Item 5. Market for Registrant’s Common Equity
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is traded on The Nasdaq Global Market under the symbol “OMER.”
Holders
As of March 25, 2025, there were approximately 58,063,901 shares of our common stock outstanding, which were held by 79 holders of record.
Dividends
We have never declared or paid any cash dividends on our capital stock, and we are precluded from paying cash dividends under the terms of our secured credit facility. We expect to retain all available funds and future earnings to fund the development and growth of our business and we do not anticipate paying any cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
We did not sell any equity securities that were not registered under the Securities Act during the three fiscal years ended December 31, 2024.
Stock Performance Graph
The following graph compares the cumulative total shareholder return for our common stock (OMER), the Nasdaq Biotechnology Index (NBI) and the Nasdaq U.S. Benchmark TR Index (NQUSBT) for the period beginning December 31, 2019 and ending December 31, 2024. This graph assumes that $100 was invested on December 31, 2019 in our common stock, the Nasdaq Biotechnology Index and the Nasdaq U.S. Benchmark TR Index. It also assumes that any dividends were reinvested. The data shown in the following graph are not necessarily indicative of future stock price performance.
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The foregoing information shall not be deemed to be “soliciting material” or to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to liability under that Section. In addition, the foregoing information shall not be deemed to be incorporated by reference into any of our filings under the Exchange Act or the Securities Act, except to the extent that we specifically incorporate this information by reference.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the audited annual consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results may differ materially from those discussed in these forward-looking statements due to a number of factors, including those set forth in the section entitled “ Risk Factors ” and elsewhere in this Annual Report on Form 10-K. For further information regarding forward-looking statements, please refer to the special note regarding forward-looking statements at the beginning of this Annual Report on Form 10-K. Throughout this discussion, unless the context specifies or implies otherwise, the terms “ Company, ” “ we, ” “ us ” and “ our ” refer to Omeros Corporation and our wholly owned subsidiaries.
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Overview
We are 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.
Complement Inhibitor Programs
The complement system plays a role in the body’s inflammatory response and becomes activated as a result of tissue damage or trauma or microbial pathogen invasion. Inappropriate or uncontrolled activation of the complement system can cause diseases characterized by serious tissue injury. Three main pathways can activate the complement system: classical, lectin, and alternative. We are focused on development of therapeutics to treat diseases associated with the lectin and/or alternative pathways of complement. We are developing antibodies as well as small-molecule inhibitors of key enzymes known to be centrally involved in the in activation of the targeted pathway of complement.
Lectin Pathway / MASP 2
MASP-2 is a novel pro-inflammatory protein target that is the effector enzyme of the lectin pathway and is required for the function of this pathway. We are developing antibodies and small-molecule inhibitors of MASP-2 as potential therapeutics for diseases in which the lectin pathway has been shown to contribute to significant tissue injury and pathology. When not treated, these diseases are typically characterized by significant end-organ damage, such as kidney or central nervous system injury. Importantly, inhibition of MASP-2 has been demonstrated not to interfere with the antibody-dependent classical complement activation pathway, a critical component of the acquired immune response to infection.
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 TA-TMA and development efforts are also directed to COVID-19, ARDS and PASC. We are also developing OMS1029, our long-acting antibody targeting MASP-2 which we expect will be well-suited to indications requiring long-term, chronic administration. In addition, we are advancing our orally administered small-molecule MASP-2 inhibitor through IND-enabling studies. For more information, see Part I, Item 1 in this Annual Report on Form 10-K under the heading “Complement Inhibitor Programs: MASP-2 Program – Lectin Pathway Disorders ”.
Alternative Pathway / MASP-3
Our pipeline of clinical-stage complement-targeted therapeutic candidates also includes zaltenibart (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.
Clinical development of zaltenibart is currently focused on PNH and C3G. We have initiated our Phase 3 clinical development program for zaltenibart in PNH and have an ongoing Phase 2 clinical trial evaluating zaltenibart in C3G. For more information, see Part I, Item 1 in this Annual Report on Form 10-K under the heading “Complement Inhibitor Programs: MASP-3 Program – Alternative Pathway Disorders ”.
PDE7 Inhibitor Programs
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, part of the National Institutes of Health, 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”). With NIDA funding, we successfully completed preclinical cocaine interaction/toxicology studies to assess safety of the OMS527 compound when co-administered with cocaine. Based on the successful outcome of the preclinical studies, we have initiated, and NIDA has confirmed availability of grant funding for, an in-patient, placebo-controlled clinical study evaluating the safety and effectiveness of OMS527 in adults with CUD who receive concurrent intravenous cocaine. For more information, see Part I, Item 1 in this Annual Report on Form 10-K under the heading “Other Clinical Programs: PDE7 Inhibitor Programs – OMS527 ”.
