Omeros Corp (OMER) 2009 Q4 法說會逐字稿

Good afternoon and welcome to the Omeros Corporation fourth quarter and year-end financial results for 2009 and Corporate update conference call. 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 will now turn the call over to Jennifer Williams, Investor Relations for OMEROS.

Good afternoon. This is Jennifer Williams. I would like to remind you 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. I would like to refer you to the risk factors section of the Company's annual report filed with the SEC earlier today for for a discussion of these risks and uncertainties. Now I would like to turn the call over to Dr. Gregory Demopulos, Omeros's Chairman and CEO.

Thanks, Jennifer. To everyone on the call welcome and thanks for joining us today. I'm Greg Demopulos. With us is Dave Toll, our Director of Finance. Dave will start the call this afternoon by providing an overall view of our financial results. After that, I will provide a corporate update, including a discussion of the meniscectomy data that we released earlier this morning. We've reserved some time for Q&A after the corporate update, and I'm sure that there will be questions about the data and other programs at Omeros. So, with that, let me turn it over to Dave.

Thanks, Greg. Good afternoon, everyone. For the three months ended December 31, 2009, we reported a net loss of $5.6 million, or $0.28 per share, as compared to a net loss of $6.4 million or $2.19 per share for the same period in 2008. For the year ended December 31, 2009, we reported a net loss of $21.1 million, or $2.92 per share. This is compared to a net loss of $23.8 million or $8.26 per share for the same period in 2008. Total operating expenses for the three months ended December 31, 2009, were $5.7 million, compared to $6.6 million for the same period in 2008. The decrease in operating expenses was primarily the result of reduced clinical trial expenses due to the completion of enrollment in the Company's Phase II clinical study of OMS103HP for arthroscopic meniscectomy surgery and reduced noncash stock-based compensation. This was offset by an increase in technology option fees associated with the Company's GPCR program and an increase in costs associated with being a public Company, and consulting fees.

Total operating expenses for the year ended December 31, 2009, were $22.2 million, compared to $25.7 million for the corresponding period in 2008. The decrease in operating expenses in 2009 as compared to the same period in 2008 was primarily the result of the 2008 write-off of $1.9 million of deferred offering costs related to a delay in the Company's IPO. Also, in 2009, there were decreases in contract service costs associated with several of Omeros clinical and preclinical programs and in clinical trial expenses due to the prior completion of enrollment in the Company's Phase II clinical study of OMS103HP for arthroscopic meniscectomy surgery. As you are aware we completed our IPO on October 7, raising approximately $62 million net of offering costs and other expenses. We expect our operating cash requirements to increase in 2010 to approximately $30 million to $35 million as we support our clinical trials and research and development of our pipeline technology. That's all for the financial update.

Thanks, Dave. What we will do now is start with really the meniscectomy study which I believe is probably at the top of everyone's interest. We at Omeros are all pleased to have been able to complete the review of our top-line data from the Phase II meniscectomy study in time to discuss them on the call today. These data were released before the market open today and represent real progress for our lead program.

This was a Phase II multicenter randomized double-blind vehicle controlled study which enrolled 161 patients undergoing arthroscopic meniscectomy surgery. The full analysis set was 143 patients. The data from this study demonstrated that OMS103HP significantly improved patients function, increased their knee flexion and decreased their pain after surgery. Importantly, as we have previously seen, 103 was well tolerated and, in fact, more adverse events were objected in the vehicle group than in the treatment group. We won't go into depth today about the data but we will be providing more detail in the future. For now, though what I would like to do is just share with you several of the highlights from the study. First of all, OMS103HP provided greater efficacy as measured by VAS pain scores over the first 24 postoperative hours. OMS103HP treated patients also achieved really significantly better passive knee flexion at one week, and the most impressive part of the data came from patients who participated in the 90-day functional assessments. These patients self-reported using the knee injury and osteoarthritis outcome score, or KOOS. These functional data clearly demonstrate that OMS103HP provided a clinical benefit in this study.

The study also demonstrated that treatment on the day of surgery alone continued to provide functional improvements out to one month and even three months postoperatively. And as I think we all know, clinicians aren't only interested in patients who do well. They're concerned about patients who don't do well. And looking at the patients in both the highest and lowest quartiles of performance on the KOOS scale, it's clear in this study that OMS103HP had had a substantial impact.

We do plan to publish the complete data set in a peer review journal. We believe that these data bode well for our lead PharmacoSurgery program. As you know, Omeros is evaluating OMS103HP in a Phase III program for arthroscopic ACL reconstruction. We expect to announce data from that study in the latter part of the year, and assuming that the data are positive, we'll submit an NDA. As the body of encouraging clinical data from OMS103HP grows our optimism for this program really only grows stronger. With respect to our other PharmacoSurgery programs, we're preparing to initiate the next Phase II study for our ophthalmology product OMS302. Our urologic product, OMS201, is currently advancing through Phase 1/Phase 2 clinical study.

