~~false2020Q10001285819--12-3100us-gaap:ProductMemberus-gaap:ProductMemberus-gaap:ProductMemberus-gaap:ProductMember5420081054507667~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2020~~2021



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-34475

OMEROS CORPORATION

(Exact name of registrant as specified in its charter)


Washington		91-1663741
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

201 Elliott Avenue West Seattle, Washington		98119
(Address of principal executive offices)		(Zip Code)
(206) 676-5000 (Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
(Title of each class)	(Trading symbol)	(Name of each exchange on which registered)
Common Stock, $0.01 par value per share	OMER	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 ~~as amended,~~ during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~Yes~~ Yes⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ~~Yes~~ Yes⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	⌧	Accelerated filer	◻
Non-accelerated filer	◻	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧


~~Securities Registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:~~
~~Common Stock~~~~, $0.01 par value per share~~	~~OMER~~	~~The Nasdaq Stock Market LLC~~
~~(Title of each class)~~	~~(Trading symbol)~~	~~(Name of each exchange on which registered)~~

As of May 6, ~~2020,~~2021, the number of outstanding shares of the registrant’s common stock, par value $0.01 per share, was ~~54,510,667.~~62,328,370.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the ~~Securities Act)~~“Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the ~~Exchange Act)~~“Exchange Act”) which are subject to the “safe harbor” created by those sections for such statements. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical fact are “forward-looking statements.” Terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “intend,” “likely,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” and similar expressions and variations thereof are intended to identify forward-looking statements, but these terms are not the exclusive means of identifying such statements. Examples of these statements include, but are not limited to, statements regarding:

●

whether the U.S. Food and Drug Administration (“FDA”) will approve the BLA for our ~~expectations related to obtaining permanent separate or similar reimbursement for OMIDRIA~~lead MASP-2 inhibitor, narsoplimab in hematopoietic stem cell transplant-associated thrombotic microangiopathy (“HSCT-TMA”);^®

●

~~(phenylephrine and ketorolac intraocular solution) 1%/0.3% from the Centers for Medicare & Medicaid Services (CMS) for periods after September 30, 2020, and~~ our expectations regarding clinical plans and anticipated or potential paths to regulatory approval of narsoplimab by FDA and/or the European Medicines Agency (“EMA”) in HSCT-TMA, immunoglobulin A nephropathy, atypical hemolytic uremic syndrome and/or COVID-19;

●

whether and when a marketing authorization application may be filed with the EMA for narsoplimab in any indication, and whether the EMA will grant approval for narsoplimab in any indication;

●

our plans for the commercial launch of narsoplimab following any regulatory approval and our estimates and expectations regarding coverage and/or reimbursement ~~coverage~~ for ~~OMIDRIA by commercial and government payers;~~any approved products;

●

our estimates regarding how long our existing cash, cash equivalents, short-term investments and revenues will be sufficient to fund our anticipated operating expenses, capital expenditures and debt service obligations;

●

our expectations relating to demand for OMIDRIA^® (phenylephrine and ketorolac intraocular solution) 1%/0.3% from wholesalers, ambulatory surgery centers ~~(ASCs) and~~and/or hospitals, and our expectations regarding OMIDRIA product sales;

●

the severity and duration of the impact of the COVID-19 pandemic on our business, operations, clinical programs and financial results;

●

our expectations related to separate payment for OMIDRIA from the Centers for Medicare & Medicaid Services (“CMS”) and CMS’ separate payment policy for non-opioid pain management surgical drugs, and our expectations regarding reimbursement coverage for OMIDRIA by commercial and government payers;

●

our plans for ~~the~~ marketing and distribution of OMIDRIA and our estimates of OMIDRIA chargebacks and rebates, distribution fees and product returns;

●

our expectations regarding the clinical, therapeutic ~~and~~and/or competitive benefits and importance of OMIDRIA and our product candidates;

●

our ability to design, initiate and/or successfully complete clinical trials and other studies for our products and product candidates and our plans and expectations regarding our ongoing or planned clinical trials, including for ~~our lead MASP-2 inhibitor,~~ narsoplimab, ~~(also referred to as OMS721),~~ and for our other investigational candidates, including OMS527 and OMS906;

●

our plans and expectations regarding development of narsoplimab for the treatment of critically ill COVID-19 patients, including statements regarding the therapeutic potential of narsoplimab for the treatment of COVID-19, discussions with government agencies regarding narsoplimab for the treatment of COVID-19, expectations for the treatment of additional COVID-19 patients in clinical trials or other settings and our expectations for receiving any regulatory approval or authorization from FDA or other regulatory body for narsoplimab in the treatment of COVID-19 patients;

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●

with respect to our narsoplimab clinical programs, our expectations regarding: whether enrollment in any ongoing or ~~all ongoing and~~ planned ~~Phase 3 and Phase 2~~ clinical ~~trials~~trial will proceed as expected; whether we can capitalize on the financial and regulatory incentives provided by orphan drug designations granted by ~~the U.S. Food and Drug Administration (FDA),~~FDA, the European Commission, ~~(EC),~~ or ~~the European Medicines Agency (EMA);~~EMA; and whether we can capitalize on the regulatory incentives provided by fast-track ~~and/~~or breakthrough therapy designations granted by ~~the~~ FDA;

