Omeros Corp (OMER) 2017 Q1 法說會逐字稿

Good afternoon, and welcome to today's conference 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 from -- for 1 week from today. I'll now turn the call over to Jennifer Williams, Investor Relations for Omeros.

Good afternoon, and thank you for joining the call today. I'd like to remind you that some of the statements that will be made on the call today will be forward-looking. These statements are based on management's beliefs and expectations as of today only and are subject to change.

All forward-looking statements involve risks and uncertainties that could cause the company's actual results to differ materially. Please refer to the Risk Factors section of the company's quarterly report on Form 10-Q, which was filed today with the SEC, for a discussion of these risks and uncertainties.

Dr. Greg Demopulos, Chairman and CEO of Omeros, will take you through a corporate update. And then Mike Jacobsen, our Chief Accounting Officer, will provide an overview of our first quarter financial results. We have some time reserved for questions after the financial overview.

Now I would like to turn the call over to Dr. Demopulos.

Thank you, Jennifer, and good afternoon, everyone. We appreciate you taking the time to join us on the call.

We have a lot to report today, so we'll begin with OMIDRIA, our FDA-approved ophthalmology product. Total revenues from the sales of OMIDRIA for the first quarter were $12.3 million. Although revenues were slightly down compared to the fourth quarter of 2016, first quarter sell-through or unit vials shipped from our wholesalers to our hospital customers and ambulatory surgery centers or ASCs increased 14% over Q4, and year-over-year growth was 107%.

There are 3 major reasons for the difference between our reported revenues and our sell-through. First, our wholesalers customarily build increased inventories at year-end, and as previously reported, this was the case at the end of last year for OMIDRIA. This excess inventory then needed to be burned through as wholesaler inventory levels returned to normal in January.

Second, while wholesaler inventory levels were high at the end of December, their inventory levels at March 31 were historically low. This first quarter deficit in inventory was then replenished in the first week of the second quarter with wholesaler purchases in that week alone, totaling approximately $2.1 million in net sales. To date, subsequent second quarter inventories have remained at normal levels.

Finally, Q1 represented the first full quarter of operation for our volume discount purchase program for OMIDRIA. As a result, our gross-to-net deductions increased as expected by approximately 4% over the fourth of last year.

So we're pleased with the continued growth in sales that we saw in the first quarter, particularly given that Q1 is historically the weakest quarter of the year for cataract surgery procedures due to the resetting of insurance deductibles in January and the large number of ophthalmology conferences in January and February. As was the case last year, March of this year accounted for the largest monthly sell-through in the first quarter. The growth has continued into the second quarter, with the daily number of vials sold in April showing a 9% monthly increase over March.

OMIDRIA continues to gain market penetration both by expanding the number of facilities using OMIDRIA and by capturing a greater percentage of cataract procedures performed within a given facility. Here are some of the data. The number of facilities purchasing OMIDRIA from December to March increased by 10%. By the end of the first quarter, 22% of all ambulatory surgery centers that use OMIDRIA were administering the drug in over 50% of their cataract surgery procedures. The top 100 ASCs by surgical volume nationally increased their utilization of OMIDRIA by 37%, and purchasing accounts grew by 21% in Q1 compared to Q4. The top 100 hospitals by surgical volume increased use of OMIDRIA by 17% in Q1 over Q4.

The list of academic centers now regularly using OMIDRIA include New York Eye and Ear, which performs more cataract surgery than any other hospital in the United States; Duke University; Massachusetts Eye and Ear; University of California at San Francisco; Wake Forest University; Yale University; Cornell Medical Center; the Moran Eye Center at the University of Utah; Emory University; the University of Virginia; Hackensack University; Ochsner Medical Center; University of North Carolina; the University of Connecticut; and others.

Beyond hospitals and freestanding ambulatory surgical centers, we also are making good inroads into large chains of ASCs, with a number of corporate headquarters supporting use of OMIDRIA within their respective member facilities. International sales of OMIDRIA are also growing, and we expect to expand the countries and regions where OMIDRIA is sold.

At the annual meeting of the American Society of Cataract and Refractive Surgery this past week, the support for and interest in OMIDRIA among surgeons, nurses and administrators was strong. As more and more surgeons have had the opportunity to use OMIDRIA at their respective facilities, the recognition of and appreciation for an FDA-approved product with important clinical benefits continues to grow.

Concurrently, multiple articles reporting the clinical benefits of OMIDRIA have been published in peer-reviewed journals. Additional investigator-initiated studies are in progress or resultant manuscripts are being submitted or are awaiting publication in peer-reviewed journals further confirming that use of OMIDRIA results in decreased complication rates, reduced use of pupil expansion devices, faster surgical times leading to higher procedural throughput and better postoperative visual acuity. Another manuscript submitted for publication proposes that based on comparative data OMIDRIA precludes the need for pre- and/or post-operative topical insets.