Moving on to the other programs in our pipeline, we're pleased to have announced in January that the National Institute on Drug Abuse, or NIDA, is working with us on our addiction program. As many of you know, NIDA has agreed to fund substantially all of the costs of a Phase 2 trial, and we expect to begin enrollment in that study in the second quarter of this year. You may also have seen the 8-K that we issued yesterday which was directed to the fact that we bought out all remaining milestones and royalties from Affitech for about $500,000 which includes a substantial milestone payment which would have come due within the month. We see this as an attractive arrangement for Omeros that presented itself really as a result of a business and financial restructuring at Affitech.

In our PDE7 program, that's the program in which we are treating movement disorders, we announced that we have accessed promising PDE7 inhibitors from Asubio. These compounds could provide with us a quicker path to the clinic by giving us advanced preclinical product candidates that are ready for additional toxicology studies in preparation for a Phase I clinical trial.

As for our GPCR, or G-protein coupled receptor program, we have begun screening, and we are pleased with our progress. We have guided that we expect to identify compounds that interact with or unlock at least one orphan GPCR in the first half of this year, and we remain on track to do just that. Switching gears to the leadership front, as our clinical programs continue to mature, and as we move toward commercialization we continue to expand our leadership. As you saw today we made two key additions to our management team. Dr. Steve Whitaker joins us as Vice President of Clinical Development and Chief Medical Officer, and Tim Duffy is our new Vice President of Business Development. Their respective backgrounds are outlined in today's release, but we are all very pleased to have both Steve and Tim on board, and they are already hard at work.

So that wraps up my comments, and now I will turn the call over to the operator to open up the phones for Q and A.

Thank you. The question-and-answer session will be conducted electronically. (Operator Instructions) We will take our first question from Alan Carr with Needham & Company.

Good afternoon and congratulations on the phase 2 results today.

Thanks, Alan.

Couple questions, both around 103HP. Wondering what other details you can tell us about this trial with respect to which end points -- which other end points were assessed here, and wondering if you can give us a sense of how response against these end points matches up with the end points that you have for the Phase III trial underway?

Well, the end points were, as are in the 103 ACL trial, these were also directed at function and pain and also range of motion. And what we saw in this study was that really across all three end points, pain, motion, function, OMS103HP performed really substantially and statistically better than did vehicle. So in that way, the data are similar to what we saw in the Phase II OMS103HP study for ACL reconstruction. What we saw here, which was really very interesting, was that in the ACL study, as you recall, our efficacy end points only ran out for 30 days. So we only followed the patient 30 postoperative days. Here, we followed the patient for 90 postoperative days. And what we saw was a sustained clinical benefit all the way out to 90 days.

How much similarity is there between the knee function composite endpoint that you have for the Phase III and the assessments that you did in this particular trial? I guess is the direct--?

This is the KOOS. What we used here, Alan, was the KOOS scale, which is, again, it's a functional scale. So in that way, both are very similar, you're looking at what patients are functionally able to do postoperatively. The difference here is that some of the activities that are included in the KOOS scale are things that ACL patients really aren't allowed to do in the immediate postoperative period. So if you look at things like running, jumping, twisting, on the knee, those are things that ACL patients aren't going to be allowed to do. So from the perspective that both the end points in the ACL study and the end points here address function, they're very similar. It's just how you are measuring that level of function.

Okay, that helps. How about, you mentioned that you expect to have data from the Phase 3 program in the latter part of this year. How is enrollment progressing? Can you give guidance on when that might be done and will you -- do you still expect to get an NDA in, submitted by the end of this year?

Yes, we have fully enrolled per the protocol in the ACL study. And are currently looking at closing enrollment. We do expect that we will be reporting data this year with respect to timing of the NDA we'll have to see how that plays out. In part, it's driven by how much money, how much effort you want to put in on the front end, and then again how much money and effort on the back end. And so it's a question of resources, but the objective is clearly to report out data in the second half of this year, and assuming that data is positive, then advance to an NDA.

Okay, great. Well, thanks, again, and congratulations on your progress.

And moving on to Liana Moussatos with Wedbush Securities.

Thank you for taking my question. In addition to the Phase III data, based on your discussions with the FDA over time, what else do you need to do to submit your NDA?

Well, we need to obviously complete, as you have said, the Phase II trial, get the data collected, scrubbed, lock the database and report out that data. We, as you know, have been using the lyophilized product and ideally our objective has been to file the NDA with the liquid formulation. What we are doing there is addressing the bioequivalence of the liquid to the lyo product. That process has been underway for awhile with the agency, and we are -- remain optimistic that we will show that bioequivalence given, again that the active ingredients in each of the two formulations, liquid and lyo, are the same. And the excipients in the liquid formulation have already been approved for perennial use. So we think we're in pretty good shape there, and we expect that we will be able to file the NDA with the liquid formulation.

