EQUITY RESEARCH                                                                                                        INI...
Omeros Corporation (OMER)                                        CORPORATE PROFILEOmeros Corporation (OMER)1420 Fifth Aven...
Omeros Corporation (OMER)                   INVESTMENT SUMMARY AND CONCLUSION                                      We are ...
Omeros Corporation (OMER)greater potential), the pipeline such as PDE7: (Addiction & Compulsive behaviors), PDE10(Huntingt...
Omeros Corporation (OMER)                                                                    COMPANY OVERVIEWOmeros was fo...
Omeros Corporation (OMER)Omeros has an exciting pipeline: 1.) OMS824 (PDE10): schizophrenia and/or cognitive andmultiple o...
Omeros Corporation (OMER)The initial issued patents in the PharmacoSurgery portfolio are directed to combinations ofagents...
Omeros Corporation (OMER)PDE10 program: OMS824. As of February 15, 2012, Omeros owned one issued patent and fourpending pa...
Omeros Corporation (OMER)                                 PRODUCT DESCRIPTIONSOMS302: Ophthalmology. OMS302 is the company...
Omeros Corporation (OMER)Phase III study: P-values significant (p<0.00001). In March, Phase III data was reported fromthe ...
Omeros Corporation (OMER)Exhibit 5: OMS302 Phase 3 ILR Surgery Intraoperative Change in Pupil Diameter (PupilSize Relative...
Omeros Corporation (OMER)Exhibit 7: OMS302 Annual Revenue Model: (Please see our model assumptions later in this report). ...
Omeros Corporation (OMER)Clinical data for OMS103HP. OMS103HP has resulted in a lot of volatility for Omeros sharesand a l...
Omeros Corporation (OMER)Exhibit 9: Graphic Representation of OMS103HP Being Used During Arthroscopy: Note theaddition of ...
Omeros Corporation (OMER)OMS201: Urology. OMS201 is the company’s earliest-stage PharmacoSurgery platform product.It is be...
Omeros Corporation (OMER)Clinical Data of OMS201: UrologyIn 2008, Omeros conducted a Phase I study on OMS201. The study wa...
Omeros Corporation (OMER)                            TECHNOLOGY PLATFORM AND PIPELINEPreclinical and discovery programs: M...
Omeros Corporation (OMER)Exhibit 13: Early Experiments in Mouse Models of Age-Related Macular DegenerationSuggest MASP-2 P...
Omeros Corporation (OMER)Exhibit 15: The Myocardial Ischemia-Reperfusion (MIRP) Injury Mouse Model AlsoSuggests MASP-2 Is ...
Omeros Corporation (OMER)Exhibit 17: Mechanism of Action for OMS721: A Human Monoclonal Antibody that InhibitsMASP-2 and B...
Omeros Corporation (OMER)Plasmin program: OMS-616 antifibrinolytic agent: Omeros is developing an antifibrinolyticagent fo...
Omeros Corporation (OMER)Exhibit 19: OMS616 Comparison with Other AntifibrinolyticsSource: OmerosExhibit 20: OMS616 Inhibi...
Omeros Corporation (OMER)Central Nervous System ProgramsAddiction programs: (PPAR-γ (OMS403)/PDE7 inhibitors (OMS527). Ome...
Omeros Corporation (OMER)Exhibit 22: PPARγ Agonist Administration Study in Rats. The results showed a reduction ofnicotine...
Omeros Corporation (OMER)Exhibit 24: OMS527’s Efficacy in an Animal Model of Parkinson’s Disease of a PDE7Inhibitor. This ...
Omeros Corporation (OMER)Exhibit 26: OMS527 for Addiction: Heroin Acquisition in Animal Model. The figure on theleft demon...
Omeros Corporation (OMER)Exclusive license agreement with Daiichi Sankyo. Under an agreement with Daiichi SankyoCo., Ltd. ...
Omeros Corporation (OMER)Exhibit 28: PDE10: A Replacement for Atypical Antipsychotics with Reduced Side Effects       Prep...
Omeros Corporation (OMER)Exhibit 29: PDE10 is Expressed in Caudate Nucleus and Putamen. It is expressed mostprominently in...
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Maxim Group initiates coverage of Omeros Corporation with a Buy
Rating and a 12-month price target of $23.

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Omer initiation

  1. 1. EQUITY RESEARCH INITIATIONBiotechnology Initiation BuyMay 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 Buy52-Week Range: $3.00-$11.00 Rating and a 12-month price target of $23. Omeros is a uniqueMarket 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): 22.4Float (MM): 13.9 Ophthalmological surgery, OMS302, is the major driver. OMS302Avg. Vol. (000) 107 is made up of two components – phenylephrine and ketorolac – addedDebt (M) $20 to the standard irrigation solution used during intraocular lens replacement procedures to maintain intraoperative mydriasis (pupilDividend/Yield: $0.00/0.00% dilation) and reduce postoperative pain. A phase III trial met itsRisk 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 theSource: 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 theJason 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. 2. Omeros Corporation (OMER) CORPORATE PROFILEOmeros Corporation (OMER)1420 Fifth Avenue, Suite 2600Seattle, WA 98101 Fundamental Risks:Web Site: www.omeros.com • Outcome of the secondSenior 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 pipelinefolks that brought Cialis to the marketplace. Dr.Demopulos started his career as a practicing surgeon at (PLEASE SEE PAGES 40-42 FOR A MOREStanford University. At that time, he had a vision of the DETAILED OUTLINE OF OURpractical application of therapeutics for better outcomes “INVESTMENT RISKS”)as part of the surgical paradigm. This vision has nowbeen extended to multiple areas from ophthalmology toarthroscopy, as well as a pipeline of robust therapeuticsthat address large markets. Institutional Ownership: 10.0%Company description. Omeros Corporation (OMER) Insider Ownership: 12.0%has active programs in ophthalmologic, arthroscopic Shares Short: 0.4Mknee, and other related surgical procedures. The platformis based on the application of low-dose combinations of Balance Sheet Summary: $MMexisting therapeutic agents, delivered directly to the (As of Dec 31, 2011)surgical site throughout the duration of the procedure to Cash & Restricted Cash: $24preemptively inhibit inflammation and other problems Long-Term Debt: $20caused by surgical trauma. Beyond the PharmacoSurgery Quarterly Burn Rate $8platform, the company has very active R&D effortsfocused on several blockbuster areas in CNS, such asschizophrenia, Parkinson’s disease, and addiction. The Analysts Following the Co.: 6company also has an active program in inflammation (its (Excluding Maxim Group)plasmin program) with the potential to fill a hole createdwhen Trasylol was pulled from the U.S. markets. Inaddition, OMER has a MASP-2 program with thepotential to address the same markets in which Alexion’s(ALXN-$86.39-NR) Solaris is sold. These effortscompliment the company’s research in its G-proteincoupled receptors (GPCR) program.Maxim Group LLC 2