With respect to reimbursement, we continue to expand payment for OMIDRIA within and across third-party payers. We also are making good progress toward our goal of achieving long-term reimbursement for our drug.

Let's turn now to our pipeline, starting with our MASP-2 program. Our MASP-2 antibody, OMS721, targets the lectin pathway of the complement system, a key component of the immune response. We have 3 OMS721 programs currently in progress; a Phase III program in atypical hemolytic-uremic syndrome or aHUS; and 2 Phase II programs that we expect to enter Phase III later this year: one in complement-related renal diseases focused on patients with immunoglobulin A or IgA nephropathy; and the second, in hematopoietic stem cell transplant-related thrombotic microangiopathies or TMAs.

Our Phase III program in patients with aHUS is advancing. The clinical trial is in patients with ongoing or newly-diagnosed aHUS. Based on discussions with both FDA and EMA, the study design consists of an open-label clinical trial with only a single arm. In other words, no control arm. We expect that the data from this single study will satisfy both regulatory agencies. This study design has the potential to shorten the path to regulatory approval by as much as several years and to save the associated costs. Our initial target enrollment is approximately 40 patients, which could provide full approval in Europe as well as satisfy requirements for accelerated approval in the U.S. To date, we have received orphan drug designation from the FDA for TMAs broadly, including aHUS and Fast Track Designation for the treatment of patients with aHUS.

In April, positive data from the dose-ranging stage of the Phase II clinical trial evaluating OMS721 in the treatment of aHUS were presented at the International Society of Nephrology's World Congress in Mexico City. The presentation summarized the trial data from 7 aHUS patients across 3 different doses. 6 of the 7 patients were plasma therapy-resistant. The data demonstrated dose response in platelet count assessed as changed from the baseline value. One patient was able to discontinue dialysis during OMS721 treatment, and renal function remained stable following completion of treatment. Two additional patients who are on chronic dialysis and considered ineligible for kidney transplantation because of their active aHUS stabilized on OMS721 treatment and were deemed eligible for transplantation. One of them has already undergone successful kidney transplantation.

Our ongoing Phase II program in patients with IgA nephropathy and other kidney diseases also continues to generate positive data. In March, we announced additional results from the first cohort in our Phase II open-label clinical trial evaluating OMS721 across patients requiring steroid treatment in 1 of 4 different types of complement-associated glomerulonephropathies: IgA nephropathy, membranous nephropathy, lupus nephritis and complement component C or C3 glomerulopathy. The trial assesses the effect of OMS721 on urine protein measures that are predictive of kidney failure, namely urine albumin to creatinine ratio or uACR and total 24-hour urine protein excretion as well as on the ability to reduce steroid dosing.

We have provided full data on 3 of the 4 IgA nephropathy patients in this cohort. Treatment effects across these IgA nephropathy patients were highly consistent, the magnitude of which are associated with improved renal survival. Specifically, uACR values were decreased by 47% to 94%, with a mean improvement of 76%. uACR values continued to improve after dosing was stopped, and improvements persisted even after trial completion. 24-hour urine protein levels also improved, showing decreases of approximately 54% to 81%, with a mean decrease of 66%. Concurrently, daily steroid doses for all patients were substantially reduced or completely eliminated. After completion of this full cohort of IgA nephropathy patients, we expect to release the results soon. More detailed data will be presented at the Annual Congress of the European Renal Association and the European Dialysis and Transplant Association in Madrid in early June.

Encouraging results were also observed in lupus nephritis. 4 of 5 patients showed a substantial reduction in 24-hour urine protein excretion over the treatment period, with a mean reduction of 69%. The fifth patient experienced a systemic disease flare and showed a substantial increase. The majority of lupus responders were also able to taper their steroid doses.

Based on the positive data in the IgA nephropathy patients treated with OMS721, we met with the FDA to discuss the Phase III development program. Following review of the data, FDA suggested that Omeros supply for breakthrough therapy designation in IgA nephropathy. Our discussion included both accelerated approval and an expedited approach to full approval based on an endpoint of proteinuria, which could be faster than accelerated approval. We have submitted our breakthrough application to the FDA and are preparing a Phase III protocol for a discussion with the agency. We expect that the Phase III program in IgA nephropathy will begin this year.

Our other OMS721 Phase II program evaluating the drug in patients with stem cell transplant-associated TMA has also been making strides. In February, we presented data from this Phase II clinical program at the Tandem Meeting of the American Society for Blood and Marrow Transplantation and the Center for International Blood and Marrow Transplant Research. To date, we have treated 9 patients with life-threatening post-transplant TMAs, and TMA markers improved in 7 of those patients. The other 2 patients received only 2 to 3 weeks of OMS721 with treatment truncated for reasons wholly unrelated to the drug, were managed palliatively and died. Patients who completed protocol-specified treatment with OMS721 showed meaningful improvement in platelet counts and measures of red blood cell destruction, specifically, lactate dehydrogenase and haptoglobin levels. We plan to seek breakthrough therapy or Fast Track Designation and accelerated approval for OMS721 in stem cell TMAs and are planning to initiate a Phase III program by year-end.