Great. And when do we -- when should we expect to see the numbers from the Phase II meniscectomy data? Are you going to present them at a meeting? You mentioned you want to publish them. Will we have to wait until the publication comes out?

I don't think you'll to have wait until the publication comes out, but we are still -- given that these are relatively fresh for us, Liana, we're till sorting out internally how we best want to handle the distribution of the more detailed data, and I think that most likely we'll make those available in the relatively near future. But we'll just to have see how all of that plays out.

Are you considering an upcoming medical conference? And if so, which ones would be the most likely?

Sure. We've considered that, and probably the most appropriate conference for this, or one of the most appropriate conferences, would be the AOSSM, right, the American Orthopedic Society for Sports Medicine. And that occurs in July. That may work, or we may put it out a little earlier than that. So that's all part of what we're determining internally right now, and we'll certainly get back to you with an update on how we plan to handle the more detailed data.

And what's the next product do you think you'll take into the clinic?

Well, the next product going into the clinic is the -- is from the addiction program, right, because that Phase II study is working its way through the IRB. From there we would be filing an IND, or we would be filing in conjunction with Columbia. It's actually Columbia that will be filing that IND for us. And that product we expect to be in the clinic that program, and begin enrollment in the early second quarter.

Okay. And the other two programs that are in the clinic now, when will we hear any progress with them?

Well, 302, we expect to be initiating another Phase II study in the -- what's left of the first half of this year, and OMS 201, as we've stated, we expect we'll have that study wrapped up by midyear, for the urologic OMS 201.

All right, thank you so much.

And Adam Cutler with Canaccord Investment is next.

Hi, thanks for taking the question. Wondering if you can tell us what your future plans are in the meniscectomy indication after the results that you announced today and sort of how investors should think about that study in the context of your ongoing Phase IIIs and the overall market opportunity for that particular product?

Yes, hi, Adam. Yes, in response to that, we are going to design a Phase III program around the meniscectomy, around the meniscectomy study that we just completed. The data are really quite impressive, and I think that we will plan and design a Phase III program. The question becomes one of when do we initiate that program, and given the temporal proximity currently to our Phase III data from the ACL study, we also need to focus our capital and personnel resources on bringing that program home. So the question as to when we would initiate any Phase III program around meniscectomy still remains an open question for us here. But clearly, we will begin almost immediately designing that Phase III program.

Okay, and then in terms of the GPCR deorphanization and then your plan to announce progress on that front in the relatively near future what kind of information should we expect will come with that announcement, and it seems to me that one of the goals thereafter is to strike partnerships that would help generate some near-term cash as well as potentially longer term opportunities for the Company. How quickly do you think you would be able to accomplish that after announcing that you have made progress in de-orphanizing a given target?

That's a good question. Look, I think the first news that we would potentially be releasing, assuming all goes well in the program, is that we have identified compounds that interact with one or more orphan GPCRs. So essentially we have unlocked orphan GPCRs and made them really potential drug targets. That would be the first, I think, the announcement that we would make. Again, assuming that we were successful in doing that. With respect to corporate partnerships, or any deals around the orphan GPCR program, I think that remains to be to be seen. Deals, as you know, can take awhile to put together, and I wouldn't want to predict at this point when we would see any corporate partnerships materialize after our success should, again, we have it, in the GPCR program.

Okay, thanks a lot.

And moving on to Jason Kolbert with National Securities.

Good morning in California or Seattle. Congratulations. Great data. I guess I have the same kind of questions that you've been asked by the other analysts today. I'd just like to know if you could go into a little bit more detail in terms of the 103HP ACL reconstruction trial, and if you compare and contrast what some of the powering assumptions are to this trial. This trial clearly has great results. You have to be encouraged that this bodes well for the outcome of the reconstructive trial, but what things do you worry about when you look at the difference between these two trials?

Let's first look at the ACL study. That entire program, the three studies running there. As you know, we powered those for a 90% confidence, and a 20% difference between OMS103HP and vehicle. And that 20% we powered as if the 20% is at the peak of the bell curve, meaning a 40% versus 60% response rate, when in fact in the Phase II study what we saw was a 42% difference, 86 versus 44. So I think with respect to the ACL study, we are very well powered. In fact, one could argue that we are overpowered. So now let's look at the meniscectomy study that we just completed. We did not power this study for statistical significance.

We actually powered this study simply to give us what we thought would be sufficient data to adequately design a subsequent Phase III program. And really we're very pleased. And I've got to say, actually maybe a little surprised at how good the data looked and how consistent the data looked across -- again, larger numbers of patients, but still not as large as one would have expected to be able to demonstrate statistical significance across those ends points. So do I think that there is a link in any way between the meniscectomy and ACL programs? Sure. Again, we're looking at pain, we're looking at motion, and we're looking at function. And all three of those things, we also are looking at in the ACL program.