Preclinical Programs - Oncology Platform
We are developing a portfolio of signaling-driven immunomodulators, oncotoxins, and an adoptive T-cell technology combined with an immunostimulator that, unlike other cellular therapy approaches requires no cellular engineering, may reduce manufacturing costs and timelines, and may maintain an enhanced anti-cancer immune response through subsequent repetitive and simple therapeutic administrations.
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. For more information, see Part I, Item 1 in this Annual Report on Form 10-K under the heading “Preclinical Programs and Platforms: Oncology Platform ”.
OMIDRIA Sale and Royalty Monetization Transactions
We previously developed and commercialized OMIDRIA® (phenylephrine and ketorolac intraocular solutions) 1%/0.3%, which is approved by FDA for use during cataract surgery or intraocular lens replacement to maintain pupil size by preventing intraoperative miosis (pupil constriction) and to reduce postoperative ocular pain. We marketed OMIDRIA in the U.S. from the time of its commercial launch in 2015 until December 2021.
On December 23, 2021, we sold our commercial product, OMIDRIA, to Rayner. Rayner paid us $126.0 million at the closing and we retained all outstanding accounts receivable, accounts payable and accrued expenses as of the closing date.
As contemplated by the Asset Purchase Agreement, in December 2022, we earned a $200.0 million Milestone Payment upon the establishment of separate payment for OMIDRIA for a continuous period of at least four years when furnished in the ASC setting. We received $200.0 million in February 2023. Upon achieving the Milestone Event, the royalty rate applicable to U.S. net sales of OMIDRIA was reduced from 50% to 30%. The 30% royalty rate continues until the expiration or termination of the last issued and unexpired U.S. patent, which we expect to occur no earlier than 2035.
Upon the occurrence of certain events described in the Asset Purchase Agreement, including during any specific period in which OMIDRIA is no longer eligible for separate payment (i.e., becomes included in the packaged payment rate for the surgical procedure) under Medicare Part B, or in certain circumstances involving entry of generic competition for OMIDRIA, the U.S. base royalty rate would be further reduced to 10%. Pursuant to legislation enacted in late 2022, we expect separate payment for OMIDRIA under Medicare Part B to extend until at least January 1, 2028.
As a result of the OMIDRIA divestiture, we recorded an OMIDRIA contract royalty asset on our balance sheet. The results of OMIDRIA activities are classified as discontinued operations in our consolidated statements of operations and comprehensive income (loss) and excluded from continuing operations for all periods presented. See Part II, Item 8, “Note 7 — Discontinued Operations – Sale of OMIDRIA” to our Consolidated Financial Statements in this Annual Report on Form 10-K.
On September 30, 2022, we sold to DRI an interest in a portion of our future OMIDRIA royalty receipts for $125.0 million which we recorded as an OMIDRIA royalty obligation on our consolidated balance sheet. DRI was entitled under that arrangement to receive royalties on OMIDRIA net sales between September 1, 2022 and December 31, 2030, subject to certain annual caps.
On February 1, 2024, we sold an expanded interest in our future OMIDRIA royalties to DRI and received $115.5 million in cash consideration, which we recorded as an addition to the OMIDRIA royalty obligation. The amended and restated royalty purchase agreement with DRI (the “Amendment”) eliminated the previously existing annual caps on royalty payments after January 1, 2024, and provides that DRI receives all royalties on U.S. net sales of OMIDRIA payable between January 1, 2024 and December 31, 2031. In addition to the cash consideration received at closing, the Amendment also entitles us to receive two milestone payments of up to $27.5 million each, payable in January 2026 and January 2028, respectively, based on achievement of certain thresholds for U.S. net sales of OMIDRIA. All royalties earned on OMIDRIA sales within the U.S. through December 31, 2031 are remitted by Rayner to an escrow account established by Omeros, from which payments are made to DRI. We retain the rights to receive all royalties payable by Rayner on any net sales of OMIDRIA outside the U.S. as well as royalties on global net sales of OMIDRIA payable from and after December 31, 2031, including royalties on U.S. OMIDRIA net sales. To date, international royalties have not been significant. DRI has no recourse to our assets other than its interest in OMIDRIA royalties. Interest expense on the OMIDRIA royalty obligation is recorded as a component of continuing operations. See Part II, Item 8, “Note 8 – OMIDRIA Royalty Obligation” to our Consolidated Financial Statements in this Annual Report on Form 10-K for additional information.
Payment on Maturity of 2023 Notes
On November 15, 2023, we extinguished $95.0 million of our 6.25% convertible senior notes (the “2023 Notes”) at par upon maturity.