Outside of our clinical trials, our compassionate use program for OMS721 remains active. From around the world, we continue to receive frequent requests from physicians, patients and family members who have heard about the benefits of OMS721 and are seeking to access the drug.

Let's turn now to the other half of our MASP program, OMS906 targeting MASP-3, which continues to make progress as well. OMS -- Omeros was the first to identify MASP-3 as the activator of the complement system's alternative pathway. Positive data in animal models with both arthritis and paroxysmal nocturnal hemoglobinuria or PNH have been generated to date. We are currently finalizing selection of our lead and backup molecules and are preparing to initiate scaleup for clinical trials. In contrast, the C5 inhibitors that only block intravascular hemolysis in PNH, OMS906 has been shown to block both intra and extravascular hemolysis. This is an important distinction and in part why OMS906 could be significantly more beneficial than a C5 inhibitor in patients with PNH. We are evaluating PNH as the first clinical indication for OMS906.

Through our broad patents directed to MASP-2 and MASP-3, the key activators of both the lectin and alternative pathways, respectively, Omeros holds what we believe is a dominant position in the complement space. Not only do we exclusively control antibodies against both MASP-2 and MASP-3 across broad indications, we also are developing small molecule inhibitors against both of these targets. And now we have identified small molecule inhibitors against C1 as well, the key activator of the third of the 3 pathways in the complement system, the classical pathway. Because of our unique ability to identify agents that interact with enzymes in the complement system, we also are evaluating other complement targets that we might elect to pursue as we continue to expand and strengthen our complement franchise.

Let's now discuss another therapeutic area where we believe Omeros is poised to play a dominant role, the field of addiction and compulsive disorders. Experts believe that phosphodiesterase 7 or PDE7 is the most exciting target in addiction, and Omeros exclusively controls the intellectual property directed to any PDE7 inhibitor in the treatment of any addiction or compulsive disorder. OMS527, our lead PDE7 inhibitor, continues to progress toward the clinic. Preclinical results are consistently positive in cocaine, alcohol, nicotine and opioids as well as in binge eating. And the data show that OMS527 decreases craving as well as both cue and stress-induced relapse. According to these studies, our PDE7 inhibitors accomplished these effects without depressing the reward system, a problem that seriously hinders the use of currently-approved anti-addiction agents. We believe that we have elucidated the mechanism by which PDE7 inhibitors exert their effects in regions of the brain that are known to control addiction, and we are currently finalizing a manuscript describing our findings for submission to a premier peer-reviewed journal. We have also initiated toxicology studies to support the submission of an IND or CTA and subsequent clinical trials. We are currently targeting the submission of an IND or CTA in late 2017 or early 2018.

The other half of our addiction franchise is OMS405, our program focused on PPAR-gamma agonists. Positive Phase II clinical data have been generated in patients with cocaine use disorder and in heroin-dependent patients. Here again, Omeros has broad issued and pending patents covering the use of any PPAR-gamma agonist in the treatment of any form of addiction or compulsive disorder.

Work is also ongoing in our OMS824 or phosphodiesterase 10, PDE10, inhibitor program. Based on available data, we continue to evaluate a range of indications for this program.

Finally, our GPCR program continues to break new ground. Compound optimization is progressing across our programs in triple-negative breast cancer; demyelinating diseases such as multiple sclerosis, appetite and eating disorders, osteoporosis and seasonal affective disorder. Collaborations around multiple GPCRs controlled by Omeros are underway with a number of academic institutions.

We previously have disclosed publicly some of our work on GPR174, our novel cancer immunotherapy target. We believe that Omeros alone has agents that block GPR174. The combined effects of that blockade stimulate the production of cytokines or tumor killers and decrease the population of regulatory T cells that act to protect the tumor. Inhibition of GPR174 potentiates both the innate and adaptive arms of the immune system and represents a new mechanism for cancer immunotherapy. Omeros' unique ability to find small molecule inhibitors of GPR 174 could provide meaningful benefits over chimeric antigen receptor T cell or CAR T therapy, checkpoint inhibitors and other cancer immunotherapies. GPR174 could represent in -- a truly unprecedented advance in the care of cancer patients. We're making rapid progress and expect to share more information on this and other of our programs in the near future.

Finally, as you may recall, we have a credit facility with CRG. Given the significant progress in our commercial efforts for OMIDRIA and in the development of our pipeline, including our MASP-2 addiction and GPCR programs, CRG has already agreed to provide the next tranche of $25 million in debt financing should we choose to take it. We have until the end of August to decide whether to make the draw. Our decision will be based on the growth of OMIDRIA sales and revenues from any other sources.

With that, I'll conclude the update on Omeros' products and programs and turn the call over to Mike for a summary of our first quarter financial results.

