1. EQUITY RESEARCH
INITIATION
Biotechnology
Initiation Buy
May 7, 2012 Omeros (OMER – NASDAQ – $9.02)
Closing Price (05/07/12): $9.02 Do the Math – It’s a Buy!
12-Month Target Price: $23 We are initiating coverage of Omeros Corporation with a Buy
52-Week Range: $3.00-$11.00 Rating and a 12-month price target of $23. Omeros is a unique
Market Cap (MM): $202 blend of specialty pharma and true drug discovery with multiple
catalysts that should play out favorably, in our opinion.
Shares O/S (MM): 22.4
Float (MM): 13.9 Ophthalmological surgery, OMS302, is the major driver. OMS302
Avg. Vol. (000) 107 is made up of two components – phenylephrine and ketorolac – added
Debt (M) $20 to the standard irrigation solution used during intraocular lens
replacement procedures to maintain intraoperative mydriasis (pupil
Dividend/Yield: $0.00/0.00%
dilation) and reduce postoperative pain. A phase III trial met its
Risk Profile: High primary endpoint (P<.00001). A second Phase III trial is enrolling with
data expected in 2H12 and a potential launch in early 2014.
FYE: December GAAP EPS P/E Conservatively speaking, global sales could reach north of $300 million
2011A ($1.28) n.a. by 2017.
2012E ($1.31) n.a. Arthroscopy represents upside. Omeros’ stock fell sharply when a
2013E ($1.26) n.a. Phase III trial of OMS103HP (a combination of Ketoprofen,
Amitrptyline, and Oxymetazoline) failed to hit its endpoint in a trial
evaluating its efficacy in Anterior Crucial Ligament (ACL) repair last
Omeros Corporation (OMER) year. We believe the failure may have more to do with “non-random
randomization” (for which it was impossible to control) rather than a
lack of efficacy. A Phase III trial in Meniscectomy is now underway
with a second planned to follow. The Phase II meniscectomy trial did
hit p-values, and we are hopeful that this trial will replicate those
results. However, we have not factored success into our EPS or FCF
models, so good data could provide upside to our forecast.
Omeros phase 2 clinical trial results for OMS103HP in the knee
meniscectomy surgery trial were excellent. Initially, the trial was
stopped early (at n=143 patients), still achieving statistical significance
across all three domains assessed (function, pain, and range of motion).
The functional measurement criteria – the endpoint in the
Source: Bigcharts.com (as of of May 7, 2012) meniscectomy trial (KOOS, a validated, patient-reported outcomes
measure) – was entirely different than the functional endpoint in the
Jason Kolbert (212) 895-3516 ACL trial (a set of functional tests commonly used following ACL
reconstruction). As such, comparing these trials does not make sense.
jkolbert@maximgrp.com
GPCR program: misunderstood and poorly valued by the street.
Omeros has thus far successfully unlocked 37 Orphan GPCRs; 30%–
40% of drugs today target only 46 GPCRs. Our valuation metrics for
Omeros are based on several models including FCFF, DCF EPS, and
Sum of the Parts models. These metrics all suggest a substantially
higher target (in the low $20s). We select a 20% discount rate for our
EPS and FCFF models given the high p-values that were demonstrated
in the ophthalmology trial. One critical note, however, is the inability
of these metrics to forecast the outcome of a clinical trial event. These
metrics assume a positive outcome for the second OMS302
ophthalmological surgery trial.
Maxim Group LLC 405 Lexington Avenue New York, NY 10174 – www.maximgrp.com
SEE PAGES 47 – 49 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS
2. Omeros Corporation (OMER)
CORPORATE PROFILE
Omeros Corporation (OMER)
1420 Fifth Avenue, Suite 2600
Seattle, WA 98101 Fundamental Risks:
Web Site: www.omeros.com • Outcome of the second
Senior Management: Ophthalmology clinical trial could
fail as could the Menisectomy trial.
Greg Demopulos, MD, Founder and CEO. Dr. • Company may raise capital.
Demopulos leads the team, many of whom are the same • Early stage pipeline
folks that brought Cialis to the marketplace. Dr.
Demopulos started his career as a practicing surgeon at (PLEASE SEE PAGES 40-42 FOR A MORE
Stanford University. At that time, he had a vision of the DETAILED OUTLINE OF OUR
practical application of therapeutics for better outcomes “INVESTMENT RISKS”)
as part of the surgical paradigm. This vision has now
been extended to multiple areas from ophthalmology to
arthroscopy, as well as a pipeline of robust therapeutics
that address large markets. Institutional Ownership: 10.0%
Company description. Omeros Corporation (OMER) Insider Ownership: 12.0%
has active programs in ophthalmologic, arthroscopic Shares Short: 0.4M
knee, and other related surgical procedures. The platform
is based on the application of low-dose combinations of Balance Sheet Summary: $MM
existing therapeutic agents, delivered directly to the (As of Dec 31, 2011)
surgical site throughout the duration of the procedure to Cash & Restricted Cash: $24
preemptively inhibit inflammation and other problems Long-Term Debt: $20
caused by surgical trauma. Beyond the PharmacoSurgery Quarterly Burn Rate $8
platform, the company has very active R&D efforts
focused on several blockbuster areas in CNS, such as
schizophrenia, Parkinson’s disease, and addiction. The Analysts Following the Co.: 6
company also has an active program in inflammation (its (Excluding Maxim Group)
plasmin program) with the potential to fill a hole created
when Trasylol was pulled from the U.S. markets. In
addition, OMER has a MASP-2 program with the
potential to address the same markets in which Alexion’s
(ALXN-$86.39-NR) Solaris is sold. These efforts
compliment the company’s research in its G-protein
coupled receptors (GPCR) program.
Maxim Group LLC 2
3. Omeros Corporation (OMER)
INVESTMENT SUMMARY AND CONCLUSION
We are initiating coverage of Omeros Corporation
Valuing Omeros
(OMER) with a Buy recommendation and a 12-month
on the
Ophthalmological target price of $23. Omeros is an unusual combination of
surgery program specialty pharmaceuticals and biotechnology drug
alone, we see discovery. On the specialty pharma side, we see great value
upside. in the ophthalmological surgery program. While we believe
in the arthroscopic surgery platform, we are staying on the
conservative side and not including positive results in our
FCF or EPS models.
RECENT PERFORMANCE/FINANCIAL HIGHLIGHTS
Financials. Omeros has financed operations primarily through private and public placements of
equity securities for proceeds totaling $139.2 million, as well as through two debt facilities with
loan proceeds totaling $37.0 million ($9.0 million of which was used to pay off the remaining
balance of the first facility). The GPCR program was partially monetized through a funding
agreement with Vulcan pursuant for which the company received $20.0 million in capital, as well
as an additional $5 million of funding from Washington State’s Life Sciences Discovery Fund.
As of December 31, 2011, Omeros had $24.6 million in cash, cash equivalents, and short-term
investments. Additionally, the company stands to receive a $3.0 million cash lease incentive
payment in the first quarter of 2012 related to new office space and a laboratory lease.
We expect that the company will need to raise capital again this year, presenting a potential near-
term overhang on the stock. We are modeling OMS302 to generate revenues in 2014. Several
other variables can impact the company’s need to raise capital, including the company’s ability to
out-license or partner one of the early-stage preclinical programs.
August 2010: Omeros secured a CEFF. The company secured a committed equity financing
facility (CEFF) under which it may sell up to $40 million of its shares of common stock to
Azimuth Opportunity, Ltd. (the "investor") over a 24-month period. Omeros is not obligated to
use the facility and remains free to enter into and consummate other equity, debt, and non-dilutive
financing transactions. Omeros paid Azimuth a $100,000 fee to secure the facility. Reedland
Capital Partners will act as placement agent and receive a fee for its services equal to 0.5% of the
aggregate dollar amount of common stock purchased by Azimuth upon settlement of each draw
under the facility. The actual amount of funds that can be raised under this facility will depend on
the number of shares sold under the agreement and the market value of Omeros' stock during the
pricing period of each sale.