2024 Term Loan and Repurchase of 2026 Notes
In December 2023, we repurchased $9.1 million par value of our 2026 Notes on the open market at approximately 55% of par value, realizing a $4.1 million non-cash gain on extinguishment.
On June 3, 2024 (the “Closing Date”), we, with certain subsidiaries, as guarantors, entered into the Credit Agreement with Athyrium and 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) the Initial Term Loan of $67.1 million, which was fully funded on the Closing Date, and (ii) a $25.0 million 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. We do not expect that FDA approval of narsoplimab will be obtained within a timeframe that would permit the Delayed Draw Term Loan to be drawn absent an amendment to, or waiver of, this condition. 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, if drawn, would be issued with an original issue discount of 3.00%.
In 2024, we used the $67.1 million Initial Term Loan, along with $21.7 million of cash on hand to repurchase from the Lenders $118.1 million aggregate principal amount of the 2026 Notes (the “2026 Note Repurchase Transaction”). The principal amount retired in the 2026 Note Repurchase Transaction represented a 55% reduction of the outstanding principal balance of the 2026 Notes at a purchase price of approximately 75% of par value.
We are permitted under the Credit Agreement to repurchase additional outstanding 2026 Notes for cash in open market or privately negotiated transactions, subject to certain limitations described below. Additionally, until the earlier of November 1, 2025 and the date the we elect to draw under the Delayed Draw Term Loan, we, at our sole discretion, may exchange up to $14.9 million aggregate principal amount of outstanding 2026 Notes for cash and additional term loan amounts, with the holders of such notes becoming Lenders under the Credit Agreement (any such additional term loans, together with the Initial Term Loan and the Delayed Draw Term Loan, the “Loans”). We also retain all potential future value of the capped call purchased in connection with the issuance of the 2026 Notes covering all shares underlying the original 2026 Notes.
All indebtedness outstanding under the Credit Agreement is guaranteed by certain of our direct and indirect subsidiaries, other than certain foreign subsidiaries that are not material (we and the guarantors, collectively, the “Credit Parties”). Pursuant to a Pledge and Security Agreement, dated June 3, 2024, the indebtedness under the Credit Agreement is secured by a first-priority security interest in and lien on substantially all tangible and intangible property of the Credit Parties, subject to customary exceptions, and excluding royalty interests in OMIDRIA and certain related rights.
The Credit Agreement contains certain customary default provisions, representations and warranties and affirmative and negative covenants, including a covenant for the Credit Parties to maintain at all times unrestricted cash, cash equivalents and short-term investments of at least $25.0 million in accounts subject to control agreements, and a covenant limiting the use of cash for open market or privately negotiated repurchases of any outstanding 2026 Notes to: (i) an initial amount not exceeding $25.0 million, which may be increased by up to an additional $10.0 million subject to the satisfaction of certain conditions; (ii) an unlimited amount, if the amount of Loans outstanding at the time of repurchase does not exceed $38.5 million; and (iii) an additional amount not to exceed 50% of the net cash proceeds from an equity offering, provided that we offer to prepay an equal amount of Loans with the net cash proceeds of such offering.
The Loans accrue interest at an adjusted term secured overnight financing rate, (“adjusted term SOFR”) (with a 3.00% floor) plus 8.75% per annum, payable quarterly. We may choose to pay up to 50% of any quarterly interest payment in kind by adding the portion of such interest payment to the outstanding principal amount of Loans using a quarterly interest rate of adjusted term SOFR (with a 3.00% floor) plus 10.25% per annum. A default interest rate of an additional 3.00% per annum would apply on all outstanding obligations after the occurrence and during the continuance of certain specified events of default.
The Credit Agreement with a four-year term has a scheduled maturity date of June 3, 2028 (unless all Loans become due and payable at an earlier date, whether by acceleration or otherwise). If on November 1, 2025, (i) the aggregate principal amount of the 2026 Notes outstanding that is not held by the Lenders is equal to or greater than $38.5 million and (ii) we have not made nor delivered notice that we expect to make certain voluntary or mandatory prepayments under the Credit Agreement of at least $20.0 million in the aggregate, then we would be required to prepay the Loans in the amount necessary to achieve the $20.0 million prepayment requirement. We expect to prepay the $20.0 million in November 2025 along with a $1.0 million prepayment penalty and have reflected this consideration in our consolidated balance sheet. All mandatory prepayments are subject to the prepayment premiums as described below.