  3. 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 HIGHLIGHTSFinancials. Omeros has financed operations primarily through private and public placements ofequity securities for proceeds totaling $139.2 million, as well as through two debt facilities withloan proceeds totaling $37.0 million ($9.0 million of which was used to pay off the remainingbalance of the first facility). The GPCR program was partially monetized through a fundingagreement with Vulcan pursuant for which the company received $20.0 million in capital, as wellas 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-terminvestments. Additionally, the company stands to receive a $3.0 million cash lease incentivepayment 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. Severalother variables can impact the company’s need to raise capital, including the company’s ability toout-license or partner one of the early-stage preclinical programs.August 2010: Omeros secured a CEFF. The company secured a committed equity financingfacility (CEFF) under which it may sell up to $40 million of its shares of common stock toAzimuth Opportunity, Ltd. (the "investor") over a 24-month period. Omeros is not obligated touse the facility and remains free to enter into and consummate other equity, debt, and non-dilutivefinancing transactions. Omeros paid Azimuth a $100,000 fee to secure the facility. ReedlandCapital Partners will act as placement agent and receive a fee for its services equal to 0.5% of theaggregate dollar amount of common stock purchased by Azimuth upon settlement of each drawunder the facility. The actual amount of funds that can be raised under this facility will depend onthe number of shares sold under the agreement and the market value of Omeros stock during thepricing period of each sale.Bull case. Omeros is highly undervalued as the market is failing to appreciate the potential valueof just OMS302 alone in Ophthalmological (lens replacement surgery) indications alone. P-valuesof 0.0001, (Omeros reported p-values for both mydriasis and pain as <0.00001 but also pointedout that p-values were even better that’s four zero’s which tell us this is not chance!). Withgreater than 3.6 million cataract/lens replacement procedures in the U.S. alone (similar numbersin Europe and twice that in the rest of the world, the potential here is great). Add in premium lensreplacement 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 changethe treatment paradigm. Now factor in the value for the Arthroscopy franchise (which evenMaxim Group LLC 3
  4. 4. Omeros Corporation (OMER)greater potential), the pipeline such as PDE7: (Addiction & Compulsive behaviors), PDE10(Huntington’s Disease, Schizophrenia, Cognitive disorders, Parkinson’s) & Plasmin (safereplacement for Trasylol a $500 million product a decade ago), MASP-2 Program (a moreeffective version of Solaris Alexion – not rated) as well as the value of license deals associatedwith the GPCR platform. All of these programs have data readouts and associated catalysts. Bullswill see the potential for Omeros technology to be transformative powered by specialty pharmadivision 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 fellsharply; now two years later it’s still below its IPO price. Bears see the PharmacoSurgeryplatform as fatally flawed and will be quick to point to the missed primary endpoint in the ACLtrial last year, proving that phase II data does not portend the phase III outcome, as such the phaseIII ophthalmological surgery trial is an unpredictable binary event that could miss sendingOmeros stock to low single digits. Some bears will still point to a flawed factorial analysis thatpresents regulatory risk (this specifically refers to the FDA’s concerns regarding a mixture ofproducts re-tasked for a new indication. How does the mixture compare to the individualcomponents in humans (i.e. rat data will not suffice for approval), however, the bears forget thatOmeros did complete a full-factorial P2 human clinical trial for OMS302. As for the earlier stagepipeline the bears see management as misreading the value of the pre-clinical, phase 1 products inlarge potential indications that require more resources than Omeros can muster. Many have triedand failed indications like Huntington’s Disease, Schizophrenia, Cognitive disorders,Parkinson’s. Cubist experienced a spectacular failure with Dyax’s (DYAX-$1.49-NR) Kalbitorfor CABG (as a replacement for Trasylol). The MASP-2 Program makes sense on a diagram butthat’s a long way off from having a drug. The GPCR platform sounds great but where are the biglicense deals. Omeros is burning through its cash, has debt and need to raise capital before anyproducts 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 seethe outcome of the second Phase III trial as presenting relatively low clinical risk and a highpotential for rapid adoption once approved. The market may be under-appreciating the size andscope of both the cataract surgery and refractive lens exchange (RLE) opportunities, in ouropinion. We also believe in the arthroscopy product – the OMS103HP – and are very hopeful thatthe meniscectomy pivotal data will be good. With that said, we do not include any market sharein our model, making a point that Omeros can stand alone without it. We see the opportunity forsignificant 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. Weacknowledge that financing risk and the CEFF may limit near-term performance, but we believeonce out of the way (likely during the next six months), the stock will rebound and surpasscurrent levels based on data from catalyst events. As such, we advise aggressive investors toaccumulate positions now in anticipation of the year ahead.Maxim Group LLC 4
  5. 5. Omeros Corporation (OMER) COMPANY OVERVIEWOmeros 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 ofthe arthroscopic surgical paradigm. That vision has now been extended to multiple areas: Thecompany has active programs in ophthalmologic and arthroscopic knee surgery, and theurological program has completed its phase II and is being evaluated. The platform is based onthe application of low-dose combinations of existing therapeutic agents delivered directly to thesurgical site throughout the duration of the procedure to preemptively inhibit inflammation andother problems caused by surgical trauma. Beyond the PharmacoSurgery platform, the companyhas very active R&D efforts in place, focused on several blockbuster areas in CNS such asschizophrenia, Parkinson’s disease, and addiction. The company also has an active program ininflammation. These efforts further compliment the company’s research in its G-protein coupledreceptors (GPCR) program. We expect to see positive news flow from these programs and theGPCR platform in the years ahead, providing a longer-term value proposition beyond thePharmacoSurgery platform.Exhibit 1: Upcoming catalysts for OMERProduct Indication Event Tim eline Im pactArthroscopyOMS103HP 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 ologyOMS-302 Ocular Lense Surgery Phenylephrine Phase II dose-ranging trial results 1Q-2010 COMPLETEDOMS-302 Ocular Lense Surgery PII Program Start 2H-2010 COMPLETEDOMS-302 Ocular Lense Surgery Phase III Trial (n=405) 3.2012 COMPLETEDOMS-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 ++UrologyOMS-201 Urological Surgery Complete Phase I/II 2H-2010 COMPLETEDOMS-201 Urological Surgery Sttart Phase II/III Study 1H-2011 COMPLETEDOMS-201 Urological Surgery Continue to Next Step of Clinical Development ? tbdPipelinePPAR (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; +++ highlySource:Maxim Forecasts and Company reports.Maxim Group LLC 5