Thanks, Greg. As Greg noted, revenues for the first quarter were $12.3 million, all from OMIDRIA product sales, and our net loss was $15.1 million or $0.34 per share. This includes noncash expenses of $4.4 million or $0.10 per share.

Here are some specifics regarding the first quarter versus the fourth quarter of last year. Our reported revenue for the quarter decreased by 5% or $648,000 from the fourth quarter, while sales of OMIDRIA by our wholesalers to the ASCs and hospitals, or sell-through, increased by 14%. The difference between reported revenue growth and sell-through unit growth was attributable to the normal reduction of wholesaler inventory levels in early January and the below-historic inventory levels held by our wholesalers at the end of the first quarter. This situation was rectified during the first week of April when our wholesalers purchased in net amount of $2.1 million of OMIDRIA, returning inventories to traditional levels and supporting ongoing demand. In addition, but to a lesser extent, the first full quarter of our OMIDRIA volume discount purchase program also contributed to the difference. As expected, the overall amount that we received per unit of OMIDRIA sold was reduced by approximately 4% from the prior quarter. This is due primarily to Q1 being the first full quarter of our volume discount program. We expect the overall amount we receive per OMIDRIA vials sold will decrease slightly going forward, again due to the expansion of our volume discount program as additional ASCs reach OMIDRIA utilization levels that qualify for the rebates. We expect the overall positive impact of our volume discount rebate program will continue growing.

Cost and operating expenses for the first quarter were $25 million, effectively flat from the $24.8 million fourth -- we had in the fourth quarter of last year. Specific variations from the fourth quarter included incremental costs associated with the Par lawsuit as we continue to defend our OMIDRIA patents, which were offset in the quarter by decreased OMS721 manufacturing and clinical trial costs. Stock compensation cost also decreased due to the timing of stock option grants to employees made in 2016.

Interest expense was $2.7 million for the current quarter and in line with our expectations. The year-over-year increase was due to incremental borrowings we made subsequent to the first quarter of 2016.

As of March 31, 2017, we had $33.7 million of cash, cash equivalents and short-term investments available for general operations. In addition, we have $5.8 million of cash and investments available as required under our loan agreement, building leases and other operating leases.

As you may recall, under our secured debt facility with CRG, we borrowed $80 million in the fourth quarter of 2016 and had 2 additional tranches, one of $25 million and the second for $20 million, available to us assuming we achieve certain OMIDRIA net product sales or average market capitalization thresholds. In light of the progress across our programs, CRG recently agreed to allow us to access the $25 million tranche at our discretion. Our decision to draw the funds needs to be made by the end of August.

Now let's take a look ahead for the remainder of 2017. With regard to revenue, we had a 14% increase in sell-through between Q4 2016 and Q1 2017. April sell-through as measured by average unit sold by our wholesalers per business day increased 9% over that in March, and we expect that OMIDRIA unit sales will continue to increase in the second quarter.

We anticipate that during 2017, the majority of our research and development expenses will be related to our Phase III and Phase II clinical programs for OMS721 and the preparation for commercial manufacturing of 721. We expect these costs to increase as the year progresses as we initiate additional OMS721 Phase III trials.

Selling, general and administrative expenses for the remainder of 2017 are expected to increase slightly from the first quarter, primarily due to the legal costs associated with the Par lawsuit.

With that, I'd like to turn the call back over to Greg. Greg?

Thanks, Mike. Operator, we can go ahead and open the line for calls.

(Operator Instructions) Our first question is from the line of Liana Moussatos of Wedbush Securities.

The $33.65 million cash, how long did that last without the $25 million tranche?

Depends on OMIDRIA revenues. We expect the OMIDRIA revenues to continue to grow. As you know, first quarter, historically, is the weakest quarter for OMIDRIA, frankly, not just OMIDRIA but surgical products in general given the resetting, as I said, of annual deductibles and just patient reticence to have surgery in January. I think that clearly sales are continuing to grow. Despite Q1 being a traditionally weak quarter and Q4 being a strong quarter, our sell-through was over 14% higher in Q1 than in Q4. So I think what we need to do is see what's happening with revenues, and then I can give you better clarity on where that $33.7 million, I believe, takes us. But again, all we see are kind of consistent and continuous signs of the increased adoption in the ophthalmology market and in the ophthalmology field around OMIDRIA. And I think that, that will continue to bear out.

And could you comment also on reimbursement for OMIDRIA in 2018? How it will change?

Yes. At the -- at midnight on 12/31 of this year, we are slated to be packaged, meaning pass-through will expire for us. And as currently indicated, there is the potential that OMIDRIA will be packaged into the overall reimbursement for cataract surgery. I can tell you that from the day we received pass-through, we turned our attention to achieving long-term reimbursement for OMIDRIA. The effort there have been consistent, and frankly, I believe, we are making significant progress toward achieving that end. We are pursuing 2 different approaches in parallel: one legislative, one administrative. However, frankly, don't want to go into the details of that. But I'll leave it as said that certainly that has our focus, and we expect that we'll be successful there. Again, no promises. But certainly, I think we're making meaningful headway toward achieving that end.