●

our expectations regarding clinical plans and anticipated or potential paths to regulatory approval of narsoplimab by the FDA and/or EMA in hematopoietic stem cell transplant-associated thrombotic microangiopathy (HSCT-TMA), Immunoglobulin A (IgA) nephropathy, and atypical hemolytic uremic syndrome (aHUS);

●

~~whether and when we will complete the rolling Biologics License Application (BLA) for narsoplimab in HSCT-TMA and whether and when FDA will accept submission and grant accelerated or regular approval;~~

●

~~whether and when a BLA may be filed with the FDA for narsoplimab in any other indication and whether FDA will grant accelerated or regular approval;~~

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●

~~whether and when a marketing authorization application (MAA) may be filed with the EMA for narsoplimab in any indication, and whether the EMA will grant approval for narsoplimab in any indication;~~

●

~~our plans for the commercial launch of narsoplimab following any regulatory approval and our estimates and expectations regarding coverage and reimbursement for any approved products;~~

●

our expectation that ~~we will rely on~~our contract manufacturers ~~to manufacture OMIDRIA~~will reliably meet our requirements for commercial ~~sale~~supply of OMIDRIA and narsoplimab (if approved) and to ~~manufacture~~meet our supply requirements of our clinical and development stage product ~~candidates for purposes of clinical supply and in anticipation of potential commercialization;~~candidates;

●

our ability to raise additional capital through the capital markets or through one or more corporate partnerships, equity offerings, debt financings, collaborations, licensing arrangements or asset sales;

●

our expectations about the commercial competition that OMIDRIA and our product candidates, if commercialized, face or may face;

●

the expected course and costs of existing claims, legal proceedings and administrative actions, our involvement in potential claims, legal proceedings and administrative actions, and the merits, potential outcomes and effects of both existing and potential claims, legal proceedings and administrative actions, as well as regulatory determinations, on our business, prospects, financial condition and results of operations;

●

the extent of protection that our patents provide and that our pending patent applications will provide, if patents are issued from such applications, for our technologies, programs, products and product candidates;

●

the factors on which we base our estimates for accounting purposes and our expectations regarding the effect of changes in accounting guidance or standards on our operating results; and

●

our expected financial position, performance, revenues, growth, costs and expenses, magnitude of net losses and the availability of resources.

Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks, uncertainties and other factors described in this Quarterly Report on Form 10-Q under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our other filings with the U.S. Securities and Exchange Commission ~~(SEC)~~(“SEC”). Given these risks, uncertainties and other factors, actual results or anticipated developments may not be realized or, even if substantially realized, may not have the expected consequences to or effects on our company, business or operations. Accordingly, you should not place undue reliance on these forward-looking statements, which represent our estimates and assumptions only as of the date of the filing of this Quarterly Report on Form 10-Q. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual results in subsequent periods may materially differ from current expectations. Except as required by applicable law, we assume no obligation to update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.

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OMEROS CORPORATION

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, ~~2020~~2021

INDEX

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OMEROS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(unaudited)


	March 31,		December 31,		March 31,		December 31,
	2020		2019		2021		2020
Assets
Current assets:
Cash and cash equivalents	$	7,118	$	3,084	$	9,028	$	10,501
Short-term investments		46,862		57,704		91,455		124,452
Receivables, net		24,117		35,185		24,826		3,841
Inventory		1,211		1,147		1,191		1,355
Prepaid expense and other assets		6,303		6,625		5,982		11,136
Total current assets		85,611		103,745		132,482		151,285
Property and equipment, net		3,355		3,829		2,173		2,551
Right of use assets		27,081		27,082		24,994		25,526
Restricted investments		1,154		1,154		1,054		1,055
Advanced payments, non-current		1,013		1,159		741		625
Total assets	$	118,214	$	136,969	$	161,444	$	181,042

Liabilities and shareholders’ deficit
Current liabilities:
Accounts payable	$	12,960	$	5,328	$	11,499	$	4,199
Accrued expenses		41,379		46,627		28,132		28,755
Current portion of lease liabilities		3,597		3,504		3,803		3,782
Total current liabilities		57,936		55,459		43,434		36,736
Lease liabilities, non-current		31,396		32,318		27,806		28,770
Unsecured convertible senior notes, net		160,746		158,213		312,159		236,288
Commitments and contingencies (Note 8)
Commitments and contingencies (Note 9)
Shareholders’ deficit:
Preferred stock, par value $0.01 per share, 20,000,000 shares authorized; NaN issued and outstanding at March 31, 2020 and December 31, 2019.		—		—
Common stock, par value $0.01 per share, 150,000,000 shares authorized at March 31, 2020 and December 31, 2019; 54,507,667 and 54,200,810 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively.		545		542
Preferred stock, par value $0.01 per share, 20,000,000 shares authorized; NaN issued and outstanding at March 31, 2021 and December 31, 2020.						—		—
Common stock, par value $0.01 per share, 150,000,000 shares authorized at March 31, 2021 and December 31, 2020; 62,252,012 and 61,671,231 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively.						622		616
Additional paid-in capital		631,233		625,048		689,882		751,304
Accumulated deficit		(763,642)		(734,611)		(912,459)		(872,672)
Total shareholders’ deficit		(131,864)		(109,021)		(221,955)		(120,752)
Total liabilities and shareholders’ deficit	$	118,214	$	136,969	$	161,444	$	181,042