  6. 6. Omeros Corporation (OMER)Omeros has an exciting pipeline: 1.) OMS824 (PDE10): schizophrenia and/or cognitive andmultiple 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 bloodloss related to cardiac surgery; phase 1 trials are expected to begin in 1H13 (efficacy equal toTrasylol 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 andmore; trials expected to begin in by 1Q13 (promising clinical candidate as the MASP-2 antibodyspecifically blocks the Lectin pathway; note that MASP-2 inhibition prevents microvascularthrombosis).Exhibit 2: Omeros’ development pipeline (abbreviated) Development Stage Product Preclinical Phase I Phase II Phase III MarketOMS-103 HP 505(B)(2):Arthroscopy: Ketoprofen/Amitriptyline/OxymetazolineInflammation/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 LossPDE7 Program Parkinsons Disease & AddictionPPAR -γ AddictionPDE10 Program SchizophreniaGPCR Program - de-orphanization CNS DisordresSource: Omeros* Will not be pursuedSource: Maxim and OmerosOmeros’ intellectual property. The PharmacoSurgery platform uses therapeutics that are wellknown and, today, generically available. As a result, Omeros does not hold any NCE (newchemical entity) patents. Recognizing this, the company created an extensive patent estatefocused on both composition and method of use patents, covering the combinations of productsrepresented in its PharmacoSurgery platform. Patent protection for OMS103HP should extendthrough 2019, providing seven years of exclusivity. In addition, we expect OMS302 to beextended 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 35issued or allowed patents and 41 pending patent applications in the United States, as well as 134issued or allowed patents and 144 pending patent applications in foreign markets. These patentsare related to therapeutic compositions and methods related to the company’s PharmacoSurgeryplatform, GPCR program, and preclinical development programs.The patent portfolio for the PharmacoSurgery technology is directed to locally deliveredcompositions and treatment methods using agents selected from broad therapeutic classes. Thesepatents 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 ofFebruary 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 PharmacoSurgeryproduct candidates and development programs. The issued PharmacoSurgery patents have termsthat will expire as late as September 24, 2022 for OMS103HP and, assuming issuance ofcurrently pending patent applications, August 4, 2032, for OMS103HP, July 30, 2023 forOMS302 and March 17, 2026 for OMS201. The company plans to intend to file additional patentapplications directed to OMS302 which, if issued, are expected to provide patent terms ending2033 or later.Maxim Group LLC 6
  7. 7. Omeros Corporation (OMER)The initial issued patents in the PharmacoSurgery portfolio are directed to combinations ofagents, drawn from therapeutic classes such as pain and inflammation inhibitory agents, spasminhibitory agents, restenosis inhibitory agents, and tumor cell adhesion inhibitory agents. Omerosexpanded their initial patent position with a series of patent applications directed to what thecompany believes are the key physiological and technical elements of selected surgicalprocedures and to the therapeutic classes that provide opportunities to improve clinical benefitduring and after these procedures. Accordingly, the pending PharmacoSurgery patent applicationsare directed to combinations of agents, drawn from therapeutic classes such as pain andinflammation inhibitory agents, spasm inhibitory agents, vasoconstrictive agents, mydriaticagents, and agents that reduce intraocular pressure. These are preferred for use in ophthalmologicprocedures including intraocular procedures, arthroscopic procedures, and urologic proceduresincluding ureteroscopy (for OMS302, OMS103HP and OMS201, respectively), as well ascovering 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 painand inflammation inhibitory agents, mydriatic agents, and agents that reduce intraocular pressure,delivered locally and intra-operatively to the site of ophthalmological procedures, includingcataract 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 foreignmarkets (Australia, Canada, China, Europe, Hong Kong, and Japan) that cover OMS302.OMS103HP: Arthroscopy. OMS103HP is encompassed by the PharmacoSurgery patentportfolio. The relevant patents and patent applications in this portfolio cover combinations ofagents, generic and/or proprietary to the company or others, drawn from therapeutic classes suchas pain and inflammation inhibitory agents and vasoconstrictive agents, delivered locally andintra-operatively to the site of medical or surgical procedures, including arthroscopy. As ofFebruary 15, 2012, Omeros owned five issued U.S. Patents, three pending U.S. PatentApplications, 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. Therelevant patents and patent applications in this portfolio cover combinations of agents, genericand/or proprietary to the company or others, drawn from therapeutic classes such as pain andinflammation inhibitory agents and spasm inhibitory agents, delivered locally and intra-operatively to the site of medical or surgical procedures, including uroendoscopy. As of February15, 2012, Omeros owned three issued U.S. Patents, two pending U.S. Patent Applications, and anadditional 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. PatentApplications and 22 pending patent applications in foreign markets (Australia, Brazil, Canada,China, Europe, India, Japan, Mexico, New Zealand, Russia, South Korea, and International PatentCooperation Treaty) directed to the recently discovered link between PPARg and addictivedisorders.Maxim Group LLC 7