Bull case. Omeros is highly undervalued as the market is failing to appreciate the potential value
of just OMS302 alone in Ophthalmological (lens replacement surgery) indications alone. P-values
of 0.0001, (Omeros reported p-values for both mydriasis and pain as <0.00001 but also pointed
out that p-values were even better that’s four zero’s which tell us this is not chance!). With
greater than 3.6 million cataract/lens replacement procedures in the U.S. alone (similar numbers
in Europe and twice that in the rest of the world, the potential here is great). Add in premium lens
replacement procedures ((0.6 million U.S. >0.2 Million EU, 0.4 Million rest of world (ROW))
and we see an even larger market opportunity with no competition. OMS302 promises to change
the treatment paradigm. Now factor in the value for the Arthroscopy franchise (which even
Maxim Group LLC 3
4. Omeros Corporation (OMER)
greater potential), the pipeline such as PDE7: (Addiction & Compulsive behaviors), PDE10
(Huntington’s Disease, Schizophrenia, Cognitive disorders, Parkinson’s) & Plasmin (safe
replacement for Trasylol a $500 million product a decade ago), MASP-2 Program (a more
effective version of Solaris Alexion – not rated) as well as the value of license deals associated
with the GPCR platform. All of these programs have data readouts and associated catalysts. Bulls
will see the potential for Omeros technology to be transformative powered by specialty pharma
division that can generate revenues and pay the bills.
Bear case. Omeros got into trouble right from its IPO where the stock was over-priced and fell
sharply; now two years later it’s still below its IPO price. Bears see the PharmacoSurgery
platform as fatally flawed and will be quick to point to the missed primary endpoint in the ACL
trial last year, proving that phase II data does not portend the phase III outcome, as such the phase
III ophthalmological surgery trial is an unpredictable binary event that could miss sending
Omeros stock to low single digits. Some bears will still point to a flawed factorial analysis that
presents regulatory risk (this specifically refers to the FDA’s concerns regarding a mixture of
products re-tasked for a new indication. How does the mixture compare to the individual
components in humans (i.e. rat data will not suffice for approval), however, the bears forget that
Omeros did complete a full-factorial P2 human clinical trial for OMS302. As for the earlier stage
pipeline the bears see management as misreading the value of the pre-clinical, phase 1 products in
large potential indications that require more resources than Omeros can muster. Many have tried
and failed indications like Huntington’s Disease, Schizophrenia, Cognitive disorders,
Parkinson’s. Cubist experienced a spectacular failure with Dyax’s (DYAX-$1.49-NR) Kalbitor
for CABG (as a replacement for Trasylol). The MASP-2 Program makes sense on a diagram but
that’s a long way off from having a drug. The GPCR platform sounds great but where are the big
license deals. Omeros is burning through its cash, has debt and need to raise capital before any
products can reach the marketplace. The CEFF also remains an over-hang in front of investors.
Our take. We view Omeros’ PharmacoSurgery platform as new and novel. For OMS302, we see
the outcome of the second Phase III trial as presenting relatively low clinical risk and a high
potential for rapid adoption once approved. The market may be under-appreciating the size and
scope of both the cataract surgery and refractive lens exchange (RLE) opportunities, in our
opinion. We also believe in the arthroscopy product – the OMS103HP – and are very hopeful that
the meniscectomy pivotal data will be good. With that said, we do not include any market share
in our model, making a point that Omeros can stand alone without it. We see the opportunity for
significant news flow in the year ahead. The company’s multiple drivers include OMS302
(ophthalmological surgery), OMS103HP (arthroscopy), and a lot of phase 1 data from the PDE7,
PDE10, Plasmin, and MASP programs, as well as from the G-PCR technology platform. We
acknowledge that financing risk and the CEFF may limit near-term performance, but we believe
once out of the way (likely during the next six months), the stock will rebound and surpass
current levels based on data from catalyst events. As such, we advise aggressive investors to
accumulate positions now in anticipation of the year ahead.
Maxim Group LLC 4
5. Omeros Corporation (OMER)
COMPANY OVERVIEW
Omeros was founded by Greg Demopulos, MD. As a practicing surgeon at Stanford University,
Dr. Demopulos envisioned the practical application of therapeutics for better outcomes as part of
the arthroscopic surgical paradigm. That vision has now been extended to multiple areas: The
company has active programs in ophthalmologic and arthroscopic knee surgery, and the
urological program has completed its phase II and is being evaluated. The platform is based on
the application of low-dose combinations of existing therapeutic agents delivered directly to the
surgical site throughout the duration of the procedure to preemptively inhibit inflammation and
other problems caused by surgical trauma. Beyond the PharmacoSurgery platform, the company
has very active R&D efforts in place, focused on several blockbuster areas in CNS such as
schizophrenia, Parkinson’s disease, and addiction. The company also has an active program in
inflammation. These efforts further compliment the company’s research in its G-protein coupled
receptors (GPCR) program. We expect to see positive news flow from these programs and the
GPCR platform in the years ahead, providing a longer-term value proposition beyond the
PharmacoSurgery platform.
Exhibit 1: Upcoming catalysts for OMER
Product Indication Event Tim eline Im pact
Arthroscopy
OMS103HP Menisectomy Indication PIII Menisectomy Indication US Trial- data 2H-2012 +++
OMS103HP Menisectomy Indication PIII Menisectomy Indication EU Trial Begins 1H-2013 +
OMS103HP Menisectomy Indication PIII EU Trial completes enrollment 1H-2014 +
OMS103HP Menisectomy Indication PIII EU Trial Reports Data 2H-2014 +++
OMS103HP Menisectomy Indication File for Approval 1H-2015 +
OMS103HP Menisectomy Indication Commercial launch 1H-2016 ++
OMS103HP Menisectomy Indication EU & ROW Filing 1H-2017 ++
OMS103HP Menisectomy Indication EU & ROW Commercialization 2H-2018 ++
Ophthalm ology
OMS-302 Ocular Lense Surgery Phenylephrine Phase II dose-ranging trial results 1Q-2010 COMPLETED
OMS-302 Ocular Lense Surgery PII Program Start 2H-2010 COMPLETED
OMS-302 Ocular Lense Surgery Phase III Trial (n=405) 3.2012 COMPLETED
OMS-302 Ocular Lense Surgery Data from 2nd PIII Trial (n=400) 2H-2012 +++
OMS-302 Ocular Lense Surgery File for Approval 1H-2013 +
OMS-302 Ocular Lense Surgery Commercial launch 1H-2014 ++
Urology
OMS-201 Urological Surgery Complete Phase I/II 2H-2010 COMPLETED
OMS-201 Urological Surgery Sttart Phase II/III Study 1H-2011 COMPLETED
OMS-201 Urological Surgery Continue to Next Step of Clinical Development ? tbd
Pipeline
PPAR (OMS 403) Opoid Addiction, Alcohol, Nicotine P2 Study 2012 +
MASP-2 (OMS721) Atypical Hemolytic Uremic Sundrome (aHUS) P1 Safety Study Data 1Q-2013 +
MASP-2 (OMS 616) Cardiovascular Surgery Prevention of Blood Loss (CABG) - P1 Safety Study Data 1H-2013 +
PDE10 (OMS 284) Schizophrenia P1 Safety Study Data 4Q-2012 +
PDE7 (OMS 527) Cocaine Addiction P1 Safety Study Data 1H-2013 +
GPCR Platform Identify Receptors linked to CNS Discovery & Research ongoing +
Stock Significance Scale: + of moderate importance; ++ higher level; +++ highly
Source:Maxim Forecasts and Company reports.
Maxim Group LLC 5
6. Omeros Corporation (OMER)
Omeros has an exciting pipeline: 1.) OMS824 (PDE10): schizophrenia and/or cognitive and
multiple other disorders; phase 1 data expected in 2012. 2.) OMS527 (PDE10): cocaine addiction;
phase 1 studies are expected to begin later this year. 3.) OMS616 (Plasmin): prevention of blood
loss related to cardiac surgery; phase 1 trials are expected to begin in 1H13 (efficacy equal to
Trasylol by human ex vivo data; no meaningful off-target activity at Kallikrein or factor Xia). 4.)
OMS721 (MASP-2 antibody): atypical hemolytic uremic syndrome (aHUS), PNH, AMD and
more; trials expected to begin in by 1Q13 (promising clinical candidate as the MASP-2 antibody
specifically blocks the Lectin pathway; note that MASP-2 inhibition prevents microvascular
thrombosis).