We may elect to prepay Loans, in whole or in part, in cash, subject to (i) during the first year of such Loans, a make-whole premium plus 5.00% of the aggregate principal amount of Loans subject to prepayment (unless the prepayment is made in contemplation of a change of control, in which case only the make-whole premium would be payable); (ii) during the second year, a 5.00% prepayment premium; and (iii) during the third year, a 3.00% prepayment premium. The Credit Agreement requires mandatory prepayments of Loans in an amount equal to 60% of the net cash proceeds (excluding research and development and certain other milestone payments) received by the Credit Parties from asset sales and licenses, provided that if an asset sale or license involving narsoplimab occurs while any Delayed Draw Term Loans are outstanding, mandatory prepayments must be in an amount equal to 100% of the net cash proceeds from such sale. Mandatory prepayments are also required: (i) from insurance recoveries on loss of property that are not otherwise reinvested in other assets of the Credit Parties; (ii) from indebtedness incurred by any of the Credit Parties other than as permitted by the Credit Agreement; (iii) in the event of a change of control and (iv) in respect of 25% of the amount of any Milestone Payment received from DRI its affiliates on the basis of net sales of OMIDRIA.
Financial Summary
As of December 31, 2024, we had cash, cash equivalents and short-term investments of $90.1 million available to fund operations and to service debt.
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Results of Operations
Research and Development Expenses
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, CROs, 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.
The following table illustrates our expenses associated with these activities:
Year Ended
Year Ended December 31,
2024
2023
2022
(In thousands)
Research and development expenses:
Direct external expenses:
Clinical research and development:
MASP-2 program - OMS721 (narsoplimab)
$
35,913
$
35,352
$
50,408
MASP-3 program - OMS906 (zaltenibart)
24,997
22,853
6,304
MASP-2 program - OMS1029
4,059
6,249
2,687
Other
115
153
442
Total clinical research and development
65,084
64,607
59,841
Preclinical research and development
6,465
5,172
7,254
Total direct external expenses
71,549
69,779
67,095
Internal, overhead and other expenses
43,841
40,337
39,503
Stock-based compensation expenses
4,133
4,754
6,123
Total research and development expenses
$
119,523
$
114,870
$
112,721
Clinical research and development expenses increased $0.5 million between 2024 and 2023. The change primarily relates to $16.1 million of TA-TMA drug manufacturing costs in anticipation of our BLA and $2.1 million in zaltenibart clinical trials expense and associated costs to manufacture drug supply. These costs are partially offset by a $15.5 million reduction in IgA nephropathy expenses with the closing out of the program and a $2.2 million reduction in OMS1029 expenses primarily due to the completion of one of our single ascending dose studies.
Clinical research and development expenses increased $4.8 million between 2023 and 2022. The $16.5 million increase in OMS906 development costs was due to an increase in manufacturing and Phase 2 clinical trial costs and a $5.0 million development milestone paid in 2023 under a technology license agreement. The $3.6 million increase in OMS1029 expense was primarily due to costs associated with initiation of human trials and other clinical development costs in the transition from preclinical to clinical development status in the third quarter of 2022. These increases were offset by decreased narsoplimab manufacturing costs during 2023.
Preclinical research and development expenses increased $1.3 million in 2024 compared to 2023, primarily due to increased preclinical oncology research and cocaine addiction work during 2024. The cocaine addiction work is being funded by a grant from NIDA, with associated grant revenue included in other income. The $2.1 million decrease in 2023 over 2022 in preclinical research and development expenses was primarily due to the migration of OMS1029 from preclinical to clinical research and development status during the third quarter of 2022, offset by an increase in preclinical oncology work during 2023.
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Internal overhead and other expenses increased $3.5 million for the year ended December 31, 2024 primarily due to additional employee related costs and having received an employee retention tax credit in the prior year that was recorded as an offset to expense.
The changes in stock-based compensation expense between the three covered years were due to the valuation and timing of the vesting of employee stock options.
We expect our overall research and development costs in 2025 to be slightly higher than in 2024, driven by increases in zaltenibart clinical trial costs associated with Phase 3 trials in PNH and C3G, a milestone payment under an existing licensing agreement, and drug manufacturing costs, which we expect to be partially offset by decreases in narsoplimab drug manufacturing and clinical trial costs. 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 Europe.
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.
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.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses are comprised primarily of salaries, benefits and stock-based compensation costs for marketing and administrative personnel who are not directly engaged in research and development. Costs also include marketing expenses, professional and legal services, general corporate costs and an allocation of our occupancy costs.
Year Ended December 31,
2024
2023
2022
(In thousands)
Selling, general and administrative expenses:
Selling, general and administrative expenses, excluding stock-based compensation expense
$
43,375
$
42,520
$
42,626
Stock-based compensation expense
6,360
7,140
8,042
Total selling, general and administrative expenses
$
49,735
$
49,660
$
50,668
The changes in stock-based compensation expense between the three covered years were due to the valuation and timing of vesting related to employee stock options.