See accompanying Notes to Condensed Consolidated Financial Statements

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OMEROS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

(unaudited)


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2020		2019		2021		2020
Revenue:
Product sales, net	$	23,537	$	21,779
Product sales, net					$	21,061	$	23,537

Costs and expenses:
Cost of product sales		267		131		263		267
Research and development		28,911		26,255		33,358		28,911
Selling, general and administrative		18,036		14,632		18,052		18,036
Total costs and expenses		47,214		41,018		51,673		47,214
Loss from operations		(23,677)		(19,239)		(30,612)		(23,677)
Interest expense		(5,903)		(5,600)		(4,897)		(5,903)
Other income		549		494		419		549
Net loss	$	(29,031)	$	(24,345)	$	(35,090)	$	(29,031)
Comprehensive loss	$	(29,031)	$	(24,345)	$	(35,090)	$	(29,031)
Basic and diluted net loss per share	$	(0.53)	$	(0.50)	$	(0.57)	$	(0.53)
Weighted-average shares used to compute basic and diluted net loss per share		54,299,813		49,014,009		61,928,511		54,299,813

See accompanying Notes to Condensed Consolidated Financial Statements

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OMEROS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

Three Months Ended March 31,


2020

2019
Operating activities:

Net loss

$
(29,031)

$
(24,345)
Adjustments to reconcile net loss to net cash used in operating activities:


Stock-based compensation expense

3,476

3,374
Non-cash interest expense

2,533

2,201
Depreciation and amortization

402

377
Changes in operating assets and liabilities:


Receivables

11,068

(1,900)
Inventory

(64)

(648)
Prepaid expenses and other assets

628

2,110
Accounts payable and accrued expenses

1,847

5,883
Net cash used in operating activities

(9,141)

(12,948)
Investing activities:




Purchases of property and equipment

(66)

(182)
Purchases of investments

(3,176)

(281)
Proceeds from the sale and maturities of investments

14,018

11,750
Net cash provided by investing activities

10,776

11,287
Financing activities:




Proceeds upon exercise of stock options

2,712

108
Principal payments on finance lease liabilities

(313)

(254)
Net cash provided by (used in) financing activities

2,399

(146)
Net increase (decrease) in cash and cash equivalents

4,034

(1,807)
Cash and cash equivalents at beginning of period

3,084

5,861
Cash and cash equivalents at end of period

$
7,118

$
4,054

Supplemental cash flow information




Cash paid for interest

$
89

$
82
Property acquired under finance lease

$
22

$
—


	Three Months Ended March 31,
	2021		2020
Operating activities:
Net loss	$	(35,090)	$	(29,031)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		3,271		3,476
Non-cash interest expense		396		2,533
Depreciation and amortization		390		402
Changes in operating assets and liabilities:
Receivables		(20,985)		11,068
Inventory		164		(64)
Prepaid expenses and other assets		5,038		628
Accounts payable and accrued expenses		6,562		1,847
Net cash used in operating activities		(40,254)		(9,141)
Investing activities:
Purchases of property and equipment		(12)		(66)
Purchases of investments		(3)		(3,176)
Proceeds from the sale and maturities of investments		33,000		14,018
Net cash provided by investing activities		32,985		10,776
Financing activities:
Proceeds upon exercise of stock options and warrants		6,333		2,712
At the market offering costs		(241)		—
Payments on finance lease obligations		(296)		(313)
Net cash provided by financing activities		5,796		2,399
Net (decrease) increase in cash and cash equivalents		(1,473)		4,034
Cash and cash equivalents at beginning of period		10,501		3,084
Cash and cash equivalents at end of period	$	9,028	$	7,118

Supplemental cash flow information
Cash paid for interest	$	5,995	$	89
Property acquired under finance lease	$	—	$	22

See accompanying Notes to Condensed Consolidated Financial Statements

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OMEROS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1—~~Organization and Significant Accounting Policies~~Description of Business

~~Organization~~Description of Business

We are a commercial-stage biopharmaceutical company committed to discovering, developing and commercializing small-molecule and protein therapeutics for large-market as well as orphan indications targeting inflammation, complement-mediated diseases, disorders of the central nervous system, addiction and immune-related diseases, including cancers. Our first drug product, OMIDRIA^® (phenylephrine and ketorolac intraocular solution) 1%/0.3%, is marketed in the United States ~~(U.S.~~(“U.S.”) for use during cataract surgery or intraocular lens replacement. In December 2020, the Centers for Medicare & Medicaid Services (“CMS”) confirmed that OMIDRIA qualifies for separate payment when used on Medicare Part B patients in ambulatory surgery centers (“ASCs”), effective retroactively as of October 1, 2020. OMIDRIA’s pass through status, which had allowed for separate payment when used on Medicare Part B patients in the ASC or hospital setting, had expired on October 1, 2020.

Our drug candidate narsoplimab is the subject of a biologics license application (“BLA”) under priority review by the U.S. Food and Drug Administration (“FDA”) for the treatment of hematopoietic stem cell transplant-associated thrombotic microangiopathy (“HSCT-TMA”). We also have multiple late-stage clinical development programs in our pipeline, which are focused on: complement-mediated disorders, including immunoglobulin A (“IgA”) nephropathy, atypical hemolytic uremic syndrome (“aHUS”) and COVID-19.