Exhibit 2: Omeros’ development pipeline (abbreviated)
Development Stage
Product
Preclinical Phase I Phase II Phase III Market
OMS-103 HP 505(B)(2):Arthroscopy: Ketoprofen/Amitriptyline/Oxymetazoline
Inflammation/Pain - Arthroscopic ACL Surgery * (program on hold)
Inflammation/Pain - Arthroscopic Meniscectomy Complete 1st PIII (2013)
OMS-302 505(B)(2) Opthalmic: Ketorolac/Phenylephrine Complete 2nd PIII (2013/4)
OMS-201 505(B)(2) Urological: Ketoprofen/Nifedipine Start P2 (?)
MASP-2 Program - IND & Move to clinic Inflammation:
Plasmin (coagulopathies) Surgery - Blood Loss
PDE7 Program Parkinson's Disease & Addiction
PPAR -γ Addiction
PDE10 Program Schizophrenia
GPCR Program - de-orphanization CNS Disordres
Source: Omeros
* Will not be pursued
Source: Maxim and Omeros
Omeros’ intellectual property. The PharmacoSurgery platform uses therapeutics that are well
known and, today, generically available. As a result, Omeros does not hold any NCE (new
chemical entity) patents. Recognizing this, the company created an extensive patent estate
focused on both composition and method of use patents, covering the combinations of products
represented in its PharmacoSurgery platform. Patent protection for OMS103HP should extend
through 2019, providing seven years of exclusivity. In addition, we expect OMS302 to be
extended out to 2023 (and, pending applications, potentially 2033) and OMS201 to 2026.
As of February 15, 2012, Omeros owned or held worldwide exclusive licenses to a total of 35
issued or allowed patents and 41 pending patent applications in the United States, as well as 134
issued or allowed patents and 144 pending patent applications in foreign markets. These patents
are related to therapeutic compositions and methods related to the company’s PharmacoSurgery
platform, GPCR program, and preclinical development programs.
The patent portfolio for the PharmacoSurgery technology is directed to locally delivered
compositions and treatment methods using agents selected from broad therapeutic classes. These
patents cover combinations of agents, generic and/or proprietary to the company or others,
delivered locally and intra-operatively to the site of any medical or surgical procedure. As of
February 15, 2012, the patent portfolio included 15 U.S. and 35 foreign issued or allowed patents,
as well as 7 U.S. and 20 foreign pending patent applications, related to the PharmacoSurgery
product candidates and development programs. The issued PharmacoSurgery patents have terms
that will expire as late as September 24, 2022 for OMS103HP and, assuming issuance of
currently pending patent applications, August 4, 2032, for OMS103HP, July 30, 2023 for
OMS302 and March 17, 2026 for OMS201. The company plans to intend to file additional patent
applications directed to OMS302 which, if issued, are expected to provide patent terms ending
2033 or later.
Maxim Group LLC 6
7. Omeros Corporation (OMER)
The initial issued patents in the PharmacoSurgery portfolio are directed to combinations of
agents, drawn from therapeutic classes such as pain and inflammation inhibitory agents, spasm
inhibitory agents, restenosis inhibitory agents, and tumor cell adhesion inhibitory agents. Omeros
expanded their initial patent position with a series of patent applications directed to what the
company believes are the key physiological and technical elements of selected surgical
procedures and to the therapeutic classes that provide opportunities to improve clinical benefit
during and after these procedures. Accordingly, the pending PharmacoSurgery patent applications
are directed to combinations of agents, drawn from therapeutic classes such as pain and
inflammation inhibitory agents, spasm inhibitory agents, vasoconstrictive agents, mydriatic
agents, and agents that reduce intraocular pressure. These are preferred for use in ophthalmologic
procedures including intraocular procedures, arthroscopic procedures, and urologic procedures
including ureteroscopy (for OMS302, OMS103HP and OMS201, respectively), as well as
covering the specific combinations of agents included in each of these product candidates.
OMS302: Ophthalmology. OMS302 is encompassed by the PharmacoSurgery patent portfolio.
The relevant patents and patent applications in this portfolio cover combinations of agents,
generic and/or proprietary to the company or others, drawn from therapeutic classes such as pain
and inflammation inhibitory agents, mydriatic agents, and agents that reduce intraocular pressure,
delivered locally and intra-operatively to the site of ophthalmological procedures, including
cataract and lens replacement surgery. As of February 15, 2012, Omeros owned one pending U.S.
Patent Application, as well as 11 issued patents and nine pending patent applications in foreign
markets (Australia, Canada, China, Europe, Hong Kong, and Japan) that cover OMS302.
OMS103HP: Arthroscopy. OMS103HP is encompassed by the PharmacoSurgery patent
portfolio. The relevant patents and patent applications in this portfolio cover combinations of
agents, generic and/or proprietary to the company or others, drawn from therapeutic classes such
as pain and inflammation inhibitory agents and vasoconstrictive agents, delivered locally and
intra-operatively to the site of medical or surgical procedures, including arthroscopy. As of
February 15, 2012, Omeros owned five issued U.S. Patents, three pending U.S. Patent
Applications, and 32 issued patents and three pending patent applications in foreign markets
(Australia, Brazil, Canada, China, Europe, Hong Kong, Japan, Mexico, Norway, Russia,
Singapore, and South Korea) that cover OMS103HP.
OMS201: Urology. OMS201 is encompassed by the PharmacoSurgery patent portfolio. The
relevant patents and patent applications in this portfolio cover combinations of agents, generic
and/or proprietary to the company or others, drawn from therapeutic classes such as pain and
inflammation inhibitory agents and spasm inhibitory agents, delivered locally and intra-
operatively to the site of medical or surgical procedures, including uroendoscopy. As of February
15, 2012, Omeros owned three issued U.S. Patents, two pending U.S. Patent Applications, and an
additional 22 issued patents and 12 pending patent applications in foreign markets (Australia,
Brazil, Canada, China, Europe, Hong Kong, India, Japan, Mexico, Norway, Russia, Singapore,
and South Korea) that cover OMS201.
PPAR γ program: OMS403. As of February 15, 2012, Omeros owned two pending U.S. Patent
Applications and 22 pending patent applications in foreign markets (Australia, Brazil, Canada,
China, Europe, India, Japan, Mexico, New Zealand, Russia, South Korea, and International Patent
Cooperation Treaty) directed to the recently discovered link between PPARg and addictive
disorders.
Maxim Group LLC 7
8. Omeros Corporation (OMER)
PDE10 program: OMS824. As of February 15, 2012, Omeros owned one issued patent and four
pending patent applications in the United States, and nine pending patent applications in foreign
markets (Australia, Canada, China, Europe, India, Japan, and New Zealand) that claim
proprietary PDE10 inhibitors.
PDE7 program: OMS527. As of February 15, 2012, Omeros owned two pending U.S. Patent
Applications, as well as one issued patent and 21 pending patent applications in foreign markets
(Australia, Brazil, Canada, China, Europe, India, Japan, Mexico, New Zealand, and Russia)
directed to the link between PDE7 and movement disorders, as well as two pending U.S. Patent
Applications and one international Patent Cooperation Treaty Patent Application directed to the
link between PDE7 and addiction and compulsive disorders. Additionally, under a license from
Daiichi Sankyo, the company exclusively controls rights to two issued U.S. Patents and one
pending U.S. Patent Application, as well as 13 issued and 11 pending patent applications in
foreign markets (Australia, Brazil, Canada, China, Europe, Hong Kong, Hungary, India, Japan,
Korea, Mexico, New Zealand, and Russia) that claim proprietary PDE7 inhibitors.
MASP-2 program: OMS721. Omeros holds worldwide exclusive licenses to rights in
connection with MASP-2, the antibodies targeting MASP-2, and the therapeutic applications for
those antibodies from the University of Leicester, Medical Research Council at Oxford
University, and Helion Biotech ApS. As of February 15, 2012, the company exclusively
controlled four issued patents and nine pending patent applications in the United States, as well as
nine issued patents and 40 pending patent applications in foreign markets (Australia, Brazil,
Canada, China, Hong Kong, Europe, India, Indonesia, Japan, Mexico, New Zealand, Russia, and
South Korea) related to the MASP-2 program.
