Why Omeros Corporation Fell as Much as 24.5% Today? Read Full Story here

Today after the company announced and discussed its performance in the third quarter of 2018 the Shares of Omeros Corporation (NASDAQ:OMER) fell more than 24%. Last month, the company’s hyped-up lead drug candidate, OMS721, didn’t deliver the goods in an early-stage study. In fact, it didn’t prove any more effective than placebo. That reset investor confidence that an ongoing, 430-patient study will yield successful results when it wraps up in 2020.

In the release, company said that it has granted the initial purchasers of the Notes an option to purchase up to $40 million in additional Notes at the same terms and conditions. OMER also said that it intends on using a portion of the proceeds from the offering to repay the full amounts of the outstanding Term Loan Agreement with CRG Servicing. The annual interest rate with CRG is 12.25% and the agreement matures on September 30, 2022.
Therefore, it would be wise for the company to begin investing more resources in one of its earlier-stage drug candidates, especially considering the balance sheet sported just $55 million in cash and equivalents at the end of September 2018. So Omeros Corporation paired its quarterly update with an announcement that it raised $210 million in a debt offering, but that comes with its own set of risks investors shouldn’t overlook.

Omeros Corporation has coughed up an operating loss of nearly $94 million in the first nine months of 2018. That sour figure is mostly explained by an 85% decline in revenue and a 60% increase in R&D spending compared to the year-ago period. It’s clearly unsustainable for a business with just $55 million in cash on hand.

On the one hand, adding $210 million in cash from the debt offering will extend the company’s runway and buy it time to develop its pipeline. That includes getting more answers on OMS721 and earlier-stage pipeline drugs OMS824 and OMS405. Given the recent data hinting that the lead drug candidate might not have a blockbuster future, those unique and separate drug candidates might prove very important in the coming months.

On the other hand, Omeros Corporation was leading with a book value of negative $89 million at the end of September 2018. As the cash from the debt offering is used up and the debt stays put, the company’s balance sheet will look downright grotesque in the next year or two. If OMS721 proves to be a complete bust, the business may not have the financial flexibility to recover.

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