Good morning, and welcome to today's earnings call for Omeros Corporation. [Operator Instructions]. Please be advised that today's call is being recorded at the company's request, and a replay will be available on the company's website for 1 week from today. I'll turn the call over to Jennifer Williams, Investor Relations for Omeros.

Good morning, 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 in 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 most recent 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 morning, everyone. Joining me here are Mike Jacobsen, Nadia Dac and Cathy Melfi, our respective heads of finance, commercial and regulatory. We'll start today with a brief overview of our financial results for the second quarter, followed by a corporate update. Mike will then provide a more detailed financial summary before we open the call to questions. Now let's look at our financial results. Our GAAP net loss for the second quarter of 2023 was $37.3 million or $0.59 per share compared to a net loss of $33.7 million or $0.54 per share in the first quarter of this year. The increase was primarily due to research and development costs. Cash burn for the second quarter of 2023 was $30.1 million, which, as Mike will explain later, includes an artificial accounting-driven component of $3.4 million. OMIDRIA royalties for the second quarter were $10.7 million, a $1.5 million increase over first quarter royalties. As of June 30, 2023, to support ongoing operations and debt service, we had $341.3 million of cash and investments on hand and an additional $11.2 million in receivables, primarily consisting of OMIDRIA royalties. Omeros has $95 million of convertible debt maturing in November. Our available cash and investments enable us to pay off these notes at maturity while continuing to fund operations and advancing our multiple programs well into 2025. As mandated by congressional legislation late last year, OMIDRIA secured separate payment from CMS and ambulatory surgery centers until at least January 2028. The legislation further mandates that beginning no later than January 2025, CMS will also pay separately for OMIDRIA when used in hospital outpatient departments. Last month, CMS issued its proposed 2024 rule for the outpatient prospective payment system and consistent with the legislation called for ongoing separate payment of…

Yes. Thanks, Greg. Our net loss for the second quarter was $37.3 million or $0.59 per share compared to a net loss of $33.7 million or $0.54 per share in the first quarter of this year. Cash burn for the second quarter of 2023 was $30.1 million. Royalties are generally paid 60 days after the month they are earned. Although the $3.4 million payment due on June 30 was received on July 3. This late payment artificially increased our second quarter cash burn by $3.4 million. As of June 30, 2023, we had $341 million of cash and investments on hand and $11 million in receivables, which primarily consists of the OMIDRIA royalties. Costs and expenses from continuing operations for the second quarter was $40.9 million, an increase of $5.2 million from the first quarter of this year. The increase was primarily due to additional research and development costs related primarily to drug manufacturing and to clinical costs associated with our Phase III clinical trial of narsoplimab in IgA nephropathy as well as site start-up expenses for our 906 studies. Interest expense for the second quarter was $7.9 million, which was consistent with the first quarter of this year. The primary drivers of interest expense are the 2023 and 2026 unsecured convertible senior notes and the DRI OMIDRIA royalty obligation. Now let's look at OMIDRIA royalties. Under our current contract with the Rayner, OMIDRIA royalties decreased from 50% to 30% of U.S. net sales up on earning the $200 million milestone payment at the end of last year. While separate payment for OMIDRIA is in effect, the 30% royalty rate will apply throughout the duration of the relevant patent terms, which we expect to be at least through 2033. For the second quarter of 2023, our royalties on OMIDRIA net sales were $10.7 million. Royalties earned are recorded as a reduction in the OMIDRIA contract royalty asset on the balance sheet. Income from discontinued operations in the second quarter was $7 million, includes 2 primary components. $3.8 million of interest earned on the OMIDRIA contract royalty asset and $3.1 million of income due to remeasurement adjustments on our OMIDRIA contract royalty asset. Now let's take a minute and talk about expected third quarter results. We expect overall operating costs from continuing operations in the third quarter to increase by approximately $5 million to $6 million. The increase is primarily due to our planned payment of a $5 million milestone obligation tied to advancing clinical development in our OMS906 program and the timing of certain manufacturing activities. Interest income in the third quarter should be nearly $4 million and interest expense for Q3 should be consistent with the second quarter at approximately $8 million. Income from discontinued operations for the third quarter should be approximately $6 million. With that, I'll turn the call back over to Greg. Greg?

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

[Operator Instructions]. Our first question comes from the line of Colin Bristow with UBS.

Thanks for all the helpful color here. First on narsoplimab in the TA-TMA. Can you give a little more color on what were the agencies' key concerns or points of focus in the May meeting? And then any detail on the specifics of the survival assets plan would also be helpful. And then just second, on the IgAN, what are you having to see in the proteinuria data and any of the components of this update that you would highlight at this stage?