  8. 8. Omeros Corporation (OMER)PDE10 program: OMS824. As of February 15, 2012, Omeros owned one issued patent and fourpending patent applications in the United States, and nine pending patent applications in foreignmarkets (Australia, Canada, China, Europe, India, Japan, and New Zealand) that claimproprietary PDE10 inhibitors.PDE7 program: OMS527. As of February 15, 2012, Omeros owned two pending U.S. PatentApplications, 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. PatentApplications and one international Patent Cooperation Treaty Patent Application directed to thelink between PDE7 and addiction and compulsive disorders. Additionally, under a license fromDaiichi Sankyo, the company exclusively controls rights to two issued U.S. Patents and onepending U.S. Patent Application, as well as 13 issued and 11 pending patent applications inforeign 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 inconnection with MASP-2, the antibodies targeting MASP-2, and the therapeutic applications forthose antibodies from the University of Leicester, Medical Research Council at OxfordUniversity, and Helion Biotech ApS. As of February 15, 2012, the company exclusivelycontrolled four issued patents and nine pending patent applications in the United States, as well asnine issued patents and 40 pending patent applications in foreign markets (Australia, Brazil,Canada, China, Hong Kong, Europe, India, Indonesia, Japan, Mexico, New Zealand, Russia, andSouth Korea) related to the MASP-2 program.Plasmin program: OMS616. Omeros holds worldwide exclusive licenses to a series ofantifibrinolytic 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 theUnited 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 pendingpatent applications in the United States, as well as 42 issued patents and seven pending patentapplications in foreign markets (Australia, Canada, China, Europe, Hong Kong, India, Japan,Macao, Mexico, New Zealand, and Russia), which are directed to previously unknown linksbetween specific molecular targets in the brain and a series of CNS disorders.Maxim Group LLC 8
  9. 9. Omeros Corporation (OMER) PRODUCT DESCRIPTIONSOMS302: Ophthalmology. OMS302 is the company’s lead PharmacoSurgery platform product.It is being developed for use during ophthalmologic procedures, including cataract and other lensreplacement surgery. It is a proprietary combination of an anti-inflammatory agent and amydriatic agent (which causes pupil dilation). Each component has well-known safety andpharmacologic profiles. Like OMS103HP, the individual FDA-approved drugs containing each ofthese active agents have been used in ophthalmologic clinical practice for more than 15 years, andboth agents are contained in generic, FDA-approved drugs.Exhibit 3: Graphic representation of OMS302 being used during the cataract/refractiveLens exchange (RLE) procedure. OMS302 represents a proprietary combination of a mydriaticagent with an anti-inflammatory. Like OMS103HP, it will require no change to the surgicalprocedure, and it will be pre-packaged in a single vial use, pre-dosed and pre-formulated. Thereare estimated to be 3.6M US and 20M worldwide lens replacement procedures (in 2012),growing at approximately 3-4% annually.Source: OmerosWhy is mydriasis important? "Maintenance of mydriasis throughout the procedure is essentialfor the safety of lens replacement surgery," states Mark I. Rosenblatt, MD, PhD, associateprofessor of ophthalmology at Weill Cornell Medical College. "A constricted pupil decreases thesurgeons operative field, which can make the procedure more difficult to perform and potentiallyincreases the rates of complications, including rents in the lens capsule or the retention of corticallens material with more frequent posterior capsular opacification or lens dislocation. And, as aside note, the addition of pain relief from this drug combination improves the surgical experiencefor the patient and assists the surgeon in pain management during the critical early postoperativeperiod."Clinical data for OMS302: Ophthalmology. OMS302 is Omeros’ second most advancedproduct candidate. Like OMS103HP, 302 is a proprietary combination of an anti-inflammatoryand a Mydriatic (pupil dilation) agent in a standard irrigation solution for use during ophthalmiclens 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 cataractprocedure. If mydriasis is not maintained throughout the procedure, the risk of injuring structureswithin the eye increases and the required operating time is often prolonged. Of equal clinicalrelevance, OMS302 also significantly decreased (p=0.0418) pain in the early postoperative periodand reduced the frequency of complaints of moderate and severe pain (2.5 times more complaintsin the vehicle-treated patients). The drug product was safe and well tolerated in this study.Maxim Group LLC 9
  10. 10. Omeros Corporation (OMER)Phase III study: P-values significant (p<0.00001). In March, Phase III data was reported fromthe 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 statisticalsuperiority (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 receiveeither OMS302 or the placebo. The primary endpoint was the maintenance of intraoperativemydriasis (pupil dilation), which is critical to the safety and surgical ease of lens replacementsurgery. Pupil constriction during surgery increases the risk of injury to intraocular structures andcan substantially prolong surgical time. In addition to statistical superiority over the placebo inmaintenance of mydriasis and the secondary endpoint of reduced postoperative pain, OMS302achieved 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, eyeinflammation, headache and increased intraocular pressure. The incidence of these adverse eventswas similar between OMS302 and placebo-treated patients.Exhibit 4: OMS302 Phase 3 ILR Surgery: Clinical Need for Consistent Dilation(Intraoperative Pupillary Miosis (Constriction)Source: OmerosMaxim Group LLC 10
  11. 11. Omeros Corporation (OMER)Exhibit 5: OMS302 Phase 3 ILR Surgery Intraoperative Change in Pupil Diameter (PupilSize Relative to Start Time of Irrigation)Source: OmerosPhase III results (summarized): The study showed a clinically meaningful improvement in themaintenance of mydriasis and the prevention of miosis as well as benefits in less postoperativepain. In fact, 590% more placebo patients compared to OMS302 patients experienced a pupil sizeof < 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; decreaserisk of surgical trauma; manage floppy iris syndrome; reduce postoperative inflammation andpain; and improve postoperative visual acuity.Next clinical steps for OMS302. The Second Phase 3 trial has already begun enrolling with dataexpected 2H12. NDA and MAA in preparation, and submissions are expected during the first partof 2013. Launch is expected during the first part of 2014.Exhibit 6: OMS302 Phase 3 ILR Surgery: Mydriasis (pupil dialation) vs. Miosis (pupilconstriction) Cortical Clean-Up Lens Implantation EndSource: OmerosMaxim Group LLC 11
