I'm just curious, has FDA given any indication of this or the efficacy bar that it believes is the appropriate benchmark? Thanks.

Yeah. Hi, Colin, and thanks for the questions. In answer to your first question, look, we believe, as we have believed since we've seen the data on this drug that this should be approved and warrant approval. So with respect to abandoning that, I mean, that's really not on the option table at this point. I mean, so I think that answers that pretty clearly as of now. With respect to your second question, did FDA conduct research with an historic control group and may have some idea of the threshold that they're expecting. We have no indication of that, but can't speak for what FDA has done to that regard. I'll ask Steve or Cathy, if they have any other views on that?

No, I don't know if FDA did anything, but it would surprise me if they had actually done an independent review.

Okay. Thank you.

Thanks, Colin.

One moment for our next question. And our next question comes from Steve Brozak with WBB Securities.

Hey. Good afternoon, Greg.

Good afternoon.

Two questions. The first one, I'm not sure if you're aware, but it looks like there's been some negative voting on [indiscernible] and how they were looking at their therapeutic on COVID. But, one of the questions that popped up, specifically around it was a failure to understand mechanism of action. I'm not going to compare them to you, because obviously, it's completely different. But can you go and give us as much detail as possible on how comfortable you are with mechanism of action? And specifically, how that brought you into developing the diagnostic approach to understand what the markers, what the signals were and as much detail as you can give on that. And then I've got a follow-up question, please.

I'm sorry, Steve, you're asking about mechanism of action in TA-TMA or mechanism of action in COVID. I'm trying to make sure I answer your question.

Sorry, absolutely. Mechanism of action that as you understand in COVID and also, how the companion diagnostic system you've set up plays into this and not just what you've done, but what other people have written about it. And I've got one follow-up afterwards, please.

Sure. I heard you say, you would like to that in as much detail as possible. I think the details are well published on this, not only in our publications, so in the publication in Frontiers in Immunology, also the publication, the manuscript published in -- Clinical and Translational Medicine, I think, lays out the mechanism pretty clearly as does the first publication that covered the response to narsoplimab in severe COVID patients treated in Bergamo. So I will hit this, I think, at a very high level since that's all been well documented. But, the bottom line is that COVID-19 is an endothelial injury, and that is the same as what we're seeing in TA-TMA. We have data. We have clinical data. You have published data from Bergamo. You have a standard of care, controlled double-blind study out of I-SPY, where narsoplimab showed the greatest benefit to survival, reported by the I-SPY group, despite the challenges sort of aligned against narsoplimab in that study. You also have in vivo, so models of animal models of COVID-19. You have data showing very clearly when you're getting into the assays that it is lectin pathway hyper activation that is the driver in COVID-19. That lectin pathway hyperactivation results in a consumptive hypocomplementemia. And that hypocomplementemia then renders the adaptive immune response, dysfunctional or non-functional and that is likely the cause of secondary infection in Kobe. And we know very clearly looking clinically that treatment with narsoplimab within one to two doses reverses that hypocomplementemia. So, normalizes the complement profile and restores the adaptive immune response. All of that's been well-published, well-documented, the extension to launch COVID is there as well. And that the same hyperactivation of the lectin pathway is seen based on our data now looking at close to thousand patients we see the same thing in about 25% to 30% of patients with long code -- so I don't know if -- I mean, that's a lot of detail, maybe more than you wanted or maybe it's less than you were actually looking for. But I think in the interest of time, let me hold there and again, point you to the publication.

Got it. All right. Look, that actually is a great good segue. And the secret in life is not doing too much, not doing too little, doing it just right, which is what you just did. But all kidding aside, FDA obviously came back and said that they wanted to have a literature -- a review on the literature side. Now, one of the things that we look at is that candidly, literature doesn't spring up all by itself. It is influenced. It is directed. It is created by the KOLs who take the time and are familiar with the subject matter. How would you position narsoplimab with the KOLs that have worked with you that the hematological oncologists that are specific? And now I'm talking about stem-cell TMA related narsoplimab use, how would you position them in terms of advocacy and an explanation of the value of narsoplimab in terms of what the FDA would be looking at into the future? And I'll hop back in the queue on that after that. Thank you.