Sure. I think having -- we're having a little trouble hearing you here. But I think the first question was, are there any concerns or what if any, concerns does FDA have with respect to our BLA resubmission process. And I think that the answer to that would be, I don't think there are specific concerns. I think that FDA is wanting to make sure that the data we provide are robust that the data we provide demonstrate a survival benefit in the narsoplimab treated group versus the external control sources. So I think really, the onus is on us at Omeros to make sure that we satisfy all of those requests by FDA. So I'll look to Cathy, who is here and our Head of Regulatory, to add anything to that she'd like.

Yes. And as Greg mentioned in the call, FDA have indicated that they're committed to working with us in terms of the resubmission of the BLA. And we believe the data that we have are will be strong and the approach consistent with the path forward that was presented to us. And so again, we're just continuing to work with FDA.

Okay. And Colin, I'm sorry, really, I think everyone in the room sort of did not quite hear your second question. I know it was tied to IgAN but it sort of trailed off and we could not hear it here. Would you mind just repeating your second question?

Just on the upcoming IgAN readout. I was just wondering what are you hoping to see in the proteinuria data, any specific thresholds? And any other components of the update that you would highlight to us or have a focus on.

Okay. No, thank you for repeating that. Understood. We don't have a specific threshold that we're targeting in IgAN. I mean, I think it's important to look at how other agents that have been approved have performed. And I think those numbers are ranging as a delta over placebo at around high 20s and I think that clearly indicates what is approvable. As you know, there is no approved complement inhibitor. So we really don't see our competitors as either a steroid or additional RAS blockade. I mean always in IgA patients you're going to want to optimize RAS blockade. And steroids, KDIGO has recommended when you can't -- when a clinician cannot get a handle on the IgA that a 6-month course of steroids is warranted, but that's really only 6 months. And the budesonide that has been approved has been approved really for only 1 9-month period. So we don't see either of those as competitors. What we need to do is see the data understand the data and go forward from there. I mean we expect the data to be positive. Of course, we can't guarantee that. But if we look at all the data we have generated with narsoplimab as well as the mechanism of action. As I said earlier, MASP-2 inhibition not only is important in the glomerulus, but also in the tubulointerstitial which is why in patients with long-standing IgA nephropathy patients whose disease in the glomerulus should have long ago burned out. We saw marked reduction in proteinuria and stabilization even improvement in some patients in eGFR. So as to the best of our knowledge, MASP-2 inhibition is the only mechanism that works at both those sites. So we're looking forward to the data. We look forward to sharing the data. I think with respect to the question is, is there anything else that we want to see. Look, we're looking specifically at high protein spillers, patients with 2 or more grams of proteinuria per day. We're doing that because that's of high interest to FDA. These are patients who rapidly and continue to progressively advance to end-stage renal disease and dialysis. We've selected that group for a specific reason, and as I've just laid out. So I think we're eager to see the data. We're eager to share the data. Once we have them in hand, we'll have a lot more to say.

One moment for your next question, please. Our next question comes from the line of Steve Brozak with WBB Securities.

One quick question and one housekeeping question, but let me go to the question. On the compassionate use that you mentioned early in the call, can you give us any details on what's taking place there and specifically around -- any changes, any increase, what the clinicians are telling you? Anything you can do to help that, obviously, specifically in the TA-TMA space, please?

Yes. Sure, Steve. Thanks. With respect to compassionate use in TA-TMA for narsoplimab, as I said, we have provided drug under compassionate use for over 125 patients. These are both adult and pediatric patients worldwide. We don't have full case report forms or case report forms really to speak up for these patients, given that it's an extended use or compassionate use program. But we do get feedback. And that feedback is also made public through the multiple presentations at International Congresses by the investigators who request and then use narsoplimab to treat their patients. It is, I think, notable that we receive multiple requests from the same institutions and this is not a small set of institutions, obviously, with 125-plus patients. But we -- across that 125-plus patient number, we're receiving repeated requests from institutions. And obviously, our conclusion from that is the drug must be doing something good. Otherwise, they would not be repeatedly requesting it for their patients, both adult and pediatric. As I mentioned in the prepared comments, interestingly also, we are seeing patients who have failed other therapies, C5 inhibitors, eculizumab, ravulizumab defibrotide as well, who are then treated with narsoplimab. So effectively, at that point, we're catching a falling knife. These are patients who are very, very sick, have gone for a while with the TA-TMA progressing, moving to end-stage organ failure or having organ failure. And yet we treat them because we do not want to deny these patients. We treat them and they recover. If you see that once you see that twice, you might say, [indiscernible], that's just coincidence or an act of God. You see that enough times and I think it becomes pretty clear that the drug is effective. And the latter is what we're seeing. So let me see if that answers your question.