  12. 12. Omeros Corporation (OMER)Exhibit 7: OMS302 Annual Revenue Model: (Please see our model assumptions later in this report). U.S. OMS-302 (Cataract): 2012 2013 2014 2015 2016 2017 3.6 MLN "Cataracts" at baseline (-0.6 PL) : annual procedures (2012) 3,032,180 3,121,518 3,217,265 3,320,004 3,430,381 3,549,119 Market Size Growth (Annual) 2.9% 3.1% 3.2% 3.3% 3.5% Market Share Penetration (302) 0.0% 0.0% 4.3% 9.5% 13.5% 17.5% Number of Procedures 0 0 137,445 315,733 463,459 621,481 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Price per procedure $ 250 250 $ 250 250.0 $ 250 $ 250 Price Growth 0% 0% 0% 0% 0% U.S. Annual Sales $ - $ - $ 34 $ 79 $ 116 $ 155 % Growth (qtrly) 130% 47% 34% U.S. OMS-302 (Premium Lens): 2012 2013 2014 2015 2016 2017 600k "premium lens replacement at baseline: (2012) 621,919 686,816 764,636 858,735 973,548 1,115,003 Market Size Growth (Annual) 10.4% 11.3% 12.3% 13.4% 14.5% Market Share Penetration (302) 0.0% 0.0% 4.6% 13.1% 23.1% 31.1% Number of Procedures 0 0 35,099 112,283 224,709 346,632 Units Per Procedure 1.0 1.0 1.0 1.0 1.0 1.0 Price per procedure $ 250 250 $ 250 250.0 $ 250 $ 250 Price Growth 0% 0% 0% U.S. Annual Sales $ - $ - $ 9 $ 28 $ 56 $ 87 % Growth (qtrly) 220% 100% 54% Western Europe (Cataract) 2012 2013 2014 2015 2016 2017 3.3 MLN "Cataracts at baseline: annual procedures (2012) 3,022,955 3,086,374 3,153,773 3,225,465 3,301,790 3,383,123 Market Size Growth (Annual) 2.1% 2.2% 2.3% 2.4% 2.5% Market Share Penetration (302) 0.0% 0.0% 0.0% 2.5% 6.5% 10.5% Number of Procedures 0 0 0 80,868 214,862 355,490 Units Per Procedure 1.0 1.0 1.0 1.0 1.0 1.0 Price per procedure $ 200 200 $ 200 200.0 $ 200 $ 200 Price Growth 0% 0% 0% Western Europe QTRLY Sales ($) $ - $ - $ - $ 16 $ 43 $ 71 EU OMS-302 (Premium Lens): 2012 2013 2014 2015 2016 #REF! 300k "premium lens replacement at baseline: (2012) 314,009 355,116 403,585 461,019 529,432 611,364 Market Size Growth (Annual) 13.1% 13.6% 14.2% 14.8% 15.5% Market Share Penetration (302) 0.0% 0.0% 0.0% 5.1% 18.2% 29.1% Number of Procedures 0 0 0 23,442 96,231 177,856 Units Per Procedure 1.0 1.0 1.0 1.0 1.0 1.0 Price per procedure $ 200 200 $ 200 200.0 $ 200 $ 200 Price Growth 0% 0% 0% EU QTRLY Sales ($) $ - $ - $ - $ 4.7 $ 19 $ 36 % Growth (qtrly) #DIV/0! 311% 85% International OMS-302 (Premium / Refractive Lense): 2012 2013 2014 2015 2016 2017 0.4 MLN "Refractive Lense" at baseline: annual procedures (2012) 406,101 422,758 440,098 458,149 476,940 496,502 Market Size Growth (Annual) 4.1% 4.1% 4.1% 4.1% 4.1% Market Share Penetration (302) 0.0% 0.0% 0.0% 1.5% 6.3% 10.5% Number of Procedures 0 0 0 6,930 29,887 52,195 Units Per Procedure 1.0 1.0 1.0 1.0 Price per procedure $ - $ 150 $ 200 200.0 $ 200 $ 200 Price Growth 0% 0% 0% International Annual Sales $ - $ - $ - $ 1 $ 6 $ 10 World Wide Cataract Revenues $ - $ - $ 34.4 $ 95.1 $ 158.8 $ 226.5 % Growth (qtrly) 177% 67% 43% World Wide Opthalmic Revenues $ - $ - $ 43.1 $ 124.6 $ 221.0 $ 323.6 % Growth (qtrly) 189% 77% 46% Totol US Opthalmic Revenues $ - $ - $ 43.1 $ 107.0 $ 172.0 $ 242.0 % Growth (qtrly) 148% 61% 41% Total International Opthalmic Revenues $ - $ - $ - $ 18 $ 49 $ 82 % Growth (qtrly) Grand Total ALL Opthalmic Revenues $ - $ - $ 43 $ 125 $ 221 $ 324 % Growth (qtrly) 189% 77% 46% Source: Maxim Estimates & Based on Market Scope, Comprehensive Report on the Global IOL Market, 2011.Maxim Group LLC 12
  13. 13. Omeros Corporation (OMER)Clinical data for OMS103HP. OMS103HP has resulted in a lot of volatility for Omeros sharesand a lot of confusion regarding the efficacy of the product. The initial phase III trial (which tookseveral years to complete enrollment) missed its primary endpoint last year in ACL repair. As aresult, the stock fell sharply as investors lost confidence in the company and thePharmacoSurgery platform. Since that time, the ophthalmology program has reported solid data.Where does that leave OMS103HP? Initially being developed around anterior crucial ligamentrepair of the knee and now with a failed phase III trial, investors have given up – but not thecompany. Currently, OMS103HP is in a phase III trial for the repair of meniscectomy injury. Inthe phase II study, significant results were reported.Investors are acutely aware that OMS103HP missed its primary endpoint in the anterior Cruciateligament (ACL) phase III study last year. However, in the ACL trial, patients were evaluated byraters comprised of physical therapists. There were imbalances observed among the physicaltherapists, which created a confounding effect on the scores and subsequent results. Contrast thiswith the results in the meniscectomy trial. The primary endpoint for this trial was the performanceon the symptoms domain of the Knee Injury and Osteoarthritis Outcome Score or KOOS. KOOSis a validated patient-reported outcome measure already used in the successful Phase 2meniscectomy trial. KOOS consists of five subscales: pain, other symptoms, function in dailyliving (ADL), function in sport and recreation, and knee-related quality of life. The primaryendpoint 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 isexpected to have data in the second half of 2012. The European trial (a combination of US & EUsites) 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: OMS103HPand vehicle 90-day postoperative follow-up. Key endpoints included knee function, range ofmotion, and pain as well as a consistent improvement over 90 day period (KOOS Outcomesscores).Exhibit 8: OMS302: Excellent Phase II Data: OMS103HP: Meniscectomy Trial showedconsistent improvement across all KOOS subscales.Source: OmerosMaxim Group LLC 13
  14. 14. Omeros Corporation (OMER)Exhibit 9: Graphic Representation of OMS103HP Being Used During Arthroscopy: Note theaddition of OMS103HP requires no change to the surgical procedure, and it will be pre-packagedin 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: OmerosExhibit 10: Annual Revenues - Arthroscopy Model: OMS103HPNote: We do not include these revenues in the model for the sake of conservatism and to makethe 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 $ 54Source: Maxim estimates.Maxim Group LLC 14