And my final question is what percent of OMIDRIA sales in Q1 were international?

Very small, Liana. Again, we're just beginning to expand in the Middle Eastern market. As I mentioned, we do plan on expanding the regions and countries internationally, and we'll keep everyone updated as we accomplish that goal.

Our next question is from Steve Brozak of WBB.

I want to dive in on a few quick questions on OMIDRIA and then go to 721. In looking over the file documents here, and you had mentioned the ANDA, I see that there's ANDA from Sandoz now. I guess it's a form of flattery in that everyone is interested. But can you expound on that and give as much detail or clarity as you can? Because it's...

Yes, yes. As much as I know, we just received this notification from Sandoz today. We see this as business as usual. As -- I think I agree with your comment. We take this as complementary. Clearly, Sandoz must think that there's enough room in this market, not only for 1 generic but for 2. The bottom line, as I see it, is nothing has changed. Our patents are our patents. Those don't change. We have very high confidence in those patents. And this is just, again, as frankly I see it and I think as we see it at Omeros, this is really standard operating procedure for these generics. And it's -- I take it, as you said, as a form of, perhaps, a high form of flattery.

It actually leads me to the next question because, obviously, we've been tracking and watching all the compounding issues. Now it's for a different kind of ophthalmic issue. But the stuff that's been taking place in Texas, where, obviously, there's been contamination and then there's been issues. How do you look at the competitive advantages you've got, obviously, versus compounding? And can you give us greater clarity on your thoughts there? And I want to follow up with sales as well please.

Sure. First, with your question regarding how we see ourselves comparing to compounded products. As you know, Steve, we're the only FDA-approved product that does what OMIDRIA does. And even compared to compounded products, frankly, OMIDRIA is more effective so -- significantly so. So you take better clinical outcomes, better clinical efficacy, and layer on the potential safety issues of compounded products, frankly, we don't see compounded products as truly competitive to OMIDRIA. Now you mentioned the specific events occurring in Texas in Dallas, Texas. Very unfortunate. We've followed these only somewhat remotely. Don't have all the details, haven't focused on them. We do understand that these were patients who underwent cataract surgery, and a compounded product was used, injected into the eye. And what we've heard now, or what I was hearing, frankly, at ASCRS, which was just this last weekend, this was, as you would expect, a topic of frequent conversation among ophthalmologists, it sounds like this is a problem that is affecting dozens of patients. I heard, perhaps, as many as 60 to 80 patients who are losing varying degrees of vision, some effectively complete vision loss, believed to be secondary to use of this compounded product during cataract surgery. Obviously, incredibly unfortunate for these patients who are undergoing what they believe is a routine, and frankly is, a routine surgical procedure that is designed and, in almost all cases, is extremely effective at restoring wonderful eyesight. And to have these patients go in and then, as a result of that procedure, have their eyesight diminished or taken is clearly a terrible thing. And frankly, the facility where this happened, we know the head of that group of surgi centers. And he is a tremendous person, cares deeply about his patients and is, by all accounts, an outstanding surgeon and physician. And it's just a terribly sad situation, I think, all the way around. And that's about all I know of it at this point.

Now obviously, looking at your distribution and looking at the ophthalmologists that are out there, one of the things that we model is your base. Can you tell us about how you're looking at increasing the base? Because obviously, when you do that, then, obviously, that increases everything, everything else gets streamlined. I'll ask that question, and then I'd like to ask questions about 721 when you're done with that.

Sure, sure. With respect to increasing the base, we continue to focus on new accounts, Steve. We see this as a pyramid. Certainly, we're focused on increasing utilization within accounts that are already using OMIDRIA, expanding it within a given physician's or surgeon's, surgical practice but also expanding it within the facility to that physician who is using OMIDRIA, expanding it to his or her colleagues. But at the same time, we're looking at adding and continue to add wholly new facilities, be they hospitals, be they ASCs. And we are continuing to -- have had and continue to have good success at adding new accounts. So obviously, our discount -- volume discount pricing program is helpful in convincing new facilities to try the drug. Because the key here is getting facilities and physicians to try the drug. Once it's in their hands, once they use it, once they use it in enough cases so that they get the sense that, "Gee, I'm starting to see something here that's a lot better than what I've been doing. And my days are smoother, my days are faster, my patients are doing better." Once they do that, it's very simple or relatively simple to get them to continue to use. The key is initially having them try. The volume discount pricing program helps to do that. So yes, we are focused on expanding the base while also building the penetration within facilities that are existing users of OMIDRIA.

Okay. Now I'm going to switch tack, and I'll hop offline because I don't want to, obviously, monopolize the call. You'd mentioned something earlier on the proteinuria side because that's a quantifiable mechanism. And when you're looking at 721 and what hurdles are to prove things, how do you see that as being something that you can quantify and that you can get the proverbial granularity in terms of assessing 721's efficacy in going out there and showing patient response? And I'll jump back in the queue after you answer that.