Plasmin program: OMS616. Omeros holds worldwide exclusive licenses to a series of
antifibrinolytic agents from The Regents of the University of California. As of February 15, 2012,
the company exclusively controlled one issued patent and one pending patent application in the
United States and four pending patent applications in foreign markets (Australia, Canada, Europe,
and Japan) that are directed to these proprietary agents.
GPCR program. As of February 15, 2012, Omeros owned three issued patents and four pending
patent applications in the United States, as well as 42 issued patents and seven pending patent
applications in foreign markets (Australia, Canada, China, Europe, Hong Kong, India, Japan,
Macao, Mexico, New Zealand, and Russia), which are directed to previously unknown links
between specific molecular targets in the brain and a series of CNS disorders.
Maxim Group LLC 8
9. Omeros Corporation (OMER)
PRODUCT DESCRIPTIONS
OMS302: Ophthalmology. OMS302 is the company’s lead PharmacoSurgery platform product.
It is being developed for use during ophthalmologic procedures, including cataract and other lens
replacement surgery. It is a proprietary combination of an anti-inflammatory agent and a
mydriatic agent (which causes pupil dilation). Each component has well-known safety and
pharmacologic profiles. Like OMS103HP, the individual FDA-approved drugs containing each of
these active agents have been used in ophthalmologic clinical practice for more than 15 years, and
both agents are contained in generic, FDA-approved drugs.
Exhibit 3: Graphic representation of OMS302 being used during the cataract/refractive
Lens exchange (RLE) procedure. OMS302 represents a proprietary combination of a mydriatic
agent with an anti-inflammatory. Like OMS103HP, it will require no change to the surgical
procedure, and it will be pre-packaged in a single vial use, pre-dosed and pre-formulated. There
are estimated to be 3.6M US and 20M worldwide lens replacement procedures (in 2012),
growing at approximately 3-4% annually.
Source: Omeros
Why is mydriasis important? "Maintenance of mydriasis throughout the procedure is essential
for the safety of lens replacement surgery," states Mark I. Rosenblatt, MD, PhD, associate
professor of ophthalmology at Weill Cornell Medical College. "A constricted pupil decreases the
surgeon's operative field, which can make the procedure more difficult to perform and potentially
increases the rates of complications, including rents in the lens capsule or the retention of cortical
lens material with more frequent posterior capsular opacification or lens dislocation. And, as a
side note, the addition of pain relief from this drug combination improves the surgical experience
for the patient and assists the surgeon in pain management during the critical early postoperative
period."
Clinical data for OMS302: Ophthalmology. OMS302 is Omeros’ second most advanced
product candidate. Like OMS103HP, 302 is a proprietary combination of an anti-inflammatory
and a Mydriatic (pupil dilation) agent in a standard irrigation solution for use during ophthalmic
lens replacement surgery (cataract and refractive lens).
Phase II study results. The company recently completed a phase 2b clinical study of OMS302
(N=221-patients). Patients who were treated with OMS302 demonstrated statistically significant
(p<0.0001) and clinically meaningful maintenance of mydriasis throughout the cataract
procedure. If mydriasis is not maintained throughout the procedure, the risk of injuring structures
within the eye increases and the required operating time is often prolonged. Of equal clinical
relevance, OMS302 also significantly decreased (p=0.0418) pain in the early postoperative period
and reduced the frequency of complaints of moderate and severe pain (2.5 times more complaints
in the vehicle-treated patients). The drug product was safe and well tolerated in this study.
Maxim Group LLC 9
10. Omeros Corporation (OMER)
Phase III study: P-values significant (p<0.00001). In March, Phase III data was reported from
the pivotal trial evaluating OMS302 in patients undergoing intraocular lens replacement surgery.
OMS302 met its primary endpoint by demonstrating statistically significant (p<0.00001)
maintenance of intraoperative mydriasis (pupil dilation). OMS302 also demonstrated statistical
superiority (p<0.00001) over the placebo in reduction of pain in the early postoperative period.
The data for both endpoints are clinically meaningful.
The trial was a multi-center, double-blind evaluation of 405 patients randomized 1:1 to receive
either OMS302 or the placebo. The primary endpoint was the maintenance of intraoperative
mydriasis (pupil dilation), which is critical to the safety and surgical ease of lens replacement
surgery. Pupil constriction during surgery increases the risk of injury to intraocular structures and
can substantially prolong surgical time. In addition to statistical superiority over the placebo in
maintenance of mydriasis and the secondary endpoint of reduced postoperative pain, OMS302
achieved p values of less than 0.05 in a series of other clinically relevant measures.
The most common adverse events were those related to surgery, specifically eye pain, eye
inflammation, headache and increased intraocular pressure. The incidence of these adverse events
was similar between OMS302 and placebo-treated patients.
Exhibit 4: OMS302 Phase 3 ILR Surgery: Clinical Need for Consistent Dilation
(Intraoperative Pupillary Miosis (Constriction)
Source: Omeros
Maxim Group LLC 10
11. Omeros Corporation (OMER)
Exhibit 5: OMS302 Phase 3 ILR Surgery Intraoperative Change in Pupil Diameter (Pupil
Size Relative to Start Time of Irrigation)
Source: Omeros
Phase III results (summarized): The study showed a clinically meaningful improvement in the
maintenance of mydriasis and the prevention of miosis as well as benefits in less postoperative
pain. In fact, 590% more placebo patients compared to OMS302 patients experienced a pupil size
of < 6 mm at cortical clean-up and 70% more OMS302 patients (compared to placebo patients_
also reported no pain in the early postoperative period.
Potential advantages of OMS302: Maintain pupil dilation; ease surgical procedure; decrease
risk of surgical trauma; manage floppy iris syndrome; reduce postoperative inflammation and
pain; and improve postoperative visual acuity.
Next clinical steps for OMS302. The Second Phase 3 trial has already begun enrolling with data
expected 2H12. NDA and MAA in preparation, and submissions are expected during the first part
of 2013. Launch is expected during the first part of 2014.
Exhibit 6: OMS302 Phase 3 ILR Surgery: Mydriasis (pupil dialation) vs. Miosis (pupil
constriction)
Cortical Clean-Up Lens Implantation End
Source: Omeros
Maxim Group LLC 11
13. Omeros Corporation (OMER)
Clinical data for OMS103HP. OMS103HP has resulted in a lot of volatility for Omeros shares
and a lot of confusion regarding the efficacy of the product. The initial phase III trial (which took
several years to complete enrollment) missed its primary endpoint last year in ACL repair. As a
result, the stock fell sharply as investors lost confidence in the company and the
PharmacoSurgery platform. Since that time, the ophthalmology program has reported solid data.
Where does that leave OMS103HP? Initially being developed around anterior crucial ligament
repair of the knee and now with a failed phase III trial, investors have given up – but not the
company. Currently, OMS103HP is in a phase III trial for the repair of meniscectomy injury. In
the phase II study, significant results were reported.
Investors are acutely aware that OMS103HP missed its primary endpoint in the anterior Cruciate
ligament (ACL) phase III study last year. However, in the ACL trial, patients were evaluated by
raters comprised of physical therapists. There were imbalances observed among the physical
therapists, which created a confounding effect on the scores and subsequent results. Contrast this
with the results in the meniscectomy trial. The primary endpoint for this trial was the performance
on the symptoms domain of the Knee Injury and Osteoarthritis Outcome Score or KOOS. KOOS
is a validated patient-reported outcome measure already used in the successful Phase 2
meniscectomy trial. KOOS consists of five subscales: pain, other symptoms, function in daily
living (ADL), function in sport and recreation, and knee-related quality of life. The primary
endpoint would focus only in the “symptoms” relief reported by the patients.
Next clinical events: Phase III enrollment; data is expected 2H-2012. The U.S. trial is
expected to have data in the second half of 2012. The European trial (a combination of US & EU
sites) could begin next year. The trial was based on a phase 2 study that was vehicle-controlled,
randomized, double-blinded and a multi-center study (10 U.S. sites) with two arms: OMS103HP
and vehicle 90-day postoperative follow-up. Key endpoints included knee function, range of
motion, and pain as well as a consistent improvement over 90 day period (KOOS Outcomes
scores).
Exhibit 8: OMS302: Excellent Phase II Data: OMS103HP: Meniscectomy Trial showed
consistent improvement across all KOOS subscales.