  15. 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 aproprietary combination of an anti-inflammatory agent (ketoprofen, an NSAID) and a smoothmuscle relaxant (nifedipine, a calcium channel blocker). As is true with the more advancedPharmacoSurgery products, the two components are generically available, FDA-approved drugswith solid profiles.OMS201 is intended to be delivered directly to the surgical site during uroendoscopic proceduresto inhibit surgically induced inflammation, pain, and smooth muscle spasms. Potential clinicalbenefits include improved renal stone passage, the ability to facilitate the placement of a ureteralaccess 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 theurethra and bladder into the ureter. The physician pilots the scope through the ureter until itreaches 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=zm6114The benefits of OMS201. A key benefit of OMS201 is the prevention or inhibition of thesurgically induced inflammation and smooth muscle spasm that is often seen during theseprocedures, complicating them. In fact, surgeons routinely place uretal stents in patientsfollowing ureteroscopy to prevent ureteral strictures and occlusion. Many surgeons commonlyplace an uretal access sheath (UAS) to protect the lining of the urethra and ureter. OMS201 couldfacilitate 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. 16. Omeros Corporation (OMER)Clinical Data of OMS201: UrologyIn 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 safetyof patients receiving primary treatment for endoscopic removal of urinary stones. The resultsdemonstrated minimal absorption levels of drugs (systemically) with no serious events. The datafrom this trial then led to a second more advanced Phase I/II trial, which found that OMS201 wassafe and well tolerated in the study. The incidence of adverse events was similar in the twoOMS201-concentration arms and the group receiving the vehicle. No adverse events wereconsidered treatment-related by investigators. There were no deaths or discontinuations foradverse events. Only one serious adverse event was reported, and it occurred in a vehicle-treatedpatient.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 usedduring the surgical procedure, the time to complete the procedure, and the overall surgicaloutcome (during the first post-operative week), post-operative pain, pain medications used, andlower urinary tract symptoms.For now, the program is on hold as the company evaluates its financial resources and prioritizesthe most promising programs. COMPETITIONThe 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, weare not aware of any products that directly compete with Omeros PharmacoSurgery productcandidates that are approved for intra-operative delivery in irrigation solutions during surgicalprocedures. It is expected that the company’s PharmacoSurgery product candidates couldcompete with preoperative and postoperative treatments for mydriasis, pain, and inflammation. Ifapproved, Omeros expects that the primary constraint to market acceptance of thePharmacoSurgery product candidates will be surgeons who continue with their respective currenttreatment practices and do not adopt the use of these product candidates, as well as the level ofreimbursement surgeons receive for the administration of these product candidates. It is alsoimportant to note that premium ILRs (lens replacements) do not rely on insurance reimbursementand 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 thataffect cognition) there are others in development. On the Plasmin front, Bayer HealthCarePharmaceuticals is currently authorized to market Trasylol® in Canada for patients undergoingcoronary artery bypass graft surgery, and any product Omeros develops in this space for suchindication would directly compete with Trasylol® in Canada as well any other countries in whichTrasylol® is authorized to be marketed. We also know that there are other companies attemptingto de-orphanize orphan GPCRs. If any of these companies is able to de-orphanize an orphanGPCR before Omeros, it may be difficult to establish an exclusive or commercially valuableintellectual property position around that orphan GPCR.Maxim Group LLC 16
  17. 17. Omeros Corporation (OMER) TECHNOLOGY PLATFORM AND PIPELINEPreclinical and discovery programs: MASP-2. Omeros is developing MASP-2 (Mannan-binding lectin Associated Serine Protease-2) antibody therapy, OMS721. MASP-2 represents anovel pro-inflammatory protein target present in the complement system. MASP-2 is downstreamof MBL in the lectin-complement pathway and upstream of the C2-C5 cascade. Omeros believesthat 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 PathwaySource: Biocarta: Lectin Induced Complement PathwayThe complement cascade of proteolytic factors involved in cellular lysis can be initiated byseveral different factors, including antibody-dependent and antibody-independent recognition ofinfectious organisms (see classical and alternative complement pathways). In the lectin-inducedcomplement cascade, carbohydrates on the surface of microbial cells activate the complementcascade 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. Thebinding of Mbl to microbial ligands activates the Mbl associated serine proteases MASP-1 andMASP-2, triggering the cleavage of C2 and C4 to create C4bC2a, a C3 convertase that cleaveslarge numbers of C3. MASP-1 and MASP-2 are similar to the C1 protease in the classicalcomplement pathway. Once formed the C3 convertase cleaves and activates the remainingcomplement factors leading ultimately to formation of a pore in the bacterial membrane by themembrane attack complex (MAC) that lyses the bacterial cell. The lectin-induced pathway alsoappears to play an important role in the activation of phagocytotic cells by infection. Although theinitiating event activating the complement cascade is distinct in the lectin-induced pathway, fromthe C3 convertase onward the lectin induced complement pathway is the same as the classicalcomplement pathway. Since antibodies are not required in the lectin-induced pathway, this aspectof the immune response is part of the innate immune response. The importance of this pathway tothe immune response has been demonstrated by the identification of children and adults with littleor no Mbl who lacked normal phagocytotic responses and are highly susceptible to infection.Maxim Group LLC 17
  18. 18. Omeros Corporation (OMER)Exhibit 13: Early Experiments in Mouse Models of Age-Related Macular DegenerationSuggest MASP-2 Plays a Pivotal Role. Systemic administration of MASP-2 antibodies to miceproduced a dose-dependent reduction of the growth of blood vessels with a maximal effect of a50% inhibition of CNV (choroidal neovascularization). Choroidal VEGF Induction Neovascularization (CNV)Source: OmerosExhibit 14: Effect of a Single Dose of Systemically Delivered MASP-2 Antibody onLaser-Induced Choroidal Neovascularization (CNV). MASP-2 antibody (1mg/kg) reducedchoroidal neovascularization in the mouse model of AMD (Newman-Keuls; p < 0.01)Source: OmerosMaxim Group LLC 18
  19. 19. Omeros Corporation (OMER)Exhibit 15: The Myocardial Ischemia-Reperfusion (MIRP) Injury Mouse Model AlsoSuggests MASP-2 Is Highly Active.Source: OmerosThe potential of the Omeros MASP-2 antibody is significant, in our opinion. MASP-2 is the onlyprotein unique to, and required for, the function of the lectin complement pathway. This sciencerelates directly to the immune response (classical pathway, alternative pathway, and the lectindependent 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 atC5, preventing the formation of C5a and the terminal complement complex, C5b-9. On themechanism of action slide below, note that OMS721 works upstream of Soliris in this pathway.Source: Omeros & Hematology, October 2007; 12(5): 371-376Maxim Group LLC 19