Okay. So you're referencing now IgA nephropathy, our trial in IgA nephropathy in 721 with an endpoint of 24-hour urine protein excretion. And your question with respect to the objectivity or accessibility of that is extremely high. It's a laboratory value. You are measuring the amount of protein over a 24-hour period that ends up in a patient's urine. So this, from our perspective, is a very meaningful endpoint. The data exist. The literature is there that demonstrates that reduction in urine protein levels is tied to improvement in kidney function very clearly. And when we say improvement in kidney function, we're really talking about kind of 2 measurements: estimated glomerular filtration rate or eGFR and creatinine. Both of those have been shown to be affected by reduction in protein levels. The reason that this is so meaningful and the reason that, frankly, we at Omeros are so excited about this is from our understanding this may be the first time. And also from the understanding of our experts in IgA nephropathy, who work closely with the FDA, this very well may be the first time that they are really considering this as an endpoint not just for accelerated approval, meaning not as a surrogate endpoint, but as an endpoint for full approval. What we had initially thought was that the FDA would consider potentially proteinuria as an endpoint for accelerated approval but would still require eGFR -- estimated glomerular filtration rate or eGFR for full approval. And in fact, you have this discussion with the FDA where they somewhat waved off eGFR for full approval and said that they would, assuming our data continue to look like our data look, consider proteinuria as an endpoint for full approval was obviously a very pleasant surprise for us and likely removes, potentially, years of clinical trial duration to full approval. So it is, as I think you're pointing out, a very big deal. And I think that it demonstrates, I think, the FDA's focus on getting a treatment to the market for this very serious disease for which there currently is no approved treatment. And I think we, so far, have found the FDA very cooperative. I expect we'll continue to find the FDA very cooperative. I know that we look very much forward to working with them very closely to get OMS721 approved quickly for the treatment of patients with IgA nephropathy, who, as I said, have no other treatment existing that is approved.

Our next question is from Elemer Piros of Cantor.

So Greg, if you were to estimate, how many hospitals and ASCs you have introduced OMIDRIA to? And what percent of the total would that be roughly? So what is your potential target number?

Boy, a lot in that question. Some, I'll be answer to answer, Elemer. Some, I will not. But with respect to where we currently stand overall in penetration of cataract surgery procedures, I think if you look at our Q1 sell-through numbers, we're probably only on the order of 3.5% to 4% of all cataract procedures performed. So clearly, we are just scratching the surface here for what is ultimately the potential market for OMIDRIA. Now with respect to your question as where do we want to be, we are focused on taking OMIDRIA to the point of standard of use for cataract surgery. And we think that, that is genuinely an achievable objective. Ophthalmologists in general are conservative. Ophthalmologists in general are slow to adopt. I mean, if you think of viscoelastics. Viscoelastics, I believe, in the first several years, following the launch of viscoelastics, the overall penetration in cataract surgery was less than 5%. If you look at viscoelastics now, it's effectively 100%. There are really very few -- and again, I'm not an ophthalmologist. But everyone tells me -- all the ophthalmologists tell me that you just don't perform cataract surgery without viscoelastics. So the idea is while slow to adopt, when they do recognize the value of the product and begin to expand the utilization of that product, they become very loyal to that product. And we do expect that, that's what we're starting to see with OMIDRIA. It was very telling at ASCRS this last weekend. I remember 2 years ago at ASCRS when, frankly, the initial reaction from a number of the ophthalmologists was almost somewhat hostile regarding this new product that was coming out and the pricing of that product. That definitely lessened in the last ASCRS, meaning last year. This year, I left that ASCRS, frankly, highly energized about the product because of the number of positive comments from the podium, from the panels, the presentations around OMIDRIA, but even more so from the unsolicited comments from physicians, nurses, administrators, coming by the OMIDRIA booth and talking about the importance of OMIDRIA to their practice, their expanding use of the product and their belief that what we're doing is ultimately good for their patients. It was a stark comparison clearly to 2 years ago and, frankly, a pretty significant difference from even a year ago. So I think that corner is being turned, and I think we're on our way to achieving what we want to achieve here.

Okay. Now coming back to the original question. If you have introduced the concept to x number of hospitals and ASCs as of the end of first quarter, where was that number? Or how -- by what percent did that grow when you look back a year ago?

Yes, I think that I mentioned that the utilization of the product from December to March had increased -- the number of facilities using that product had increased by 10%.

But you wouldn't have the year-ago number?

Oh, I think I don't. I don't have it at my hand, Elemer. I can -- if -- at some point, we can put that information if we choose out there. I can tell you that the growth of new accounts has been pretty consistent. Obviously, as a percentage, those percentages are going to progressively come down since the number of accounts that are using -- the base of accounts continues to expand. So we can't continue to be generating 75% to 80% new accounts as we did when we initially launched the product. But there's no question that the growth of the base of users of OMIDRIA continues to grow and continues to grow at a pretty steady and at an attractive pace.