That's very eloquent, very well said. Thank you. That's really helpful. When you take a look now, as the last patient enrolls, and you've kind of been asked this question already, but can you walk us through the process over the next six months on what happens from now that the last patient enrolled until the data set is closed and then how the data gets scrubbed and ultimately released and submitted?

With respect to time line or actually with respect to the operations associated and how we do that?

I think both will be helpful, because I think once we have an understanding of the operations internally and your capability, it will help assemble our own time lines and understand how you get to a filing, we're thinking by the end of the year or early next year.

Well, let me first explain, Jason, then, how -- because I've told you that we are fully enrolled for the protocol and we have a decision now about closing enrollment, and we're currently looking at doing so. Here's how we got to where we're -- that that enrollment is still running and now is wrapping up. But this really came out of the meniscectomy study, right where, we found that while we were pulling together all of the data from the meniscectomy study, we found that the data were primarily from the surgical charts. But given that this is a surgical study, as one would expect, we actually found that there were the data that also needed to be pulled from the anesthesia and from the hospital charts. And so what we decided to do was to go out to the Phase III sites and begin all of that work in advance, so that we could accelerate the process on the back end.

So while we were performing these tasks around just making sure that we could again accelerate the process on the back end of the ACL program, we continued to enroll patients to really increase the power of the studies, which kind of circled back to your initial question about powering the study. So once we have completed the enrollment, and again, we're, frankly, more than fully powered, what we will do is, last patient out will be three months from completion of enrollment. While we are doing that we will be building tables. We will be getting ready for the database lock and in preparation for database lock, obviously what we will be doing is cleaning, scrubbing data. Once we have last patient out of the study I don't think it will be a very long time for us before we have top-line data. From that point, assuming positive data, which, I'm hopeful we will have and certainly after today, I'm even more hopeful we will have -- I think that it is really dropping that data into tables that, for the most part, have largely been built. And in that way, we can accelerate the time from top line data to NDA preparation, NDA completion and NDA submission.

Great, that's terrific. Thank you so much, and congratulations to Dr. Whitaker and Tim Duffy for joining. What a great time to be thinking now about what the commercialization end and kind of the data submission end. Thanks, guys.

Thank you very much, Jason.

And next is [Deana Skirley] with [Nidiger, Tucker, Bruenner].

You've already answered one question by your statement in the release about the GPCRs. Real quick question. You went over this thoroughly before you did the IPO, but just comment, if you would, a little bit about the possible value of a de-orphanized GPCR, comparing it to what is already -- GPCRs that already exist?

Well, boy, that's a bit of a tough one, because you're asking me to predict--?

No, I'm not asking you to predict. I'm just asking you to give some sort of a comparison?

Okay, I can do that. What I would point to is that, look, the total pharmaceutical market exceeds $700 billion a year. What we do know is that 30 to 40% of all drugs currently on the market, and that range is there because it depends on whether you include anti-infectives or not, but 30 to 40% of all drugs currently on the market target G-Protein Coupled Receptors, or GPCRs, and there are really only 46 GPCRs that are currently targeted by those marketed drugs. Now, when you look, there are over, let's say, roughly 120 orphan GPCRs. And again, just so we're all on the same page, orphan GPCR meaning one that has no known molecule or ligand that bonds to it. So absent that molecule or ligand, you really cannot -- you cannot drug that GPCR, you cannot unlock that GPCR.

So given that there are -- excuse me, 120, and given that we believe that if this program is successful, we will be able to unlock a large number of those orphan GPCRs, certainly not all of them, but we expect a large number or large proportion of those. We really are talking about potentially adding dozens of new drug targets, new G-Protein Coupled Receptor drug targets to the market. So I guess the best answer I can provide at this time is to say, well, you know that 30% to 40% of all drugs target GPCRs, and only 46 GPCRs. I think that it would have a significant impact on the pharmaceutical industry should we be able to deliver what we think we can, which is the addition of dozens of new targets. So does that--?

Fair enough.

Great.

Thank you.

Thank you.

And that is all the time we have for questions. Dr. Demopulos, I would like to turn the conference back to you for closing remarks, sir.

All right, thank you very much, and thanks again to everyone for participating today. We really are quite pleased to be able to share the Phase II data from the meniscectomy study with you today. And also to talk about the other programs. While the focus today has been meniscectomy, clearly there are a lot of things happening with our other program, and we're excited about those as well. We hope that all of you are equally encouraged by the progress that we've made here, and we look forward to providing all of you with continued updates in the weeks and months ahead, and with that, good afternoon to all, and thank you again for listening in.

And that does conclude our conference call today. We would like to thank you for your participation.