No, thank you for the answer and obviously, these patients thank you for the answer and what you've done. So that is a succinct an explanation as you can ask for. On the housekeeping side, and then I'll jump back in the queue. Earlier in the call, you reiterated and I looked online, and you basically stated that the loss was $0.59, but I'm seeing some other places reporting a $0.70 loss I believe that's a typo, but I just want to make sure that you reiterate that number at $0.59 and there's no other issues around the -- what we're seeing elsewhere.

No, there's not. The $0.59 per share loss is the correct GAAP number. I think what is happening, and we've tried to correct this multiple times on our earnings calls. But I think what's happening is the $0.70 is being lifted from continuing operations. But we are required by accounting rules to account for our royalties in noncontinuing operations. So that whole piece is clearly being missed. I think when many report our EPS. So it's looking at just continuing operations, ignoring noncontinuing operations and within the noncontinuing operations are all of our royalties that we receive. But it's just -- it's a function of accounting and accounting requirements. Let me see if Mike, do you have anything to add to that or make that more clear.

Yes. I think the key to know is our discontinued operations is going to continue as long as we get OMIDRIA royalty. A lot of times, discontinued operations is a year or 2 when it's gone. But in our case, the way the accounting made us do this, we will continue to have discontinued operations. OMIDRIA royalties are obviously a significant positive cash flow for us and using discontinuing operations miss is a big part of our finance.

One moment for our next question, please and our next question comes from the line of Greg Harrison with Bank of America.

Is there any color you can provide about your latest interim analysis on OMS906, you mentioned in the press release and how consistent those results were with what you presented at EHA?

Sure. Thanks, Greg. We want to be careful here that we don't preempt what we have submitted for presentation at ASH. But I think we can speak to it in general terms. We are seeing very consistent results. And as we move further out in time, one might expect that we are seeing continued improvement. So we're very encouraged by what we're seeing. The latest cut of the data only reinforces, I think, our confidence in the target and our confidence in the drug. But again, not just in PNH, but more broadly across really a very wide range of alternative pathway-related diseases and disorders. PNH is a good litmus test because you really do need to effectively ablate alternative pathway activity and if you don't do that, you see it pretty quickly in your LDH levels and shortly thereafter in your hemoglobin levels. So it's a very good litmus test on how effective a drug is in inhibiting alternative pathway activation. And we're clearly seeing that OMS906 is highly effective. And then that should be translatable to the other alternative pathway indications. And really, with the other therapeutics in the space, it's pretty easy for us to identify what is an alternative pathway-related disease or disorder and what is not. And we can then follow those other agents and what will be with an agent that we expect has significant advantages as well as the target having significant advantages over other drugs and other targets. I'll see if Nadia, do you have any additional comments?

I think one of the things I'll add and not only for 906, but our portfolio is also the advantage of lessening treatment burden on these patients. And having patients taking daily pills or very often injections and things like that is another key differentiator. And so we're excited across the entire portfolio, including 906 for this additional advantage.

Thank you, Nadia. So as you see, I mean, we've got relatively short-acting IV. We have long-acting IV or subcu and now in MASP-2, we're moving pretty quickly on our oral. And that's looking good as well. So we have the landscape covered, and we control the effector enzyme of the lectin pathway, which effectively means we control the lectin pathway. And we also control the key activator of the alternative pathway with all of the advantages that Nadia just mentioned and that I went through in the prepared comments. So we really do believe that we can make a very strong case that we have the premier complement franchise in the industry full stop.

Next question comes from Serge Belanger with Needham.

A couple on the IgAN program. Maybe can you talk about the statistical powering of the trial that's going to read out later this quarter? And secondly, do you believe the ARTEMIS trial is the only Phase III trial required to support BLA and MAA filing in Europe? And then my second question -- I guess, third question, regarding the nonpaying coverage in OMIDRIA. OMIDRIA had some good traction in the ASC setting. Just curious how the no paying coverage that takes effect in 2025 will change the overall coverage of the product and whether it will see increased usage beyond the ASC study?