I think I understand the question. I mean, look, we have a strong advocacy within the expert community, so within the community of stem cell transplanters who treat -- well, number one, who performed this very rare procedure. And then as part of that, part of that management of the procedure and the post-procedural complications treat TA-TMA. We have, as I said, very strong advocacy. You just need to look at the publication in the Journal of Clinical Oncology, which is really, I believe the highest-ranked journal in oncology. I think the index factor on that one is about $55 million you look at the author list. And I think that answers a lot about the advocacy, how we would -- how they would help us going forward with FDA? Look, haven't thought through that part. We've just received this decision from FDA. We really need to digest it. We wanted to make it available for shareholders right away, but we've got a lot of work still to do as we digest it work with our advisers to figure out how to most effectively and most expeditiously yet narsoplimab approved for this indication. So again, let me hold there and see if that answered your question.

Yes. Yes, it did. Thanks. Let me hop back in the queue.

Okay. Thanks.

One moment for our next question. And our next question come Eric Joseph with JPMorgan.

Hi. Thanks for taking the questions. Two from us. If FDA -- on TMA with narsoplimab, if FDA wants to see survival benefit in a matched historical patient population. Do you have a sense of the minimum benefit in survival that you would have the power to detect given sort of the conservative sizing of your study population? And then on IGAN with Phase III ARTEMIS -- you noted that enrollment is ongoing and you have a nine-month readout expected midyear. Can you just clarify how close you are to full study enrollment? And do you expect the study to maintain adequate powering to detect a difference in proteinuria when you read out next year? Thanks.

Yes. With respect to what would be the minimum threshold that FDA would want to see with respect to narsoplimab survival benefit relative to historical control? We haven't had a chance to discuss that with FDA. We know that what we've seen with narsoplimab, it clearly exceeds particularly given the severity of the patients that we treated with narsoplimab clearly exceeds what's in the literature, and we think that likely the literature is reflective and frankly, likely over reflective of what is happening in the real world, just given publication bias, which would usually don't publish negative data as you know. So if anything, it's an overstatement. But the mortality benefit or the survival benefit that we have seen with narsoplimab, we think, is quite substantial. With respect to your second question on the IGAN trial study enrollment powering, we've powered that at 98% and our enrollment is wrapping up, and we believe, as I said, we're on track for mid-2023 top line data. I mean, Steve, do you have any other comments or more color you can give to that?

I don't think so, Greg. We powered at 90% and we did it conservatively, and we will have data in mid-2023, with our nine point – sorry, our 9 million, million point.

To be clear, those are longer-term EGFR data as we've been very clear, the data that we are looking for in mid-2023 and our 36-month – 36-week proteinuria data.

So just to clarify that, if I could -- we shouldn't -- you're not necessarily going to have enrolled the full 450 patients per the clinical trials entry to be sufficiently powered for proteinuria?

No. The sufficient proteinuria of powering is not based on the 450 patients, Eric. It's based -- that 90% confidence is based effectively about 60% of that. Is that correct, Steve? And the 450 is the power needed for all patients with the EGFR endpoint. So I think you may be conflating those two numbers.

That's very helpful. I appreciate it.

Yes. Okay. Great. Thank you.

One moment for our next question. And our next question comes from Greg Harrison with Bank of America.

Hi, there. This is Mary Kate on for Greg. Thanks for taking our questions. Regarding the updates expected at ASH, including the trial design of the Phase 2 study in pediatric, maybe what differences should we keep in mind as you evaluate narsoplimab in pediatric patients? And do you expect a similar impact in this population?

Yeah. Let me turn that over to Steve Whitaker. Steve, can you address that?

Sure. We would expect a similar treatment effect in the pediatric population. Pediatric studies tend to be smaller than the adult studies. And the study will be similar to that, which we ran a single-arm study with -- will be a carve historical control associated with it for the EMA, which we do not have to finish this prior to the EMA. Let me just make that that clear. But we did have agreement with the Pediatric Committee of the EMA.

Does that help, Mary?

Yeah, that's great.

One moment for our next question.