  20. 20. Omeros Corporation (OMER)Exhibit 17: Mechanism of Action for OMS721: A Human Monoclonal Antibody that InhibitsMASP-2 and Blocks the Lectin Pathway of ComplementSource: OmerosSoliris (eculizumab). Soliris is the brand name for the antibody eculizumab, which is currentlyapproved in the United States and Europe, as well as a number of other major markets for thetreatment of the rare blood disorder paroxysmal nocturnal hemoglobinuria (PNH). Since initialcommercialization in 2007, Soliris has generated over $400 million in worldwide sales – andsales are still growing. Soliris is one of the most expensive commercially approved drugs atapproximately $400,000 per patient per year. The drug works by targeting a component of theimmune system that causes PNH and is administered as a 35-minute intravenous infusion. Dosingbegins 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 inpatients with lupus nephritis as far back as 1998. A series of other indications (includingmembranous nephritis, psoriasis, dermatomyositis and bullous pemphigoid), was examined overthe years. The most compelling clinical results came in studies of patients with PNH, a rareblood disorder in which the host immune system attacks red blood cells (RBCs). This programtook precedent over other indications and eventually led to Soliris’ approval. Today, Soliris haschanged the treatment paradigm for patients with PNH.This success of Soliris creates an interesting question: What is the value of the OmerosMASP-2 program? In comparison to Soliris, MASP-2 acts at the top of the lectin-dependentpathway and has no interference with the classical pathway (antibody-dependent classicalcomplement activation). Indications for MASP-2 range from age-related macular degeneration(AMD) to ischemia reperfusion injury (which typically follows organ transplant, myocardialinfarction, coronary artery bypass grafts, aortic aneurysm repair, stroke, and gastro-intestinalvascular injury as well as aHUS, PNH, TTP and HUS). Other favorable attributes relate to thepotential to deliver MASP-2 antibodies systemically, a therapeutic potential at a low effectivedose, and a low cost of goods. A MASP-2 candidate (OMS721) has been selected for clinicaldevelopment this year (2012).Maxim Group LLC 20
  21. 21. Omeros Corporation (OMER)Plasmin program: OMS-616 antifibrinolytic agent: Omeros is developing an antifibrinolyticagent for the control of blood loss during surgery or resulting from trauma. Excessive bleedingduring cardiac surgery is known to increase overall morbidity and mortality. In an attempt tocontrol this bleeding, patients undergoing cardiac and other extensive surgery often receiveantifibrinolytic compounds. These drugs inhibit plasmin, an enzyme present in blood thatdegrades fibrin clots. Because plasmin degrades fibrin clots, an agent that inhibits plasmin mayhave 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 lossthan the other two most commonly used antifibrinolytics on the market today, tranexamic acidand 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 importantin promoting clotting, and their inhibition can increase bleeding. Trasylol was found to beassociated with a number of safety issues, including increased mortality. Further, it is a bovineprotein associated with anaphylactic reactions. While the specific cause of increased deathremains unknown, an often-cited explanation is the lack of specificity of Trasylol.Omeros’ proprietary agents also inhibit plasmin but, unlike Trasylol, they do not significantlyinhibit kallikrein and Factor XIa. Additionally, these agents are derived from human protein,which may reduce immunological side effects. The properties of these proprietary agents aredescribed in a peer-reviewed article titled "Engineering Kunitz Domain 1 (KD1) of Human TissueFactor 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. Webelieve the efficacy and improved selectivity of these agents can provide a novel approach to thecontrol 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 thefirst Kunitz domain (KD1) of tissue factor pathway inhibitor 2 (TFPI-2). It is believed to behighly 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 asignificantly more selective antifibrinolytic agent than Trasylol.Source: OmerosMaxim Group LLC 21
  22. 22. Omeros Corporation (OMER)Exhibit 19: OMS616 Comparison with Other AntifibrinolyticsSource: OmerosExhibit 20: OMS616 Inhibits Plasmin with Potency Equal to Trasylol (top charts) and IsSelective for Plasmin (bottom charts).Source: OmerosMaxim Group LLC 22
  23. 23. Omeros Corporation (OMER)Central Nervous System ProgramsAddiction programs: (PPAR-γ (OMS403)/PDE7 inhibitors (OMS527). Omeros is developingproprietary compositions that include PPAR-γ (peroxisome proliferators-activated receptor) forthe treatment and prevention of addiction to substances such as opioids, nicotine, alcohol, andamphetamines, as well as other compulsive behaviors. OMS403 is such a candidate. PPARγ isexpressed in adipose tissue, macrophages, brain tissues (lateral hypothalamus, paraventricularnucleus of the hypothalamus, arcuate nucleus, and ventral tegmental area). This link betweenPPAR-γ and substance abuse was previously unknown and, as such, the company has filed patentapplications 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 aPPAR agonist significantly reduced the voluntary intake of alcohol and nicotine, stress-inducedrelapse 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/kgEthanol 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 DaysSource: OmerosEuropean pilot study design – alcohol addiction: The trial is a three-arm (four patients perarm), 11-month-long, open label study. Arm 1: 30mg/day pio; Arm 2: 50mg/day naltrexone; Arm3: counseling. Patients were matched for age, status, education, and alcohol addiction years. AnAUDIT (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. 24. Omeros Corporation (OMER)Exhibit 22: PPARγ Agonist Administration Study in Rats. The results showed a reduction ofnicotine self-administration, a reduction of stress-induced relapse to nicotine seeking, and areduction 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/kgSource: OmerosEuropean pilot study design – nicotine addiction: The trial consists of three groups with threeto four patients in each group. Patient-entry criteria includes that the patients were smoking, onaverage, 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): Threepatients, 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 thePPa and VAR groups; however, the PPA group showed none of the side effects associated withVAR.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 outMaxim Group LLC 24