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Our selling, general and administrative expenses are expected to be higher than in 2024. The magnitude of the anticipated increase in selling, general and administrative expenses for 2025 will be highly dependent on whether narsoplimab receives U.S. regulatory approval for treatment of TA-TMA. If narsoplimab is approved in 2025, we expect to hire a field sales force and initiate commercial launch activities which will increase our selling, general and administrative expenses.
Interest Expense
Interest expense is comprised of contractual cash and accrued interest on our 2026 Notes, 2023 Notes and Initial Term Loan. In addition, we record pass through interest on the OMIDRIA royalty obligation, non-cash interest comprised of remeasurement adjustments taken on our OMIDRIA royalty obligation and amortization of debt discount or premiums on our notes and term debt.
Interest expense, net of premiums, discounts, issuance costs and remeasurement adjustments is shown below:
Year Ended December 31,
2024
2023
2022
(In thousands)
2023 Notes
Contractual interest expense
$
—
$
5,195
$
5,938
Amortization of debt discount and issuance costs
—
619
662
Interest expense on 2023 Notes
—
5,814
6,600
2026 Notes
Contractual interest expense
7,772
11,774
11,814
Amortization of debt discount and issuance costs
859
1,234
1,167
Interest expense on 2026 Notes
8,631
13,008
12,981
OMIDRIA royalty obligation
Pass through interest remitted to administrative agent
20,634
11,848
1,253
Non-cash remeasurement adjustment
(5,614
)
—
1,695
Interest expense on OMIDRIA royalty obligation
15,020
11,848
2,948
2024 Initial Term Loan
Contractual interest expense
5,525
—
—
Amortization of debt premium and issuance costs
(4,681
)
—
—
Interest expense on 2024 Initial Term Loan
844
—
—
Finance leases and other
180
174
173
Total interest expense
$
24,675
$
30,844
$
22,702
Interest expense decreased $6.2 million in 2024 compared to 2023 primarily due to extinguishing $95.0 million in par value of our 2023 Notes at maturity in November 2023 and partially repurchasing $127.2 million in collective par value of our 2026 Notes in December 2023 and June 2024 reducing interest expense on our 2026 Notes by $4.4 million. This decrease was partially offset by increased interest expense of $3.2 million related to our OMIDRIA royalty obligation as we added $115.5 million of principal upon sale in February 2024 to DRI of our remaining OMIDRIA U.S. royalty earnings through 2031. In addition, with the execution of the Credit Agreement, we incurred $0.8 million in effective interest on our Initial Term Loan with Highbridge and Athyrium.
Interest expense increased $8.1 million in 2023 compared to 2022 primarily due to interest incurred from our OMIDRIA royalty obligation.
Contractual interest expense is comprised of cash interest paid during the year and the net change in accrued interest. Interest on our OMIDRIA royalty obligation is calculated under the effective interest method and represents a portion of the royalties remitted by Rayner to our administrative agent, Wilmington Savings Fund Society, FSB, along with principal. Pass through interest paid to DRI is offset by non-cash remeasurement adjustments taken to properly reflect the OMIDRIA royalty obligation for changes in probable cash flows on our future expected Rayner royalties. Debt discounts on the 2026 Notes and 2023 Notes are accretive whereas the unrealized gain on the 2026 Note Repurchase Transaction is treated as a premium on the Initial Term Loan and deducted from contractual interest expense.
For further information see Part II, Item 8, “Note 6 – Debt” and “Note 8 – OMIDRIA Royalty Obligation” to our Consolidated Financial Statements in this Annual Report on Form 10-K.
Interest and Other Income
Year Ended December 31,
2024
2023
2022
(In thousands)
Interest and other income
$
11,304
$
16,342
$
4,062
Interest and other income principally includes $8.4 million of interest earned on our investments, $1.6 million earned on sublease rental income and $1.3 million of NIDA grant income. The $5.0 million decrease in interest and other income between 2024 and 2023 was primarily due to holding lower average cash and investment balances than in the prior year. The $12.3 million increase in interest and other income between 2023 and 2022 was a result of receiving the $200.0 million Milestone Payment from Rayner in February 2023 and investing those funds.
We expect interest and other income in 2025 to be less than 2024 primarily due to lower average cash and investment balances during 2025.
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Gain on Early Extinguishment of Convertible Senior Notes
Year Ended December 31,
2024
2023
2022
(In thousands)
Gain on early extinguishment of convertible senior notes
$
—
$
4,112
$
—
In December 2023, we repurchased $9.1 million par value of our 2026 Notes at a discount, realizing a $4.1 million non-cash gain on extinguishment.