I might add one point on the pediatric, which is that pediatric patients tend to do better. with TMA following transplant than do adults. It's almost as if they're two different populations. One is the resiliency, I think of children as a cause. The other is the diseases in the children for which they undergo transplant are often not as belief as are those in the adult population.

And our next question comes from Brandon Folkes with Cantor.

Hi. Thanks for taking my questions. Greg, maybe just a point of, not clarification, a further update with -- but in terms of when you say you're considering your options to address the path that the FDA put out there with sort of this historical control and independent literature analysis? Are you considering options to address that in particular, or may you be considering broader options as well on narsoplimab or TA-TMA?

Yes. Brandon, thanks for the question. With respect to the options that we're considering, certainly, we're looking -- we're considering a broad range of options. With respect to historical control, we think that, that is a very doable option, one that can be addressed, we need to sort through how best to do that. But I think, in answer to your question, if I caught it, some of it was dropping away on our end. I think, our -- we had a little bit of a breakup electronically here. But I think if I'm answering your question, we're also looking at what we can do more broadly. And let me turn to Cathy, our Head of Regulatory and see if anything you want to add there, Cathy?

Sure. Sure, Greg. And as Greg mentioned before, we will be going back to FDA to discuss the accounts. And as we always do, to reach agreement with them on what is expected and what we need to do. So Again, as Greg also mentioned, we're still sorting through this and our options. But we'll plan to put together what we think is a very robust proposal, whatever that may look like and go to the FDA with it.

Yes. Obviously, Brandon, the objective is, get the drug approved as quickly as possible. There's no approved treatment, patients need it. We're hearing that from the physicians. We're hearing that from the physicians who have used it. Even those who were initially sort of nonbelievers, who have now used it and are believers as a result of compassionate use, I think, there's a clear need, and this is why we're committed to getting this approved as quickly as possible.

One moment for our next question. And our next question comes from Serge Belanger with Needham.

Hi. Good afternoon.

Hey, Serge.

Hi. Just a couple of questions on the recent O&D division and their proposed path to resubmit the BLA -- if I recall, up to early 2019, the pivotal study for narsoplimab in HSCT-TMA had a primary endpoint of a mortality comparison to historically not controlled. Just curious, if the data the FDA is looking for is similar to what you were already doing as part of the trial, and I guess, in on-site, why was that endpoint modified back then. Thanks.

Thanks. Appreciate the question, sir. Yes, you're correct. We had initially proposed just what you identified, which was an historical control and using -- so survival is the primary endpoint with an historical control. The division rejected that proposal and instead ask for a response-based endpoint with a threshold to exceed. And I think you're probably correct around the dates as well. I'd have to go back and specifically look -- but yes, I think you sound like you're up to speed on that. So I'll take your word on the date. But yes, that's -- you are correct. So we had initially proposed sort of just what we're seeing now as the option going forward or as an option going forward. And -- and yes, FDA had requested that we instead pursue a response-based endpoint with a threshold to exceed. And together with the FDA, we developed that response-based endpoint. Does that answer your question?

Well, I guess the proposed path that was elucidated in their denial a couple of days ago. How close is it to what you were already doing as a secondary endpoint in the pivotal study?

I think it is -- I think it's very close. I mean it's -- I think as we read it, it's effectively the same thing with the historical control. So which is what initially was proposed biomass [ph]. So yes, I think, again, we were very willing to do it at that time. I think we're obviously able to undertake that right now in the same -- with the same approach that we were proposing, as you said several years ago.

Got it. Thank you.

Okay

I would now like to turn it back to Dr. Demopulos for closing comments.

All right. Thank you, operator, and thanks to all of the folks with the questions. They were on point, and we appreciate them. Again, I want to thank everyone for joining the call today. We'll continue to keep you updated on our progress. I know that everyone is very focused on this route forward with narsoplimab and TA-TMA. We can assure you we're -- we're working very hard on that, and we'll have updates as we have more information for you. I think the coming year, frankly, the rest of 2022 and the coming year hold some really, we think, exciting milestones for the company. And we'll let you know how all of those go. As always, we appreciate your continued support. And all please have a good evening. Thanks again.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.