Source: Omeros
Maxim Group LLC 13
14. Omeros Corporation (OMER)
Exhibit 9: Graphic Representation of OMS103HP Being Used During Arthroscopy: Note the
addition of OMS103HP requires no change to the surgical procedure, and it will be pre-packaged
in a single vial use, pre-dosed and pre-formulated.
The market Opportunity for meniscectomy is
significant. We assume that at least 2 mln
meniscectomy procedures performed in the US
alone in 2011. In our model, we assume no
sales in this indication for the sake of
conservatism. With that said we would
normally model a modest growth rate in the
number of procedures today (1.5%) and a
product launch in 2015 at pricing of $100 per
unit with an average of 3 units used per
procedure. Our market share assumptions
would normally include an initial share in the
low single digits (2016) rising. We should also
include “International” sales (primarily EU
based) in the future. As such, any good news
from this program is upside to the company.
Source: Omeros
Exhibit 10: Annual Revenues - Arthroscopy Model: OMS103HP
Note: We do not include these revenues in the model for the sake of conservatism and to make
the point that arthroscopy only represents upside for the company.
U.S. OMS-103HP (Meniscetomy): Knee 2012 2013 2014 2015 2016 2017
2.0 MLN "KNEE" at baseline: annual arthroscopies (2011) 2,011,952 2,043,372 2,074,018 2,103,891 2,132,995 2,161,333
Market Size Growth (Annual) 1.6% 1.5% 1.4% 1.4% 1.3%
Market Share Penetration (103-HP) 0.0% 0.0% 0.0% 2.3% 7.5% 11.5%
Number of Procedures 0 0 0 47,494 160,064 248,641
Units Per Procedure 3.0 3.0 3.0 3.0 3.0 3.0
Price per Unit $ - 0 $ - 101.1 $ 104 107
Price Growth 3% 3%
U.S. Annual Sales $ - $ - $ - $ 15 $ 50 $ 57
% Annual Growth 245% 15%
Western Europe OMS-103HP (Menisectomy): Knee 2012 2013 2014 2015 2016 2017
1.8 MLN "KNEE" at baseline: annual arthroscopies (2011) 1,905,221 1,934,675 1,963,399 1,991,395 2,018,666 2,045,216
Market Size Growth (Annual) 1.5% 1.5% 1.4% 1.4% 1.3%
Market Share Penetration (103-HP) 0.0% 0.0% 0.0% 2.3% 7.5% 11.5%
Number of Procedures 0 0 0 44,953 151,484 235,282
Units Per Procedure 3.0 3.0 3.0 3.0 3.0 3.0
Price per Unit $ - 0 $ - 101.1 $ 104 107
3% 3%
International Annual Sales $ - $ - $ - $ 14 $ 47 $ 54
Source: Maxim estimates.
Maxim Group LLC 14
15. Omeros Corporation (OMER)
OMS201: Urology. OMS201 is the company’s earliest-stage PharmacoSurgery platform product.
It is being developed for use during urological surgical procedures, including bladder endoscopy,
cystocopy, minimally invasive prostate surgery, and ureteroscopy. OMS201 consists of a
proprietary combination of an anti-inflammatory agent (ketoprofen, an NSAID) and a smooth
muscle relaxant (nifedipine, a calcium channel blocker). As is true with the more advanced
PharmacoSurgery products, the two components are generically available, FDA-approved drugs
with solid profiles.
OMS201 is intended to be delivered directly to the surgical site during uroendoscopic procedures
to inhibit surgically induced inflammation, pain, and smooth muscle spasms. Potential clinical
benefits include improved renal stone passage, the ability to facilitate the placement of a ureteral
access sheath, and the reduction of the need for ureteral stents, to reduce postoperative pain,
frequency, and dysuria.
Exhibit 11: The Ureteroscopic Procedure: The physician passes an ureteroscope through the
urethra and bladder into the ureter. The physician pilots the scope through the ureter until it
reaches the target (in this diagram, a kidney stone). No cuts are made in the body.
Source: http://www.med.nyu.edu/cgi-bin/healthwise/healthwise.cgi?popup=1&hwid=zm6114
The benefits of OMS201. A key benefit of OMS201 is the prevention or inhibition of the
surgically induced inflammation and smooth muscle spasm that is often seen during these
procedures, complicating them. In fact, surgeons routinely place uretal stents in patients
following ureteroscopy to prevent ureteral strictures and occlusion. Many surgeons commonly
place an uretal access sheath (UAS) to protect the lining of the urethra and ureter. OMS201 could
facilitate the placement of the UAS by reducing the inflammation associated with the procedure,
which then reduces downstream surgical complications, such as the placement of uretal stents.
Maxim Group LLC 15
16. Omeros Corporation (OMER)
Clinical Data of OMS201: Urology
In 2008, Omeros conducted a Phase I study on OMS201. The study was a randomized, double-
blind, vehicle controlled and parallel-assigned trial to evaluate the systemic absorption and safety
of patients receiving primary treatment for endoscopic removal of urinary stones. The results
demonstrated minimal absorption levels of drugs (systemically) with no serious events. The data
from this trial then led to a second more advanced Phase I/II trial, which found that OMS201 was
safe and well tolerated in the study. The incidence of adverse events was similar in the two
OMS201-concentration arms and the group receiving the vehicle. No adverse events were
considered treatment-related by investigators. There were no deaths or discontinuations for
adverse events. Only one serious adverse event was reported, and it occurred in a vehicle-treated
patient.
The trial also gave some insight into which endpoint might be used in a larger study, such as
“directed to ease surgery,” including the size of the uretal access sheath (UAS) that can be used
during the surgical procedure, the time to complete the procedure, and the overall surgical
outcome (during the first post-operative week), post-operative pain, pain medications used, and
lower urinary tract symptoms.
For now, the program is on hold as the company evaluates its financial resources and prioritizes
the most promising programs.
COMPETITION
The pharmaceutical industry is highly competitive and characterized by a number of established,
large pharmaceutical companies, as well as smaller companies like Omeros. With that said, we
are not aware of any products that directly compete with Omeros PharmacoSurgery product
candidates that are approved for intra-operative delivery in irrigation solutions during surgical
procedures. It is expected that the company’s PharmacoSurgery product candidates could
compete with preoperative and postoperative treatments for mydriasis, pain, and inflammation. If
approved, Omeros expects that the primary constraint to market acceptance of the
PharmacoSurgery product candidates will be surgeons who continue with their respective current
treatment practices and do not adopt the use of these product candidates, as well as the level of
reimbursement surgeons receive for the administration of these product candidates. It is also
important to note that premium ILRs (lens replacements) do not rely on insurance reimbursement
and tend to be out of pocket.
The company’s clinical and preclinical product candidates face competing products. For example,
in the PDE10 inhibitors space (for use in the treatment of schizophrenia and other diseases that
affect cognition) there are others in development. On the Plasmin front, Bayer HealthCare
Pharmaceuticals is currently authorized to market Trasylol® in Canada for patients undergoing
coronary artery bypass graft surgery, and any product Omeros develops in this space for such
indication would directly compete with Trasylol® in Canada as well any other countries in which
Trasylol® is authorized to be marketed. We also know that there are other companies attempting
to de-orphanize orphan GPCRs. If any of these companies is able to de-orphanize an orphan
GPCR before Omeros, it may be difficult to establish an exclusive or commercially valuable
intellectual property position around that orphan GPCR.
Maxim Group LLC 16
17. Omeros Corporation (OMER)
TECHNOLOGY PLATFORM AND PIPELINE
Preclinical and discovery programs: MASP-2. Omeros is developing MASP-2 (Mannan-
binding lectin Associated Serine Protease-2) antibody therapy, OMS721. MASP-2 represents a
novel pro-inflammatory protein target present in the complement system. MASP-2 is downstream
of MBL in the lectin-complement pathway and upstream of the C2-C5 cascade. Omeros believes
that MASP-2 plays a significant role in macular degeneration, ischemia reperfusion injury,
transplant surgery, and renal disease, as well as aHUS, PNH, TTP and HUS.