Net Income from Discontinued Operations, Net of Tax
On December 23, 2021, we sold our commercial drug, OMIDRIA, to Rayner. As a result of the OMIDRIA divestiture, the results of OMIDRIA operations have been classified as discontinued operations for all periods presented.
Net income from OMIDRIA discontinued operations, net of tax is shown below:
Year Ended December 31,
2024
2023
2022
(In thousands)
Interest on OMIDRIA contract royalty asset
$
16,922
$
15,315
$
18,634
Remeasurement adjustments
7,969
41,167
14,457
Other income
1,211
1,087
307
Milestone income
—
—
200,000
Income before income tax
26,102
57,569
233,398
Income tax expense (1)
(288
)
(462
)
(3,952
)
Net income from discontinued operations, net of tax
$
25,814
$
57,107
$
229,446
(1) For further discussion of income tax expense, please refer to Part II, Item 8, “Note 13 – Income Taxes” to our Consolidated Financial Statements in this Annual Report on Form 10-K.
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Interest on OMIDRIA contract royalty asset
During the years ended December 31, 2024, 2023 and 2022, we recorded $16.9 million, $15.3 million and $18.6 million, respectively, of income in discontinued operations representing interest income on the outstanding OMIDRIA contract royalty asset at an implied effective interest rate of 11.0%.
Remeasurement Adjustments
During the years ended December 31, 2024, 2023 and 2022, we recorded remeasurement adjustments of $8.0 million, $41.2 million and $14.5 million, respectively. Periodically, but at least annually, we remeasure the OMIDRIA contract royalty asset when there is a greater probability of achieving materially higher or lower royalty earnings than previously expected. To measure the OMIDRIA contract royalty asset, we use the expected value approach, which is the sum of the discounted probability-weighted royalty payments we would receive using a range of potential outcomes, to the extent that it is probable that a significant reversal in the amount of cumulative income recognized will not occur. Remeasurement is impacted by any changes to the probability-weighting applied to the range of potential outcomes that could occur. For further discussion of discontinued operations, please refer to Part II, Item 8, “Note 7 – Discontinued Operations – Sale of OMIDRIA” to our Consolidated Financial Statements in this Annual Report on Form 10-K.
Milestone Income
The Milestone Event occurred in December 2022, entitling us to receive a Milestone Payment of $200.0 million from Rayner. We received the Milestone Payment together with accrued interest in February 2023.
Income Tax Expense
For the years ended December 31, 2024, 2023 and 2022, we recorded state income tax expense of $0.3 million, $0.5 million and $4.0 million, respectively, in discontinued operations.
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Financial Condition - Liquidity and Capital Resources
As of December 31, 2024, we had cash, cash equivalents and short-term investments of $90.1 million. Our cash used in operations for the year ended December 31, 2024 was $148.8 million and included a net loss for the year of $156.8 million. Pursuant to a covenant in the Credit Agreement, we must maintain $25.0 million of unrestricted cash, cash equivalents and short-term investments at all times.
In recent years, we have 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 December 31, 2024, expected repayment of a portion of the borrowings under our secured credit facility on or prior to November 1, 2025 and maturity of our 2026 Notes on February 15, 2026, raise substantial doubt about our ability to continue as a going concern through one year from the issuance of the Company's consolidated financial statements. 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. 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; however, we do not expect that FDA approval of narsoplimab will be obtained within the timeframe that would permit us to draw the Delayed Draw Term Loan absent an amendment to, or a waiver of, this condition. Proceeds of the Delayed Draw Term Loan, if available, may only be used towards any related transaction costs and for commercialization of narsoplimab efforts of TA-TMA.
We have had preliminary discussions with certain holders of the 2026 Notes regarding a potential refinancing of the 2026 Notes and we may pursue additional debt financings to retire the 2026 Notes that remain outstanding and to raise additional capital 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 or restructurings, 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. See Part II, Item 8, “Note 6 – Debt” to our Consolidated Financial Statements in this Annual Report on Form 10-K for additional information.
If these capital resources, for any reason, are needed but inaccessible, it would have a significant negative impact on our financial condition. For purposes of determining available capital resources, potential future royalty and/or milestone receipts are excluded. Should it be necessary, we plan to manage our operating expenses and reduce our projected cash requirements by delaying clinical trials, reducing selected research and development efforts, or implementing other restructuring activities.
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Cash Flow Data
Year Ended December 31,
2024
2023
2022
(In thousands)
Selected cash flow data
Cash provided by (used in):
Operating activities
$
(148,803
)
$
74,726
$
(86,483
)
Investing activities
$
82,217
$
27,454
$
(127,564
)
Financing activities
$
62,881
$
(106,084
)
$
124,248
Operating Activities. Net cash used in operating activities for the year ended December 31, 2024 decreased by $223.5 million compared to the same period in 2023. This decrease was primarily due to collecting the $200.0 million Milestone Payment from Rayner in the prior year and a $15.5 million decrease in accounts payable and accrued expenses in the current year.