Basis of Presentation

Our condensed consolidated financial statements include the financial position and results of operations of Omeros Corporation ~~(Omeros)~~(“Omeros”) and our wholly owned subsidiaries. All ~~inter-company~~intercompany transactions have been eliminated, and we have determined we operate in 1 segment. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ~~(GAAP)~~(“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The information as of March ~~31, 2020~~31,2021 and December 31, ~~2019~~2020 and for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 includes all adjustments, which include normal recurring adjustments, necessary to present fairly our interim financial information. The Condensed Consolidated Balance Sheet at December 31, ~~2019~~2020 has been derived from our audited financial statements but does not include all of the information and footnotes required by GAAP for audited annual financial information.

The accompanying unaudited condensed consolidated financial statements and related notes thereto should be read in conjunction with the audited consolidated financial statements and related notes thereto that are included in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, which was filed with the U.S. Securities and Exchange Commission ~~(SEC)~~(“SEC”) on March ~~2, 2020.~~1, 2021.

Risks and Uncertainties ~~Related to COVID-19~~

In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, China and has since spread around the world. On March 11, 2020, the World Health Organization (WHO) declared the outbreak of COVID-19 a global pandemic. The COVID-19 ~~outbreak~~pandemic and the ~~response of~~responses to it by various governmental authorities, ~~to try to limit it are having~~the medical community and others have had a significant impact on our business. ~~On March 18, 2020, The American Academy~~It is not possible to estimate precisely the future impact of Ophthalmology issued a letter recommending that all ophthalmologists immediately cease providing any treatment other than urgent or emergent care. Upon this recommendation the ambulatory surgery centers (ASCs) and hospitals using OMIDRIA postponed nearly all cataract surgery. Consequently, our sales of OMIDRIA to our wholesalers have been minimal following the announcement. In early May, a large number of states began re-opening ASCs and hospitals to cataract surgery, and we have had facilities in at least 36 states initiate re-ordering of OMIDRIA from our wholesalers. The COVID-19 ~~pandemic could have a continuing adverse impact~~ on our business, operations ~~and~~or financial results including through sustained limitations on cataract surgery and corresponding reduction in demand for OMIDRIA, disruptions in commercial sales activities, higher than normal volume of OMIDRIA product returns, delays or disruptions with respect to manufacturing of clinical or commercial supply, delays in our clinical trials or in the submission or review of regulatory applications, as well as a deterioration of general economic conditions. Duedue to the unknown magnitude, duration and outcome of the ~~COVID-19 pandemic, it is not possible to estimate precisely its impact on~~pandemic.

We have filed with FDA our ~~business, operations~~narsoplimab BLA for HSCT-TMA, which has been granted priority review with an FDA action date of July 17, 2021 under the Prescription Drug User Fee Act. We anticipate, but cannot guarantee, that narsoplimab will receive FDA approval and will launch in the U.S. in 2021. If approved, we cannot fully predict the timing or ~~financial results; however,~~ the ~~impact could~~magnitude of narsoplimab revenues, but we believe they will be ~~material.~~

~~Going Concern Discussion~~

~~As of March 31, 2020, we had cash, cash equivalents~~significant. Our sales and ~~short-term investments of $54.0 million and an accounts receivable-based line of credit that allows us to borrow up to $50.0 million depending on our eligible accounts receivable~~marketing

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~~borrowing base. We have incurred losses from operations of $23.7 million and $63.4 million~~strategies for the ~~three months ended March 31, 2020, and the year ended December 31, 2019, respectively. Cash used in operating activities was $9.1 million and $60.1 million~~launch of narsoplimab for ~~the three months ended March 31, 2020, and the year ended December 31, 2019, respectively. We will continue~~HSCT-TMA include various milestones at which we commit to ~~incur losses from operations as revenues exceed operating costs and debt service obligations.~~

OMIDRIA pass-through reimbursement is scheduled to end on September 30, 2020 and our first quarter 2020 sales of OMIDRIA were negatively affected by the COVID-19 pandemic. As such, we cannot predict future OMIDRIA revenues due to the uncertain impact of these circumstances on sales of OMIDRIA in 2020 and beyond. Similarly, we are unable to includeincremental spending, providing for flexibility in the ~~determination regarding our prospects as a going concern amounts available under our accounts receivable-based line~~timing of credit or any proceeds from debt transactions or other financing instruments despite our successful track record in accessing capital through these avenues. We also have not included any potential partnerships related to our products or product candidates. ~~Regardless~~costs incurred should the approval of whether we secure continued passthrough payment for OMIDRIA, our working capital needs will likely continue to increase, particularly if the disruption to our operations caused by the COVID-19 pandemic continues. The conditions described above, when evaluated within the constraints of the accounting literature, raise substantial doubt with respect to our ability to meet our obligations through May 11, 2021 and, therefore, to continue as a going concern.narsoplimab be delayed.