Exhibit 12: Graphic Representation of the Lectin-Induced Complement Pathway
Source: Biocarta: Lectin Induced Complement Pathway
The complement cascade of proteolytic factors involved in cellular lysis can be initiated by
several different factors, including antibody-dependent and antibody-independent recognition of
infectious organisms (see classical and alternative complement pathways). In the lectin-induced
complement cascade, carbohydrates on the surface of microbial cells activate the complement
cascade by binding to mannan-binding lectin (also called the mannan-binding protein, Mbl/Mbp).
Mbp is an acute phase serum protein whose expression is induced by microbial infection. The
binding of Mbl to microbial ligands activates the Mbl associated serine proteases MASP-1 and
MASP-2, triggering the cleavage of C2 and C4 to create C4bC2a, a C3 convertase that cleaves
large numbers of C3. MASP-1 and MASP-2 are similar to the C1 protease in the classical
complement pathway. Once formed the C3 convertase cleaves and activates the remaining
complement factors leading ultimately to formation of a pore in the bacterial membrane by the
membrane attack complex (MAC) that lyses the bacterial cell. The lectin-induced pathway also
appears to play an important role in the activation of phagocytotic cells by infection. Although the
initiating event activating the complement cascade is distinct in the lectin-induced pathway, from
the C3 convertase onward the lectin induced complement pathway is the same as the classical
complement pathway. Since antibodies are not required in the lectin-induced pathway, this aspect
of the immune response is part of the innate immune response. The importance of this pathway to
the immune response has been demonstrated by the identification of children and adults with little
or no Mbl who lacked normal phagocytotic responses and are highly susceptible to infection.
Maxim Group LLC 17
18. Omeros Corporation (OMER)
Exhibit 13: Early Experiments in Mouse Models of Age-Related Macular Degeneration
Suggest MASP-2 Plays a Pivotal Role. Systemic administration of MASP-2 antibodies to mice
produced a dose-dependent reduction of the growth of blood vessels with a maximal effect of a
50% inhibition of CNV (choroidal neovascularization).
Choroidal VEGF Induction
Neovascularization (CNV)
Source: Omeros
Exhibit 14: Effect of a Single Dose of Systemically Delivered MASP-2 Antibody on
Laser-Induced Choroidal Neovascularization (CNV). MASP-2 antibody (1mg/kg) reduced
choroidal neovascularization in the mouse model of AMD (Newman-Keuls; p < 0.01)
Source: Omeros
Maxim Group LLC 18
19. Omeros Corporation (OMER)
Exhibit 15: The Myocardial Ischemia-Reperfusion (MIRP) Injury Mouse Model Also
Suggests MASP-2 Is Highly Active.
Source: Omeros
The potential of the Omeros MASP-2 antibody is significant, in our opinion. MASP-2 is the only
protein unique to, and required for, the function of the lectin complement pathway. This science
relates directly to the immune response (classical pathway, alternative pathway, and the lectin
dependent pathway). Omeros compares MASP-2 to Alexion’s Soliris (see the next exhibit).
Exhibit 16: Only One Complement Agent on the Market Today: Soliris (eculizumab).
Soliris is a humanized monoclonal antibody that blocks the activation of terminal complement at
C5, preventing the formation of C5a and the terminal complement complex, C5b-9. On the
mechanism of action slide below, note that OMS721 works upstream of Soliris in this pathway.
Source: Omeros & Hematology, October 2007; 12(5): 371-376
Maxim Group LLC 19
20. Omeros Corporation (OMER)
Exhibit 17: Mechanism of Action for OMS721: A Human Monoclonal Antibody that Inhibits
MASP-2 and Blocks the Lectin Pathway of Complement
Source: Omeros
Soliris (eculizumab). Soliris is the brand name for the antibody eculizumab, which is currently
approved in the United States and Europe, as well as a number of other major markets for the
treatment of the rare blood disorder paroxysmal nocturnal hemoglobinuria (PNH). Since initial
commercialization in 2007, Soliris has generated over $400 million in worldwide sales – and
sales are still growing. Soliris is one of the most expensive commercially approved drugs at
approximately $400,000 per patient per year. The drug works by targeting a component of the
immune system that causes PNH and is administered as a 35-minute intravenous infusion. Dosing
begins at 600 mg every week for four weeks followed by 900 mg every two weeks.
The first series of clinical studies of eculizumab was in patients with rheumatoid arthritis, and in
patients with lupus nephritis as far back as 1998. A series of other indications (including
membranous nephritis, psoriasis, dermatomyositis and bullous pemphigoid), was examined over
the years. The most compelling clinical results came in studies of patients with PNH, a rare
blood disorder in which the host immune system attacks red blood cells (RBCs). This program
took precedent over other indications and eventually led to Soliris’ approval. Today, Soliris has
changed the treatment paradigm for patients with PNH.
This success of Soliris creates an interesting question: What is the value of the Omeros
MASP-2 program? In comparison to Soliris, MASP-2 acts at the top of the lectin-dependent
pathway and has no interference with the classical pathway (antibody-dependent classical
complement activation). Indications for MASP-2 range from age-related macular degeneration
(AMD) to ischemia reperfusion injury (which typically follows organ transplant, myocardial
infarction, coronary artery bypass grafts, aortic aneurysm repair, stroke, and gastro-intestinal
vascular injury as well as aHUS, PNH, TTP and HUS). Other favorable attributes relate to the
potential to deliver MASP-2 antibodies systemically, a therapeutic potential at a low effective
dose, and a low cost of goods. A MASP-2 candidate (OMS721) has been selected for clinical
development this year (2012).
Maxim Group LLC 20
21. Omeros Corporation (OMER)
Plasmin program: OMS-616 antifibrinolytic agent: Omeros is developing an antifibrinolytic
agent for the control of blood loss during surgery or resulting from trauma. Excessive bleeding
during cardiac surgery is known to increase overall morbidity and mortality. In an attempt to
control this bleeding, patients undergoing cardiac and other extensive surgery often receive
antifibrinolytic compounds. These drugs inhibit plasmin, an enzyme present in blood that
degrades fibrin clots. Because plasmin degrades fibrin clots, an agent that inhibits plasmin may
have potential utility for reducing blood loss due to trauma or surgery.
Prior to withdrawal from the market in 2008 for safety concerns, the antifibrinolytic Trasylol
(aprotinin) had been shown in a number of studies to be more effective at reducing blood loss
than the other two most commonly used antifibrinolytics on the market today, tranexamic acid
and epsilon aminocaproic acid. While Trasylol is a potent inhibitor of plasmin, it is non-selective.
In addition to plasmin, it significantly inhibits kallikrein and Factor XIa, two enzymes important
in promoting clotting, and their inhibition can increase bleeding. Trasylol was found to be
associated with a number of safety issues, including increased mortality. Further, it is a bovine
protein associated with anaphylactic reactions. While the specific cause of increased death
remains unknown, an often-cited explanation is the lack of specificity of Trasylol.
Omeros’ proprietary agents also inhibit plasmin but, unlike Trasylol, they do not significantly
inhibit kallikrein and Factor XIa. Additionally, these agents are derived from human protein,
which may reduce immunological side effects. The properties of these proprietary agents are
described in a peer-reviewed article titled "Engineering Kunitz Domain 1 (KD1) of Human Tissue
Factor Pathway Inhibitor-2 to Selectively Inhibit Fibrinolysis: Properties of KD1-L17R Variant"
that was published in the February 11, 2011 issue of the Journal of Biological Chemistry. We
believe the efficacy and improved selectivity of these agents can provide a novel approach to the
control of bleeding from surgery and trauma.
Next Steps: Manufacturing scales up and the potential start of a phase 1 trial by 1H-2013.
Exhibit 18: OMS616 Is a Potent Inhibitor of Plasmin. It is a single amino acid mutation of the
first Kunitz domain (KD1) of tissue factor pathway inhibitor 2 (TFPI-2). It is believed to be
highly selective and a potent inhibitor of plasmin activity and selectivity significantly reduces off-
target inhibition of kallikrein and Factor XIa and associated anticoagulant activity. It is a
significantly more selective antifibrinolytic agent than Trasylol.
Source: Omeros
Maxim Group LLC 21
22. Omeros Corporation (OMER)
Exhibit 19: OMS616 Comparison with Other Antifibrinolytics
Source: Omeros
Exhibit 20: OMS616 Inhibits Plasmin with Potency Equal to Trasylol (top charts) and Is
Selective for Plasmin (bottom charts).