Yes. Greg, you provided a very good explanation of the first quarter numbers, and I personally don't look at the sequential decline or being stable quarter-on-quarter. But I look at, say, the last 4 quarters, so the observation there is that revenues grew from $10 million to $12.3 million. So if you just divide it, it's about $0.5 million in addition or additional on a quarter-on-quarter basis over a year period, so evening out seasonality, et cetera, et cetera. Are you satisfied with that level of growth?

Well, I think that you're -- with all due respect, Elemer, I think you're mischaracterizing that a bit. The $12.3 million that you're pointing to this quarter was, as we said I think pretty clearly, a function of just lumpiness and inventory. And if you look at the growth, what we saw in utilization was again double-digit growth, and we've seen double-digit growth quarter over quarter over quarter. So I think that, that is pretty attractive from our perspective. I think Q2 will see, we expect, continued growth, and we plan on seeing continued growth throughout the year. Do we think that we can get to cash flow positive with OMIDRIA? Absolutely. Do we think we'll have long-term reimbursement for the product? Yes, we do. Any guarantees in that? No. But if I had to bet, I'd bet yes. So I think that our -- I'll change your question a little bit to: Are we comfortable with the growth that we're seeing in OMIDRIA? Of course, I'd always like to see it faster. Our team knows that, and they would like to see it faster as well. Are we generally comfortable with it? Yes, I am and we as a whole are. We'd love to see it faster. But quarter-over-quarter double-digit growth, I think, is not a terrible, terrible arc there. So I think we're going to get there, and I think we continue to do so.

Yes. Okay. And just one question on 721 please. So the aHUS Phase III protocol, has that been rolled into the existing protocol that you had for -- that is listed on clinicaltrials.gov? I think that lists like 89 patients, but there are multiple types of patients in that protocol. Or is this completely separate thing?

I'm sorry, Elemer, I lost a part of what you said. Could you repeat that?

Yes. So the Phase III protocol for 721 in the aHUS indication, has that protocol been rolled into the previous Phase II protocol that you listed back in 2014? Or it's an entirely new thing? And shall we look for it elsewhere?

No, that is a new protocol. The protocol for TMAs, the Phase II program, has continued to advance, and in that is our stem cell TMA.

Got it. So we should look for it somewhere else on clinicaltrials.gov?

Yes, that should already, I expect, be up on Clin Trials. If it's not, it's simply because our team is running flat out. We've gone from one indication now in 721 to 3 indications and 1 already in Phase III, 2 more moving to Phase III. As you can imagine things are a bit busy.

Our next question is from Jason Kolbert of Maxim.

I want my questions to really focus on 721. On the one hand, congratulations on OMIDRIA. I see the importance in the revenues. I see the sequential growth, and I see the very clear explanation of wholesaler inventory. But I'm surprised by the intense focus on those numbers because I think you and I both understand that OMIDRIA, while it's great, it's a means to an end. And clearly, 721 is one of the ends. I think one of the most important things you're talking about now is breakthrough designation. So can you talk with me a little bit about what the process was or will be to secure that and how that changes kind of your clinical trial thinking and how the pivotal programs might unfold for the 3 different indications associated with 721? Because to me that's where there could be, what I would consider, the most significant inflection point in the company.

Jason, and thanks for your comments. Yes, look, as I think we agree, 721 is driving revenue that supports the pipeline. I wouldn't underestimate what those revenues can and what I expect will be, but I think you're correct in identifying 721 as a major program within Omeros. Let me answer specifically your questions. Breakthrough designation. This arose most recently when we met with the FDA to speak with them about our Phase III program. FDA looked at our data. We presented the IgA nephropathy data to them. I think it's safe to say that no one has ever seen data that looked as compelling in IgA as the data that we have generated in 721. And that is not my opinion. That is what I have been told by experts in renal diseases and IgA specifically. And frankly, I think that was clearly the read by the FDA. So in that meeting, they suggested that we submit a breakthrough therapy designation request, which we have already done. So there is a 60-day clock on the review of that application. It needs to go to the department level. Again, that's assuming FDA meets those deadlines, sometimes does, sometimes does not. What the importance of breakthrough designation carries with it is the ability to work closely with the FDA on things like the design of the Phase III protocol. It's really ongoing and real-time interactions with the FDA. FDA then brings its resources to get products approved as efficiently as possible, and that's what breakthrough therapy designation delivers for the sponsor and for the drug.

And when you take a look at specifically patient size, are there impacts there? I mean, given the safety profile was established at this point, what are they really looking for in terms of establishing efficacy towards approval under the designation with breakthrough status?

The number of patients -- you mean sample size for the trial, Jason?

Yes, exactly.