We plan to continue to fund our operations ~~through proceeds~~for the next twelve months with our cash and investments from sales of OMIDRIA and, inif FDA approval is granted, from sales of narsoplimab for HSCT-TMA. In addition, we may utilize funds available under our ~~accounts receivable-based~~ line of credit, which allows us to borrow up to 85% of our available accounts receivable borrowing base, less certain reserves, or ~~$50~~$50.0 million, whichever is less. We also entered into a sales agreement to sell shares of our common stock, from time to time, up to an aggregate offering amount of $150.0 million through an “at the market” equity offering program. Should it be necessary or determined to be strategically advantageous, we ~~also~~ could pursue debt financings as well as public and private offerings of our equity securities, similar to those we have previously completed, ~~previously, and/~~or other strategic transactions, which may include licensing a portion of our existing technology. ~~If these capital sources, for any reason, are needed but inaccessible, it would have a significantly negative effect on our financial condition.~~ Should it be necessary to manage our operating expenses, we would reduce our projected cash requirements ~~through reduction of our expenses~~ by delaying clinical trials, reducing selected research and development efforts, ~~and/~~or implementing other restructuring activities.

The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to our ability to continue as a going concern.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant items subject to such estimates include revenue recognition, stock-based compensation expense and accruals for clinical trials as well as manufacturing of drug ~~product and clinical drug supply and other contingencies.~~product. We base our estimates on historical experience and on various other factors, including the impact of the COVID-19 pandemic, that we believe are reasonable under the circumstances; however, actual results could differ from these estimates.

Note 2—Significant Accounting Policies

Revenue Recognition

When we enter into a customer contract, we perform the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation.

We generally record revenue from product sales when the product is delivered to our wholesalers. Product sales are recorded net of wholesaler distribution fees and estimated chargebacks, rebates, returns and purchase-volume discounts. Accruals or allowances are established for these deductions in the same period when revenue is recognized, and actual amounts incurred are offset against the applicable accruals or allowances. We reflect each of these accruals or

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allowances as either a reduction in the related accounts receivable or as an accrued liability depending on how the amount is expected to be settled.

~~Right-of-Use~~Inventory

Inventory is stated at the lower of cost or market determined on a specific identification basis in a manner that approximates the first-in, first-out (“FIFO”) method. Costs include amounts related to third-party manufacturing, transportation and internal labor and overhead. Capitalization of costs as inventory begins when regulatory approval of the product candidate is reasonably assured in the U.S. or the European Union (“EU”). We expense inventory costs related to product candidates as research and development expenses prior to receiving regulatory approval in the respective territory. Inventory is reduced to net realizable value for excess and obsolete inventories based on forecasted demand.

Right of Use Assets and Related Lease Liabilities

We record operating leases as right-of-use assets and recognize the related lease liabilities equal to the fair value of the lease payments using our incremental borrowing rate when the implicit rate in the lease agreement is not readily available. We recognize variable lease payments when incurred. Costs associated with operating lease assets are

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recognized on a straight-line basis within operating expenses over the term of the lease. We record finance leases as a component of property and equipment and amortize these assets within operating expenses on a straight-line basis to their residual values over the shorter of the term of the underlying lease or the estimated useful life of the equipment. The interest component of a finance lease is included in interest expense and recognized using the effective interest method over the lease term. We account for leases with initial terms of 12 months or less as operating expenses on a straight-line basis over the lease term.

~~Advance Payments~~

Advance payments for goods or services that will be used or rendered for future research and development activities are deferred and then recognized as an expense as the related goods are delivered or the services are performed, or when the goods or services are no longer expected to be provided.

Stock-Based Compensation

Stock-based compensation expense is recognized for all share-based payments based on estimated fair values as of the date of grant. The fair value of our stock options is calculated using the Black-Scholes option-pricing model, which requires judgmental assumptions ~~including~~around volatility, forfeiture rates and expected option ~~life. We use~~term. Compensation expense is recognized over the ~~straight-line method to allocate stock-based compensation cost to reporting periods over each optionee’s~~optionees’ requisite service ~~period,~~periods, which is generally the vesting ~~period.~~period, using the straight-line method. Forfeiture expense is estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained upon an examination. A valuation allowance is established when it is more likely than not that the deferred tax assets will not be realized.

Recently Adopted Pronouncements

~~In June 2016,~~On January 1, 2021, we adopted Accounting Standard Update (“ASU”) 2020-06, Debt—Debt with Conversion Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) on a modified retrospective basis. ASU 2020-06 removes the ~~Financial Accounting Standards Board issued ASU 2016-13,~~ ~~Financial Instruments—Credit Losses~~~~, (Topic 326) which changes how entities~~separate liability and equity accounting for our convertible senior notes. Consequently, we now account for ~~credit losses on most financial assets~~our convertible senior notes wholly as debt. (See “Note 3 – Net Loss Per Share” and ~~certain~~“Note 7 – Unsecured Convertible Senior Notes” for further information)

On January 1, 2021, we adopted ASU 2019-12, Income Taxes (Topic 740), which is intended to simplify various aspects of the income tax accounting guidance, including elimination of the exception to the incremental approach of intra-period tax allocation when there is a loss from continuing operations and income or gain from other ~~instruments and expands disclosures. The standard is effective for annual and interim periods beginning after December 15, 2019 with early adoption permitted.~~items (for example, other comprehensive income). We adopted the standard on ~~January 1, 2020~~a prospective basis and the ~~adoption did not have a material~~ impact onto our consolidated financial statements ~~and disclosures.~~

~~Note 2—Net Loss Per Share~~

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and dilutive common share equivalents outstanding for the period, determined using the treasury-stock method. Common share equivalents are excluded from the diluted net loss per share computation if their effect is anti-dilutive.