  25. 25. Omeros Corporation (OMER)Exhibit 24: OMS527’s Efficacy in an Animal Model of Parkinson’s Disease of a PDE7Inhibitor. This shows that a representative PDE7 inhibitor is equally effective as (and greaterthan 50x more potent to) L-DOPA. Sub-therapeutic doses of both a PDE7 inhibitor and L-DOPAin combination resulted in efficacy greater that the expected sum of the effects of the individualagents, demonstrating the potentiation of L-DOPA’s effect. 7.50 7.00Stride 6.50Length (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-DOPASource: OmerosIn a murine (MPTP) model, mice are trained to walk across a sheet of paper with inked pawsand stride length is measured. MPTP administration causes extensive damage in dopaminergicneurons. Following administration of MPTP, stride length is measurably decreased. Stride lengthis fully restored by clinically effective agents (L-DOPA, dopaminergic agonists). Stride length isfully restored by PDE7 inhibitors (five distinct chemical classes), including Omeros’ leadcompound 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: OmerosPDE7 inhibitors may provide an alternative to L-DOPA or related drugs, or they may allow dosereduction of these drugs, reducing the associated side effects. The Michael J Fox foundation issupporting this research. In exchange, the foundation receives access to data.Maxim Group LLC 25
  26. 26. Omeros Corporation (OMER)Exhibit 26: OMS527 for Addiction: Heroin Acquisition in Animal Model. The figure on theleft demonstrates the effects of treatment with OMS824 (PPARγ) in rats. The untreated groupcontinued to self-administer heroin, while the treated group showed complete ablation of heroinacquisition. The figure on the right demonstrates a positive control. The same animals tested forheroin acquisition were tested for self-administration of food. The PPARγ did not affect theanimal’s food acquisition. As such, we can conclude that the agonists effect in heroin reductionwas 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) * * 150mg 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<0.01Source: OmerosExhibit 27: Chronic Effect of PDE7 Inhibition on Cocaine Self-Administration. Datasupports that chronic PDE7 inhibition reduces cocaine self-administration.Source: OmerosMaxim Group LLC 26
  27. 27. Omeros Corporation (OMER)Exclusive license agreement with Daiichi Sankyo. Under an agreement with Daiichi SankyoCo., Ltd. (DSKYF-NR $16.98) (successor-in-interest to Asubio Pharma Co., Ltd.) Omeros holdsan exclusive license to PDE7 inhibitors claimed in certain patents and pending patent applicationsowned by Daiichi Sankyo for use in the treatment of movement disorders and other specifiedindications, 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 $30.2million upon the achievement of certain events. However, if only one of the two target indicationsadvanced through the milestones, the total milestone payments are less ($23.5 million). Themilestone payment events include successful completion of preclinical toxicology studies; dosingof human subjects in Phase 1, 2 and 3 clinical trials; receipt of marketing approval of a PDE7inhibitor product; and reaching specified sales milestones. In addition, Daiichi Sankyo is entitledto receive from the company a low single-digit percentage royalty of any net sales of a PDE7inhibitor licensed under the agreement by Omeros or its sublicensee(s), provided that if the salesare made by a sublicensee, then the amount payable by us to Daiichi Sankyo is capped at anamount equal to a low double-digit percentage of all royalty and specified milestone paymentsreceived by Omeros from the sublicensee.Next clinical steps. The company selected OMS527 in cocaine addiction to move forward intothe clinic. Phase 1 data is now expected in 1H13. We note that there are currently no approvedtherapies 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 compulsivebehaviors. In addition, Omeros will also conduct a phase 1 study in patients with Parkinson’sdisease and collect “finger-tapping” efficacy data. If positive, the plan is to advance clinicaldevelopment (in Parkinson’s disease).PDE10 Program: (OMS824)Treatment of schizophrenia and cognitive disorders. PDE10 is an enzyme that is expressed inareas 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 ofcurrently used anti-psychotic drugs, such as weight gain, improved cognition, and a reduced riskof 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 MedicalResearch Institute (SMRI). Should a product be commercialized, the company will pay royaltiesback to SMRI to a maximum capitated amount.Funding agreement with The Stanley Medical Research Institute. Omeros development issupported by funds from The Stanley Medical Research Institute, or SMRI, a non-profitcorporation that supports research on the causes and treatment of schizophrenia and bipolardisorder. Under the agreement, Omeros receives grant and equity funding upon achievement ofproduct development milestones through Phase 1 clinical trials totaling $9.0 million, subject tothe mutual agreement with SMRI. Through December 31, 2011, Omeros had received $5.7million from SMRI, $3.2 million of which was recorded as equity funding and $2.5 million ofwhich was recorded as revenue. Omeros also agreed to pay royalties to SMRI based on any netincome the company receives from sales of a PDE10 product. Based on the amount of grantfunding received as of December 31, 2011, the maximum amount of royalties payable to SMRIwas $12.8 million.Maxim Group LLC 27
  28. 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 LevelsSource: 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 OlanzapineSource: OmerosA rational for PDE10 in Huntington’s disease. It appears as though PDE10 is expressed inbrain regions that are relevant to disorders involving striatum and cortico-striatal signaling.PDE10 inhibition in vivo increases striatal cGMP and enhances cortico-striatal glutamatergictransmission. 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’smodel.Maxim Group LLC 28
  29. 29. Omeros Corporation (OMER)Exhibit 29: PDE10 is Expressed in Caudate Nucleus and Putamen. It is expressed mostprominently 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 ofnerve 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 declinein body weight is not affected (not shown). Open field activity is significantly preserved (notshown).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 ofschizophrenia, Huntington’s disease, and cognitive disorders. Omeros has identified leadcompounds that possess a high target potency and selectivity, oral efficacy, a favorable PK withno significant off-target interactions, and no initial toxicology concerns. IND-enabling studies areongoing. Huntington’s disease may be the lead indication. The compound scale up is completeand GMP clinical material production is underway. We anticipate Phase 1 data later this year.Maxim Group LLC 29

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