Source: Omeros
Maxim Group LLC 22
23. Omeros Corporation (OMER)
Central Nervous System Programs
Addiction programs: (PPAR-γ (OMS403)/PDE7 inhibitors (OMS527). Omeros is developing
proprietary compositions that include PPAR-γ (peroxisome proliferators-activated receptor) for
the treatment and prevention of addiction to substances such as opioids, nicotine, alcohol, and
amphetamines, as well as other compulsive behaviors. OMS403 is such a candidate. PPARγ is
expressed in adipose tissue, macrophages, brain tissues (lateral hypothalamus, paraventricular
nucleus of the hypothalamus, arcuate nucleus, and ventral tegmental area). This link between
PPAR-γ and substance abuse was previously unknown and, as such, the company has filed patent
applications claiming the use of PPAR-γ agonist alone and in combination with other agents.
A pre-clinical rat model of alcohol and nicotine addiction demonstrated that administration of a
PPAR agonist significantly reduced the voluntary intake of alcohol and nicotine, stress-induced
relapse to alcohol and nicotine seeking behavior, and the associated withdrawal symptoms.
Exhibit 21: PPAR-γ Agonist in Animal Model of Alcohol Addiction
Alcohol Intake
7 Vehicle
6 PPa 30mg/kg
Ethanol Intake (g/kg)
5
4
* *
* * * *
*
1 N: 9 msP rats/group
*P<0.05; **P<0.01
0 8
0 1 2 3 4 5 6 7
Days
Source: Omeros
European pilot study design – alcohol addiction: The trial is a three-arm (four patients per
arm), 11-month-long, open label study. Arm 1: 30mg/day pio; Arm 2: 50mg/day naltrexone; Arm
3: counseling. Patients were matched for age, status, education, and alcohol addiction years. An
AUDIT (Alcohol Use Disorders Identification Test) score was used.
Results:
• Arm 1: Complete abstinence after three months of treatment. All four patients are no
longer receiving the drug, but they are under counseling. After more than five months
into this “pioglitazone-free” phase, all remain abstinent. Amelioration of co-morbid
depression and anxiety was seen. All patients were compliant (four patients in treatment
for 11 months).
• Arm 2: Two patients failed to reach abstinence, and they were switched to
gammahydroxybutirrate (substitution therapy). The other two individuals dropped out of
the study between weeks 22 and 24.
• Arm 3: No significant reduction of daily ethanol consumption and craving for alcohol.
All subjects dropped out of the study after the initial two months.
Maxim Group LLC 23
24. Omeros Corporation (OMER)
Exhibit 22: PPARγ Agonist Administration Study in Rats. The results showed a reduction of
nicotine self-administration, a reduction of stress-induced relapse to nicotine seeking, and a
reduction of nicotine withdrawal symptoms.
Nicotine self-administration
30
Number of responses (2hr)
25
N: 9 Long Evans rats/group
20
*P<0.05
15
*
10
5
0
Veh PPa 30mg/kg
Source: Omeros
European pilot study design – nicotine addiction: The trial consists of three groups with three
to four patients in each group. Patient-entry criteria includes that the patients were smoking, on
average, 30 cigarettes/day for over 23 years. Three arm study: PPARγ agonist: Four patients,
15mg/day (1st month); 30mg/day (2nd month) versus Varenicline (VAR: Chantix): Three
patients, dose titrated from 0.5 to 2.0 mg/day and versus Bupropion: Three patients, 150 mg/kg.
The outcome following two months of treatment: Smoking cessation was achieved in both the
PPa and VAR groups; however, the PPA group showed none of the side effects associated with
VAR.
Exhibit 23: Smoking cessation was achieved in both the PPa and VAR groups
Smoking Reduction (%)
P1 P2 P3 P4
PPa 100 98 96 75
VAR 100 94 93
BUP 40 45 DO*
Source: Omeros * patient dropped out
Maxim Group LLC 24
25. Omeros Corporation (OMER)
Exhibit 24: OMS527’s Efficacy in an Animal Model of Parkinson’s Disease of a PDE7
Inhibitor. This shows that a representative PDE7 inhibitor is equally effective as (and greater
than 50x more potent to) L-DOPA. Sub-therapeutic doses of both a PDE7 inhibitor and L-DOPA
in combination resulted in efficacy greater that the expected sum of the effects of the individual
agents, demonstrating the potentiation of L-DOPA’s effect.
7.50
7.00
Stride 6.50
Length
(Cm)
6.00
5.50
5.00
Control MPTP 1mg / kg 5mg / kg 0.01mg / kg 0.05mg / kg 0.1mg / kg Theoretical 1mg / kg
L-DOPA L-DOPA OMS181869 OMS181869 OMS181869 Additive L-DOPA +
1mg / kg 0.05mg / kg
L-DOPA + OMS181869
0.05mg / kg
OMS181869
Potentiates
50 to 100x More Potent Than AND
Its Activity
L-DOPA
Source: Omeros
In a murine (MPTP) model, mice are trained to walk across a sheet of paper with inked paws
and stride length is measured. MPTP administration causes extensive damage in dopaminergic
neurons. Following administration of MPTP, stride length is measurably decreased. Stride length
is fully restored by clinically effective agents (L-DOPA, dopaminergic agonists). Stride length is
fully restored by PDE7 inhibitors (five distinct chemical classes), including Omeros’ lead
compound PDE7 inhibitors also enhancing the effect of low dose L-DOPA.
Exhibit 25: OMS527 May Have Utility in Parkinson’s (PDE7 inhibition restores stride length).
Source: Omeros
PDE7 inhibitors may provide an alternative to L-DOPA or related drugs, or they may allow dose
reduction of these drugs, reducing the associated side effects. The Michael J Fox foundation is
supporting this research. In exchange, the foundation receives access to data.
Maxim Group LLC 25
26. Omeros Corporation (OMER)
Exhibit 26: OMS527 for Addiction: Heroin Acquisition in Animal Model. The figure on the
left demonstrates the effects of treatment with OMS824 (PPARγ) in rats. The untreated group
continued to self-administer heroin, while the treated group showed complete ablation of heroin
acquisition. The figure on the right demonstrates a positive control. The same animals tested for
heroin acquisition were tested for self-administration of food. The PPARγ did not affect the
animal’s food acquisition. As such, we can conclude that the agonists effect in heroin reduction
was not a result of cognitive, memory or function impairments.
Heroin self-administration Food self-administration
150
200 Pre-treatment Treatment
*
Num ber of rewards (30 min)
*
* 150
mg of heroin/rat
100 *
* *
* *
100
* 1 2 3 4
50
Treatment day
50
0
0 1 2 3 4 5 6 7 8
0
Day 0 1 2 3 4 5 6 7 8
N: 10 Wistar rats/group Vehicle N: 10 Wistar rats/group
Day
OMS182428 *P<0.05; **P<0.01
*P<0.05; **P<0.01
Source: Omeros
Exhibit 27: Chronic Effect of PDE7 Inhibition on Cocaine Self-Administration. Data
supports that chronic PDE7 inhibition reduces cocaine self-administration.
Source: Omeros
Maxim Group LLC 26
27. Omeros Corporation (OMER)
Exclusive license agreement with Daiichi Sankyo. Under an agreement with Daiichi Sankyo
Co., Ltd. (DSKYF-NR $16.98) (successor-in-interest to Asubio Pharma Co., Ltd.) Omeros holds
an exclusive license to PDE7 inhibitors claimed in certain patents and pending patent applications
owned by Daiichi Sankyo for use in the treatment of movement disorders and other specified
indications, such as the treatment of addiction and compulsive disorders. Under the agreement,
Omeros will make milestone payments to Daiichi Sankyo of up to an aggregate total of $30.2
million upon the achievement of certain events. However, if only one of the two target indications
advanced through the milestones, the total milestone payments are less ($23.5 million). The
milestone payment events include successful completion of preclinical toxicology studies; dosing
of human subjects in Phase 1, 2 and 3 clinical trials; receipt of marketing approval of a PDE7
inhibitor product; and reaching specified sales milestones. In addition, Daiichi Sankyo is entitled
to receive from the company a low single-digit percentage royalty of any net sales of a PDE7
inhibitor licensed under the agreement by Omeros or its sublicensee(s), provided that if the sales
are made by a sublicensee, then the amount payable by us to Daiichi Sankyo is capped at an
amount equal to a low double-digit percentage of all royalty and specified milestone payments
received by Omeros from the sublicensee.