~~The basic and diluted net loss per share amounts~~ for the three months ended March ~~31, 2020~~31,2021 was immaterial.

Note 3—Net Loss Per Share

Our potentially dilutive securities include potential common shares related to our stock options, warrant and ~~2019 were computed based on~~unsecured convertible senior notes. Diluted earnings per share (“Diluted EPS”) considers the ~~shares~~impact of ~~common stock outstanding during the respective periods. Potentially~~potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. Shares issuable under the unsecured convertible notes are calculated using the if-converted method and are excluded from the ~~diluted loss per share calculation are~~below table as ~~follows:~~

March 31,

2020

2019
Outstanding options to purchase common stock

12,591,341

11,840,521
Outstanding warrants to purchase common stock

243,115

243,115
Total potentially dilutive shares excluded from loss per share

12,834,456

12,083,636

their impact is anti-dilutive. Diluted EPS excludes the impact of potential common shares related to our stock options in periods in which the option exercise price is greater than the average market price of our common stock for the period.

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Potentially dilutive securities excluded from Diluted EPS are as follows:


	Three Months Ended
	March 31,
	2021	2020
Outstanding options to purchase common stock	3,453,133	1,659,029
Outstanding warrants to purchase common stock	—	10,901
Total potentially dilutive shares excluded from loss per share	3,453,133	1,669,930

Note 3—4—Certain Balance Sheet Accounts

Accounts Receivable, net

Accounts receivable, net consist of the following:


	March 31,		December 31,		March 31,		December 31,
	2020		2019		2021		2020

	(In thousands)				(In thousands)
Trade receivables, net	$	24,011	$	35,074	$	24,576	$	3,771
Sublease and other receivables		106		111		250		70
Total accounts receivables, net	$	24,117	$	35,185	$	24,826	$	3,841

Trade receivables ~~are shown~~ net of ~~$4.1~~product return and chargeback allowances were $1.5 million and ~~$1.6~~$1.2 million ~~of chargeback and product return allowances~~ as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Inventory

Inventory consists of the following:


	March 31,		December 31,		March 31,		December 31,
	2020		2019		2021		2020

	(In thousands)				(In thousands)
Raw materials	$	91	$	91	$	242	$	109
Work-in-progress		394		338		405		462
Finished goods		726		718		544		784
Total inventory	$	1,211	$	1,147	$	1,191	$	1,355

Property and Equipment, Net

Property and equipment, net consists of the following:


	March 31,		December 31,		March 31,		December 31,
	2020		2019		2021		2020

	(In thousands)				(In thousands)
Finance leases	$	5,496	$	5,474	$	5,690	$	5,690
Laboratory equipment		2,750		2,844		2,910		2,898
Computer equipment		921		921		985		985
Office equipment and furniture		625		625		625		625
Total cost		9,792		9,864		10,210		10,198
Less accumulated depreciation and amortization		(6,437)		(6,035)		(8,037)		(7,647)
Total property and equipment, net	$	3,355	$	3,829	$	2,173	$	2,551

For ~~both~~ the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, depreciation and amortization expenses were $0.4 million.

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Accrued Expenses

Accrued expenses consist of the following:


	March 31,		December 31,		March 31,		December 31,
	2020		2019		2021		2020

	(In thousands)				(In thousands)
Sales rebates, fees and discounts					$	6,871	$	3,326
Contract research and development	$	19,318	$	24,107		6,146		7,952
Sales rebates, fees and discounts		8,785		10,870
Consulting and professional fees						5,002		5,393
Interest payable		4,921		1,640		3,703		5,205
Consulting and professional fees		3,337		3,610
Employee compensation		2,772		3,546		3,665		3,948
Clinical trials		1,468		1,982		2,007		2,121
Other accrued expenses		778		872		738		810
Total accrued expenses	$	41,379	$	46,627	$	28,132	$	28,755

Note 4—5—Fair-Value Measurements

As of March 31, ~~2020,~~2021, and December 31, ~~2019,~~2020, all investments were classified as short-term and available-for-sale on the accompanying Condensed Consolidated Balance Sheets. Investment income, which was included as a component of other income, consists of interest earned.

On a recurring basis, we measure certain financial assets at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting standard establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required:

Level 1—Observable inputs for identical assets or liabilities, such as quoted prices in active markets;

Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable; and

Level 3—Unobservable inputs in which little or no market data exists, therefore they are developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

Our fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis are as follows:


	March 31, 2020								March 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

	(In thousands)								(In thousands)
Assets:
Money-market funds classified as non-current restricted investments	$	1,154	$	—	$	—	$	1,154	$	1,054	$	—	$	—	$	1,054
Money-market funds classified as short-term investments		46,862		—		—		46,862		91,455		—		—		91,455
Total	$	48,016	$	—	$	—	$	48,016	$	92,509	$	—	$	—	$	92,509


	December 31, 2019								December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

	(In thousands)								(In thousands)
Assets:
Money-market funds classified as non-current restricted investments	$	1,154	$	—	$	—	$	1,154	$	1,055	$	—	$	—	$	1,055
Money-market funds classified as short-term investments		57,704		—		—		57,704		124,452		—		—		124,452
Total	$	58,858	$	—	$	—	$	58,858	$	125,507	$	—	$	—	$	125,507

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Cash held in demand deposit accounts of ~~$7.1~~$9.0 million and ~~$3.1~~$10.5 million is excluded from our fair-value hierarchy disclosure as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. There were 0 unrealized gains or losses associated with our ~~short-term~~ investments as of March 31, ~~2020~~2021 or December 31, ~~2019.~~2020. The carrying amounts reported in the accompanying Condensed Consolidated Balance Sheets for receivables, accounts payable, other current monetary assets and liabilities approximate fair value.