Net cash provided by operating activities for the year ended December 31, 2023 increased by $161.2 million compared to the same period in 2022. This increase was primarily due to collecting the $200.0 million Milestone Payment from Rayner in February 2023 and a $15.3 million increase in accounts payable and accrued expenses in 2023. This increase was partially offset by a $26.7 million change in the remeasurement of the OMIDRIA contract royalty asset, $8.7 million related to the accretion of interest on U.S. government treasury bills and a $4.1 million gain on the early extinguishment of a portion of our 2026 Notes.
Investing Activities. Net cash provided by investing activities for the year ended December 31, 2024 increased $54.8 million as compared to the same period in 2023. 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 in February 2024 related to the sale of future OMIDRIA royalties.
Net cash provided by investing activities increased $155.0 million during 2023 compared to 2022 driven by collection of the $200.0 million Milestone Payment from Rayner we received in February 2023.
Financing Activities. Net cash provided by financing activities increased $169.0 million during 2024 compared to the prior year. The increase was primarily due to receiving $115.5 million in cash from DRI related to the sale of future OMIDRIA royalties and extinguishing $95.0 million of par value on our 2023 Notes in the prior year. This was partially offset by increased payments to DRI of $17.6 million in 2024 related to the OMIDRIA royalty obligation, an additional $16.9 million paid to repurchase our 2026 Notes and increased common stock repurchases of $7.2 million.
Net cash used in financing activities decreased $230.3 million during 2023 compared to the prior year. The decrease was primarily due to receiving $125.0 million in 2022 in connection with selling a portion of our OMIDRIA royalties to DRI and extinguishing $95.0 million of our 2023 Notes. In addition, we paid $4.9 million to retire $9.1 million par value of our 2026 Notes and repurchased $4.7 million of our common stock through a stock repurchase program in 2023.
Contractual Obligations and Commitments
Operating and Finance Leases
We have operating leases related to our office and laboratory space. The initial term of the leases is through November 2027 and we have two options to extend the lease term, each by five years. As of December 31, 2024, the remaining aggregate non-cancelable rent payable under the initial term of the lease, excluding common area maintenance and related operating expenses, was $20.2 million.
We have finance leases for certain laboratory and office equipment that have lease terms expiring through October 2029. As of December 31, 2024, the remaining aggregate non-cancellable finance lease payable was $2.2 million.
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Debt
For more information regarding the convertible senior notes extinguished in mid-November 2023, convertible senior notes due in February 2026 and our Credit Agreement, see Part II, Item 8, “Note 6 - Debt”.
OMIDRIA Royalty Obligation
For more information regarding the OMIDRIA Royalty Obligation, see Part II, Item 8, “Note 8 - OMIDRIA Royalty Obligation”.
Goods & Services
We have certain non-cancellable obligations under other agreements for the acquisitions of goods and services associated with the manufacturing of our product candidates, which contain firm commitments. As of December 31, 2024, our aggregate firm commitments were $4.7 million.
We may be required, in connection with in-licensing or asset acquisition agreements, to make certain royalty and milestone payments and we cannot, at this time, determine when or if the related milestones will be achieved or whether the events triggering the commencement of payment obligations will occur. Therefore, such payments are not included in the table above. For information regarding agreements that include these royalty and milestone payment obligations, see Part II, Item 8, “Note 10 - Commitments and Contingencies” to our Consolidated Financial Statements in this Annual Report on Form 10-K.
Critical Accounting Policies and Significant Judgments and Estimates
The preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances; however, actual results could differ from those estimates. An accounting policy is considered critical if it is important to a company’s financial condition and results of operations and if it requires the exercise of significant judgment and the use of estimates on the part of management in its application. Although we believe that our judgments and estimates are appropriate, actual results may differ materially from our estimates. For a summary of our critical accounting policies, see Part II, Item 8, “Note 2 - Significant Accounting Policies” to our Consolidated Financial Statements in this Annual Report on Form 10-K.
We believe the following to be our critical accounting policies because they are both important to the portrayal of our financial condition and results of operations and they require critical judgment by management and estimates about matters that are uncertain:
● OMIDRIA royalties and contract asset accounting;
● OMIDRIA royalty obligation accounting; and
● accounting for debt issuances, primarily related to fair valuing debt and issuance costs.
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If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations for future periods could be materially affected.