Yes, we're still working through sample size and how we want to structure that study. So we've not put out yet numbers with respect to overall sample size for the IgA program. Part of that will depend in discussions or on discussions with the FDA about the overall design. We have a pretty good idea about how we'd like to run that study and what we think the design of that study should be. As part of that, we have preliminary numbers around sample size. So I think that when we talk with the FDA more, we'll get there.

And I'm very excited for you and for patients.

Our next question is from Tyler Van Buren of Cowen and Company.

Much like Jason, I'm not very surprised to hear the quarter-over-quarter change in dynamics in Q1. We're seeing it broadly across the industry. Just my one OMIDRIA question I wanted to ask in terms of the commercial strategy and how it's evolved, did -- and for clarification first, did you state that the centers are seeing 50% penetration in their cataract procedures with OMIDRIA that are signed up? Maybe some clarification there would be helpful.

Yes. What I said there was that at the end of the first quarter, 22% of all of the ASCs that use OMIDRIA are administering the drug in over 50% of their total number of cases, cataract surgery cases, performed within their respective facilities.

That's helpful. And it sounds like you guys are in a lot of the major hospitals or institutions, and obviously, you're going to continue to grow the base. So do you see the largest opportunity in more of the community-based surgical centers? And is that kind of why you've shifted to this volume discount pricing program? And have you seen any early traction there? Just wanted to get maybe some more specific thoughts there.

Yes, the volume discount pricing program applies to the ASCs, and roughly 65% of cataract surgery cases are performed in ASCs. The other 35% being performed in hospitals. We continue to focus on both of those facilities or types or care settings, hospitals and ASCs. It's interesting that, in fact, the distribution of OMIDRIA used across these 2 different settings of care for cataract surgery very closely aligns with the national distribution, meaning 65% ASCs, 35% hospitals. We're seeing the same thing or we've achieved that same split with respect to OMIDRIA sales specifically. So I think that answers your question.

That's helpful. So uptake seems to be similar in both settings. And just a couple, what is hopefully, quick ones on 721. Have patients been dosed in the study so far?

We have not put out any updates on our enrollment numbers. We will do that likely at some point, but we continue just to move forward on that program.

Okay. I imagine how quickly the program is advancing that you guys are going to be exploring different doses potentially in different dosing regimens. Any updated thoughts on your strategy there?

Well, we have a fixed dosing regimen that we are pursuing in aHUS, and we may very well already have dosing regimens for IgA and stem cell also. So I think the key here is we have 3 programs running: 1 in Phase III; 2 in Phase II, which are moving to a Phase III. Our -- we're largely agnostic with respect to which indication makes it over the finish line first, Tyler. We're looking to get OMS721 on the market as quickly as possible. So if that means that, that's aHUS, great. If that means that somehow IgA and/or stem cell leapfrog aHUS in terms of the ability to complete the program faster, that's fine too. So we're going to continue to push. And the issue of dosing, we think that we have that pretty well ironed out. So I'm not sure that we're expecting to see additional dosing studies, for example, in IgA nephropathy or in stem cell. And obviously, we're not in aHUS given that, that Phase III program is already underway.

Okay. That's great to hear. And with respect to the patients that you're enrolling in aHUS study, you mentioned that there was some ongoing patients as well as some new patients. Can you maybe just speak to your ability to get new patients on therapy with Soliris available? Is there a potential rescue protocol built into the study for whatever reason 1 patient didn't respond? And ultimately, do you view the mix of U.S. versus ex U.S. sites being 50-50 in the program? Is there a requirement for that? Just your thoughts on that.

Yes. Thanks. We're enrolling in the Phase III program for aHUS, both patients who have been previously treated on other agents, and of course, the other agent there would be Soliris. We're also including patients who are newly diagnosed, so have had no treatment. Clearly, those newly-diagnosed patients are coming from, primarily, regions where Soliris is either not available or is, for some other reason, inaccessible by aHUS patients. But I'll be very clear that there are a good number of those regions and patients available to us. So specifically, I think with respect to your question around split between U.S. and ex U.S., I think that what we're going to see is a good number of these patients just as we've already seen arising out of ex U.S. regions. Now that is specific to aHUS. That's going to be different for stem cell and for IgA, where there are no approved products anywhere in the world. So I think then we can clearly draw pretty readily from U.S. sites as well as ex U.S. sites.

And that includes our Q&A session for today. I'd like to turn the call back over to Greg Demopulos for any further remarks.

Thank you, operator, and thank you again, everyone, for taking the time to listen in.

Clearly, these are exciting times for Omeros. OMIDRIA sales continue to gain traction. Phase III OMS721 program is underway. And as I said, 2 more are expected to quickly join it: one addiction program is in Phase II, and the next OMS527 is rapidly advancing to the clinic. We expect that all of these programs and the rest of our pipeline will continue to generate a long line of near-term milestones, and we look forward to keeping you updated on those milestones and our achievement of them.

As always, we appreciate your continued interest and support. Have a good day. Thank you.

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