See ~~“Note 6--Convertible~~“Note7—Unsecured Convertible Senior Notes” for the carrying amount and estimated fair value of our ~~6.25% Convertible Senior Notes due 2023.~~outstanding convertible senior notes.

Note ~~5—Debt~~

6—Line of Credit

We have a Loan and Security Agreement with Silicon Valley Bank, which provides for a $50.0 million revolving line of credit facility (the ~~Line~~“Line of Credit ~~Agreement)~~Agreement”). Under the Line of Credit Agreement, we may draw, on a revolving basis, up to the lesser of $50.0 million ~~and~~or 85.0% of our eligible accounts receivable, less certain reserves. Interest on amounts outstanding is payable monthly at the greater of 5.5% ~~and~~or the prime rate. The line of credit is secured by all our assets excluding intellectual property and development program inventories.

As of March 31, ~~2020~~2021 and December 31, ~~2019, we had~~2020, 0 amounts were outstanding ~~borrowings~~ under the Line of Credit Agreement.

Note 6—7—Unsecured Convertible Senior Notes

~~We have~~On January 1, 2021, we early adopted ASU 2020-06on amodified retrospective basis. ASU 2020-06 removes the separate liability and equity accounting for our outstanding convertible senior notes. Consequently, we now account for our convertible senior notes wholly as debt. Adoption of ASU 2020-06 resulted in a cumulative effect adjustment of $75.5 million to restore our unsecured convertible notes and additional paid-in capital to the balances without an equity allocation component. The carrying value of the notes are reflective of their face value less unamortized debt issuance costs. Interest expense recognized in future periods will be reduced as a result of accounting for the unsecured convertible notes wholly as a liability measured at amortized cost.

Unsecured convertible senior notes outstanding at March 31, 2021 and December 31, 2020 are as follows:


	Balance as of March 31, 2021
	2023 Notes		2026 Notes		Total

	(In thousands)
Principal amount	$	95,000	$	225,030	$	320,030
Unamortized debt issuance costs		(1,749)		(6,122)		(7,871)
Total unsecured convertible senior notes, net	$	93,251	$	218,908	$	312,159

Fair value of outstanding unsecured convertible senior notes (1)	$	114,119	$	279,431

Amount by which the unsecured convertible senior notes if-converted value exceeds their principal amount	$	19,119	$	54,401

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	Balance as of December 31, 2020
	2023 Notes		2026 Notes		Total

	(In thousands)
Principal amount	$	95,000	$	225,030	$	320,030
Unamortized discount		(17,101)		(60,544)		(77,645)
Unamortized issuance costs attributable to liability component		(1,481)		(4,616)		(6,097)
Total unsecured convertible senior notes, net	$	76,418	$	159,870	$	236,288

Fair value of outstanding unsecured convertible senior notes (1)	$	101,769	$	246,779

Amount by which the unsecured convertible senior notes if-converted value exceeds their principal amount	$	6,769	$	21,749

Equity component	$	25,854	$	63,544
Unamortized issuance costs		(837)		(1,916)
Net carrying amount of equity component (2)	$	25,017	$	61,628

(1)	The fair value is classified as Level 3 due to the limited trading activity for the unsecured convertible senior notes.

(2)	Included in the Condensed Consolidated Balance Sheet within additional paid-in capital at December 31, 2020. Upon early adoption of ASU 2020-06 on January 1, 2021, amounts were reclassified to unsecured convertible senior notes, net.

2023 Unsecured Convertible Senior Notes

On November 15, 2018, we issued $210.0 million in aggregate principal amount of our 6.25% ~~Convertible Senior Notes due 2023~~convertible senior notes (the ~~Convertible Notes)~~“2023 Notes”). The ~~Convertible~~2023 Notes ~~are unsecured and~~ accrue interest at an annual rate of 6.25% per annum, payable semi-annually in arrears on May 15 and November 15 of each year. The ~~Convertible~~2023 Notes mature on November 15, 2023 unless earlier purchased, redeemed or converted in accordance with their terms. On August 14, 2020, we issued the 5.25% convertible senior notes (the “2026 Notes”) and used approximately $125.6 million of the net proceeds to repurchase $115.0 million principal amount of the 2023 Notes (see “2026 Unsecured Convertible Senior Notes” below).

The ~~Convertible~~2023 Notes ~~will be~~are convertible into cash, shares of our common stock or a combination thereof, as we elect at our sole discretion. The initial conversion rate is 52.0183 shares of our common stock per $1,000 of note principal (equivalent to an initial conversion price of approximately $19.22 per share of common stock), subject to adjustment in certain circumstances. To reduce the dilutive impact or potential cash expenditure associated with the conversion of the ~~Convertible~~2023 Notes, we entered into a capped call transaction (the “2023 Capped Call”), which ~~essentially~~ covers the number of shares of our common stock underlying the ~~Convertible~~2023 Notes when our common stock is trading between the initial conversion price of $19.22 per share and $28.84 per share. In connection with the partial repurchase of the 2023 Notes, we entered into a capped call termination contract to unwind a proportionate amount of the 2023 Capped Call. As of March 31, ~~2020, all Convertible Notes remain outstanding.~~2021, approximately 4.9 million shares remained outstanding on the 2023 Capped Call.