OMIDRIA Royalties, Milestones and Contract Royalty Assets
We have rights to receive future royalties from Rayner on OMIDRIA net sales at royalty rates that vary based on geography and certain regulatory contingencies. Therefore, future OMIDRIA royalties are treated as variable consideration. To measure the OMIDRIA contract royalty asset, we used the expected value approach which is the discounted sum of probability-weighted royalty payments we would receive using a range of potential outcomes, to the extent that it is probable that a significant reversal in the amount of cumulative income recognized will not occur. Our calculations take the net present value of the sum to arrive at the OMIDRIA contract royalty asset stated on the balance sheet. We revalued the contract royalty asset to reduce the applicable royalty percentage from 50% to 30%, as required under the Asset Purchase Agreement following the occurrence of the Milestone Event triggering the $200.0 million Milestone Payment in 2022. Royalties earned will be recorded as a reduction to the OMIDRIA contract royalty asset. The amount recorded in discontinued operations in future periods will reflect interest earned on the outstanding OMIDRIA contract royalty asset and any amounts received different from the expected royalties recorded at closing. The OMIDRIA contract royalty asset is subject to changes in net sales of OMIDRIA. All else being equal, a 10% decrease or increase in net sales results in a $15.3 million change in value of the OMIDRIA contract royalty asset, resulting in a potential OMIDRIA contract royalty asset valued within the range of $138.0 million to $168.7 million. Changes in net sales could occur due to various risks such as competitors entering the market, changes in the standard of care for cataract patients and loss of separate payment status for OMIDRIA. In determining the value of the OMIDRIA contract royalty asset, we have considered all of these factors. The OMIDRIA contract royalty asset will be re-measured periodically using the expected value approach based on actual results and future expectations. Any required adjustment to the OMIDRIA contract royalty asset will be recorded in discontinued operations.
We receive monthly royalty reports of Rayner’s OMIDRIA product sales in accordance with the Asset Purchase Agreement. Upon the closing of the Asset Purchase Agreement, we determined the expected minimum net present value of future OMIDRIA royalty receipts and recognized the amount as a gain on the sale of OMIDRIA in discontinued operations on our income statement and as an OMIDRIA contract royalty asset on our balance sheet. To determine the OMIDRIA contract royalty asset, we used the expected value approach which is based on the sum of probability-weighted payments we would receive using a range of potential outcomes at an implied effective interest rate of 11%. The contract royalty asset excludes any revenue which potentially may be reversed in the event of an over estimation.
OMIDRIA Royalty Obligations
The sale of any portion of our OMIDRIA royalty receipts is treated as a liability on our consolidated balance sheet, as this does not result in the transfer of a participating interest. We amortize royalty obligation liabilities over the term of the arrangement using the effective interest method and classify interest expense as a component of continuing operations.
To the extent our estimates of future royalties are less than previous estimates, we will adjust the carrying amount of the royalty obligation to the present value of the revised estimated cash flows, discounted at the original effective interest rate utilizing the cumulative catch-up method. The adjustment would be recognized as a component of net income (loss) from continuing operations. Our estimate of cash flows from future royalties is derived from the contract royalty asset accounting described above.
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Debt Issuances
Transactions involving contemporaneous exchanges of cash between the same debtor and creditor in connection with the issuance of a new debt obligation and satisfaction of an existing debt obligation by the debtor are first evaluated as to whether they qualify as a troubled debt restructuring (“TDR”) under ASC Topic 470-60, Debt - Troubled Debt Restructuring by Debtors (“ASC 470-60”). ASC 470-60 requires debt modifications to be evaluated if (1) the borrower is experiencing financial difficulty, and (2) the lender grants the borrower a concession. If both conditions are met under TDR accounting, we would record as the carrying value of the new debt any repurchased old debt less any cash paid. No gain on restructuring is recognized unless the carrying value of the new debt exceeds the undiscounted cash flows of the new debt. Any cancellation of debt income is amortized over the term of the new debt. We determined that the Initial Term Loan qualified as a TDR. Therefore, we amortized as debt premium the cancellation of debt income from the partial repurchase of the 2026 Notes against the Initial Term Loan. If a TDR is determined to not have occurred, we evaluate the modification in accordance with ASC Topic 470-50-40, Debt - Modifications and Extinguishments, which requires modification of debt instruments to be evaluated to assess whether the modifications are considered “substantial”. In instances where our future cash flows change more than 10%, we record our debt at fair value based on factors available to us for similar borrowings and use the extinguishment accounting method. We extinguished the 2023 Notes at maturity. The partial repurchase of the 2026 Notes in 2023 was deemed to be a modification whereby we were able to recognize a $4.1 million gain on debt extinguishment.
Recent Accounting Pronouncements
Please refer to Part II, Item 8, “Note 2 - Significant Accounting Policies” to our Consolidated Financial Statements in this Annual Report on Form 10-K for information regarding recent accounting pronouncements.