Next clinical steps. The company selected OMS527 in cocaine addiction to move forward into
the clinic. Phase 1 data is now expected in 1H13. We note that there are currently no approved
therapies to treat cocaine addiction. As you can tell from the previous series of pre-clinical data,
Omeros believes that the PDE7 target broadly controls addiction disorders and compulsive
behaviors. In addition, Omeros will also conduct a phase 1 study in patients with Parkinson’s
disease and collect “finger-tapping” efficacy data. If positive, the plan is to advance clinical
development (in Parkinson’s disease).
PDE10 Program: (OMS824)
Treatment of schizophrenia and cognitive disorders. PDE10 is an enzyme that is expressed in
areas of the brain that are strongly linked to schizophrenia and other psychotic disorders.
Preclinical studies have shown that PDE10 inhibitors may address some of the limitations of
currently used anti-psychotic drugs, such as weight gain, improved cognition, and a reduced risk
of sudden cardiac death. Omeros acquired the PDE10 program as part of the Nura acquisition
(2006). Pre-clinical development of this program is supported by funds from the Stanley Medical
Research Institute (SMRI). Should a product be commercialized, the company will pay royalties
back to SMRI to a maximum capitated amount.
Funding agreement with The Stanley Medical Research Institute. Omeros development is
supported by funds from The Stanley Medical Research Institute, or SMRI, a non-profit
corporation that supports research on the causes and treatment of schizophrenia and bipolar
disorder. Under the agreement, Omeros receives grant and equity funding upon achievement of
product development milestones through Phase 1 clinical trials totaling $9.0 million, subject to
the mutual agreement with SMRI. Through December 31, 2011, Omeros had received $5.7
million from SMRI, $3.2 million of which was recorded as equity funding and $2.5 million of
which was recorded as revenue. Omeros also agreed to pay royalties to SMRI based on any net
income the company receives from sales of a PDE10 product. Based on the amount of grant
funding received as of December 31, 2011, the maximum amount of royalties payable to SMRI
was $12.8 million.
Maxim Group LLC 27
28. Omeros Corporation (OMER)
Exhibit 28: PDE10: A Replacement for Atypical Antipsychotics with Reduced Side Effects
Prepulse Inhibition (%)
90
80 Vehicle
70 PDE10 Inhibitor
60
50
40
30
20
10
0
73 dB 76 dB 79 dB 82 dB
Prepulse Levels
Source: Omeros
… WITHOUT the Side Effects
% of Initial Weight % of Time Exploring Novel Object
104 75
102
70
100
Increased
No Body 98 65
Cognition:
Weight 96 60
94 Novel Object
Increase
92 Recognition 55
90 50
88
45
86
84 40
Vehicle PDE10 Inh Olanzapine Vehicle PCP PCP PCP
PDE10 Inh Olanzapine
Source: Omeros
A rational for PDE10 in Huntington’s disease. It appears as though PDE10 is expressed in
brain regions that are relevant to disorders involving striatum and cortico-striatal signaling.
PDE10 inhibition in vivo increases striatal cGMP and enhances cortico-striatal glutamatergic
transmission. PDE10 inhibitors are effective in models of cognitive disorders involving fronto-
striatal signaling.
They appear to:
• Reverse phencyclidine (PCP) disruption of attentional set shifting
• Reverse PCP disruption of novel object recognition (NOR)
• Reverse PCP disruption of auditory gating (pre-pulse inhibition)
• Reduce PCP-induced hyperactivity
• Reduce conditioned avoidance response (CAR)
PDE10 inhibitors prolong survival and delay the signs and symptoms in the R6/2 Huntington’s
model.
Maxim Group LLC 28
29. Omeros Corporation (OMER)
Exhibit 29: PDE10 is Expressed in Caudate Nucleus and Putamen. It is expressed most
prominently in the cell bodies and terminals of striatal medium spiny neurons (human, monkey,
dog, rat, mouse). Immunohistochemistry shows staining of rat striatum and globus pallidus and of
nerve terminals in rat substantia nigra pars reticulate.
Source: Coskran et al. J Histochem Cytochem. (2006); 54(11):1205-1213.
Exhibit 30: TP10 Significantly Prolongs Survival in the R6/2 Model of Huntington’s Disease
(p < 0.0001). The development of the clasping sign is also delayed (*p < 0.01), while the decline
in body weight is not affected (not shown). Open field activity is significantly preserved (not
shown).
Source: Giampa et al. PLoS ONE. 2010; 5(10): e13417. doi:10.1371.
Next steps. PDE10 inhibition could expand efficacy and improve safety for the treatment of
schizophrenia, Huntington’s disease, and cognitive disorders. Omeros has identified lead
compounds that possess a high target potency and selectivity, oral efficacy, a favorable PK with
no significant off-target interactions, and no initial toxicology concerns. IND-enabling studies are
ongoing. Huntington’s disease may be the lead indication. The compound scale up is complete
and GMP clinical material production is underway. We anticipate Phase 1 data later this year.
Maxim Group LLC 29
30. Omeros Corporation (OMER)
PHARMACEUTICAL LANDSCAPE & OPPORTUNITY FOR OMEROS
A substantial proportion of medicines prescribed in the clinic today by physicians target G-
Protein Coupled Receptors (GPCRs), mostly discovered before the advancements in technology
as well as molecular biology. GPCRs play a significant role in many essential physiological
processes. They have been linked to regulation of behavior and mood through GPCRs found in
the brain, inflammation through receptors in the immune system, and metabolic processes, among
others. The majority of drug development is focused on discovering chemical compounds that
influence the ability of the ligand to bind with the GPCR, in effect inhibiting or accelerating
intracellular processes. The high degree of specificity and affinity associated with GPCRs has
contributed to them becoming the largest family of drug targets against a variety of diseases. It is
estimated that worldwide annual drug sales in 2007 exceeded $700B, with more than $50B being
spent on drug R&D. According to Insight Pharma Reports, of the 324 total targets for marketed
drugs, 46 are GPCRs and they account for 30-40% of all drugs sold worldwide.
Exhibit 31: List of GPCR-Targeting Drugs
Class Drug Indication
Adrenoreceptor
Alpha-1 Hytrin, Alfuzosin Benign prostatic hyperplasia, High blood pressure
Alpha-2 Catapres High blood pressure
Zebeta, Brevibloc, Kerlone, Sectral,
Toprol
Beta-1 XL, Lopressor, Tenormin High blood pressure
Beta-2 Ventolin, Albuterol Asthma/bronchospasm
Inderal, Corgard, Blocadren, Levatol,
Betapace, Visken, CoReg, Normodyne,
Beta-1/Beta-2 Trandate High blood pressure
Calcitonin Calcimar Osteoporosis
Dopamine
D2 Reglan Heartburn, Slow gastric emptying
D2 Haldol, Zyprexa Schizophrenia
D2 Requip, Mirapex Parkinson’s disease, Restless legs syndrome
D1/D2 L-dopa (Sinemet) Parkinson’s disease, Restless legs syndrome
Histamine
H1 Claritin, Zyrtec, Seldane Allergies
H1 Dramamine Motion sickness
H2 Tagamet, Zantac Heartburn/Ulcers
Serotonin (5-HT)
5-HT1B Desyrel Anxiety, Depression
5-HT1D Imitrex Migraine headaches
Opioid
Mu Morphine, Codeine, Fentanyl, Pain
Meperidine
Mu/Kappa Oxycontin, Percodan Pain
CysLT1 Montelukast (Singulair) Asthma
Endothelin Receptor Letaris, Bosentan Pulmonary artery hypertension
Acetylcholine Receptors
M1, M2, M3, M4 and M5 Tolterodine Overactive bladder
M1, M2, M3, M4 and M5 Atropine Poisoning
M1 Scopolamine Motion sickness, Diarrhea
Angiotensin II receptor Losartan, Valsartan Congestive heart failure
GLP-1 Byetta Type 2 diabetes
Somatostatin Receptors Octreotide Acromegaly, Tumors
Prostaglandin E2 receptors Misoprostol Gastric ulcers
Source: Omeros
Maxim Group LLC 30