Sure. Thanks, Serge. In answer to your first question, the IgAN powering, our statisticians believe that and are quite confident that we are overpowered. So I think we're in good shape there. And yes, we expect that the one Phase III clinical trial will be sufficient to support a BLA and MAA, and that's consistent with other therapeutics that have received approval recently. So we see no difference there. With respect to OMIDRIA and HOPD use. Look, we know what happens in the HOPDs. HOPDs represent about 20% of the total procedures. So once we again receive our OMIDRIA again, received separate payment in the HOPDs. We expect to see about a 20% boost in our total revenues or net sales from OMIDRIA at least. And again, I think the key here -- and when I say a 20% boost, I guess that would really be about a 25% increase over where we are given that it's 20% of total net sales. I think that the key here is also in the amount of time that we now have secured, so long-term separate payment. How quickly can Rayner lock down Med advantage or Med Part C, separate payment reimbursement. That's the key to this. Because right now, I think still physicians and centers mostly call their patients. They'll look for patients who are Med Part B. And the reason they do that is the concern that if they use OMIDRIA on a Med Part C patient, a Med Advantage patient and are not paid, that is a meaningful cost to them, but there becomes a threshold beyond which if you can access Med Advantage for doesn't need to be 100% of the patients. It just needs to be enough of the patients where physicians and centers then are willing to…

The only thing I will add, I agree with everything you just said is even going back to the hospital outpatient department question, the request for OMIDRIA continue even without the NOPAIN Act previously. So we know there's demand and there's significant opportunity that we're excited about.

Thank you, Nadia. Yes, I would underscore what Nadia just said. I mean there are a number of HOPDs that are using the product really at their cost because they believe that strongly in it, and they believe that patients should have it. So I think once that HOPD separate payment begins as well, I think it has an amplifying effect across ASCs and HOPDs.

Our next question comes from the line of Olivia Brayer with Cantor Fitzgerald.

This is [indiscernible] on for Olivia. Could you give us any more color on what type of survival analysis is included in the proposal you're submitting next month for TA-TMA and once you're in agreement with the FDA on those, how quickly do you think you can turn around the survival data for the submission package?

Sure. Thank you. first, with respect to what we are proposing. These are just specific analyses that we think to run that will allow a robust and a meaningful comparison of the survival data from our clinical trial, the TA-TMA trial to survival in the external sources. So there's not really anything magical about this. We just want to submit a detailed proposal so that we hopefully have alignment with FDA. After having done that, submitted that proposal, as I said, this will be part of a Type B meeting, we would expect a response from FDA within 60 days. Then it is largely for us pushing a button and I don't want to minimize this. I'm sure that our statisticians and data management group might not want me representing it that way. But again, these analyses will already have been set and it is pushing the button, getting the readout. What it will take for us to submit, it's going to be work, but we are resubmitting a BLA. So it's updating safety, it's adding the new information into the BLA and then resubmitting and I think as we said, our objective here is even with the full duration of a 6-month review cycle by FDA. Our objective or our target is to have a decision from FDA in mid 2024. But let me turn to Cathy and see Cathy, what would you like to add to that?

Yes. Only to say that for parts of the resubmission that don't count on the analysis that we still have to do, we are already doing the work and preparing the documents that we need for us. So we're trying to do everything we can sort of in advance and in parallel, so that, as Greg said, we minimize the amount that we need to do once we get the feedback from FDA. So we're working very hard on it right now.

The objective, of course, on our side, and thanks, Cathy. The objective, of course, is to get the BLA resubmitted as quickly as possible, right? I mean this has been in arduous task, and we want to and expect to get narsoplimab over the finish line in the relatively near term. So we've laid out the time lines. We think that those are reasonable. And I can tell you internally, it's really all hands on deck pushing to get this completed. We had an earlier question about compassionate use. I mean there's clearly a need and a desire for the product. And we get these compassionate use requests, I would say, weekly. I mean we just had -- I think, Cathy, we just had one or more this week already. And when we get those, we don't ask can they pay. We ask particularly if these are children. The question we ask is how quickly can we get it there? How quickly can we get the drug there. So we're trying. We're making this available and we do make it available because we are very confident it works. And obviously, the requests that we're getting, I think, indicate the confidence within the transplant community that it works. So our objective as fast as possible, get it over the finish line and make this available broadly to patients, hopefully, adult and pediatric patients make this available so that we can continue to save lives, which I can tell you with complete certainty we're doing right now. Nadia?

Yes, I'll add something as well in terms of the needs out there and the demand. We've recently attended a couple of payer conferences and continued interactions with the transplant centers. And the #1 question is when are we going to have this because they are eager to have a product that is specifically indicated for TA-TMA. So that they can add it to their formularies, they can get it to patients and not have to deal with off-label use that unfortunately is what is the standard of care and all that's available now. So that is the top question that we have to answer repeatedly.

All right. I hope that answers your question. If not, let us know.

And at this time, I'd like to hand the conference back over to Dr. Gregory Demopulos for closing remarks.

All right. Thank you, operator, and thanks to all of you for joining this morning. As you can see, across our programs, we have a handful of value-driving milestones this quarter and over the next 6 months. All of us at Omeros are looking forward to seeing how they play out. So with that, enjoy the rest of your summer. And as always, we appreciate your continued support. Have a good day.

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.