The ~~balance of our Convertible Notes at March 31, 2020 and December 31, 2019, is as follows:~~following table sets forth total interest expense recognized in connection with the 2023 Notes:


	March 31,		December 31,		Three Months Ended March 31,
	2020		2019		2021		2020

	(In thousands)				(In thousands)
Principal amount	$	210,000	$	210,000
Unamortized discount		(45,329)		(47,660)
Unamortized issuance costs attributable to principal amount		(3,925)		(4,127)
Total Convertible Notes, net	$	160,746	$	158,213
Contractual interest expense					$	1,484	$	3,281
Amortization of debt issuance costs						150		202
Amortization of debt discount						—		2,331
Total					$	1,634	$	5,814

The estimated fair value of the Convertible Notes at March 31, 2020, as determined through consideration of quoted market prices, was $190.1 million. The fair value is classified as Level 3 due to the limited trading activity for the Convertible Notes.

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2026 Unsecured Convertible Senior Notes

The 2026 Notes are unsecured and accrue interest at an annual rate of 5.25% per annum, payable semi-annually in arrears on February 15 and August 15 of each year. The 2026 Notes mature on February 15, 2026, unless earlier purchased, redeemed or converted in accordance with their terms.

The initial conversion rate is 54.0906 shares of our common stock per $1,000 of note principal (equivalent to an initial conversion price of approximately $18.4875 per share of common stock), which equals approximately 12.2 million shares issuable upon conversion, subject to adjustment in certain circumstances.

The 2026 Notes are convertible at the option of the holders on or after November 15, 2025 at any time prior to the close of business on February 12, 2026. Additionally, holders may convert their 2026 Notes at their option at specified times prior to the maturity date only if:

(1)

during any calendar quarter, beginning after September 30, 2020, that the last reported sale price per share of our common stock exceeds 130% of the conversion price of the 2026 Notes for each of at least 20 trading days in the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2)

during the five consecutive business days immediately after any five-consecutive-trading-day period (such five-consecutive-trading-day period, the “measurement period”) in which the trading price per $1,000 principal amount of 2026 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;

(3)

there is an occurrence of one or more certain corporate events or distributions of our common stock; or

(4)

we call the 2026 Notes for redemption.

At our sole discretion, we may elect to convert the 2026 Notes into cash, shares of our common stock or a combination thereof at maturity. Subject to the satisfaction of certain conditions, beginning August 15, 2023, we may redeem in whole or in part the 2026 Notes at our option at a cash redemption price equal to the principal amount of the 2026 Notes plus any accrued and unpaid interest.

In order to reduce the dilutive impact or potential cash expenditure associated with the conversion of the 2026 Notes, we entered into capped call transactions (the “2026 Capped Calls”). The 2026 Capped Calls will cover the number of shares of common stock underlying the 2026 Notes when our common stock is trading within the range of approximately $18.49 and $26.10. However, should the market price of our common stock exceed the $26.10 cap, then the conversion of the 2026 Notes would have a dilutive impact or may require a cash expenditure to the extent the market price exceeds the cap price.

The following table sets forth interest expense recognized related to the 2026 Notes:



	Three Months Ended
	March 31, 2021
	(In thousands)
Contractual interest expense	$	2,954
Amortization of debt issuance costs		246
Total	$	3,200

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Future minimum payments for the 2023 and 2026 Notes as of March 31, 2021 are as follows:


	(In thousands)
2021	$	—
2022		—
2023		95,000
2024		—
2025		—
2026		225,030
Total future minimum payments under the convertible senior notes	$	320,030

Note 8—Leases

We have an operating lease for our office and laboratory facilities with an initial term that ends in 2027 with 2 options to extend the lease term by five years. We carry various finance leases for laboratory equipment.

Supplemental lease information is as follows:


	Three Months Ended
	2021		2020

	(In thousands)
Lease cost
Operating lease cost	$	1,583	$	1,509
Finance lease cost:
Amortization		323		357
Interest		63		89
Variable lease cost		813		542
Sublease income		(418)		(293)
Net lease cost	$	2,364	$	2,204

Cash paid for amounts included in the measurement of lease liabilities is as follows:


	Three Months Ended
	2021		2020

	(In thousands)
Cash payments for operating leases	$	3,381	$	2,136
Cash payments for financing leases	$	354	$	402

Note 9—Commitments and Contingencies

Contracts

We have various agreements with third parties that would collectively require payment of termination fees if we cancelled work as of March 31, 2021.

Development Milestones and Product Royalties

We have licensed a variety of intellectual property from third parties that we are currently developing or may develop in the future. These licenses may require milestone payments in connection with clinical development or commercial milestones as well as low single to low double-digit royalties on the net income or net sales of the product.

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For the three months ended March 31, 2021 and 2020, development milestone expenses were insignificant. We do not owe any royalties on OMIDRIA. Should narsoplimab be approved, we would owe milestone payments to development partners and be obligated to pay low single-digit royalties on net sales of the product.

Note ~~7—Leases~~

~~We have operating leases related to our office and laboratory space and finance leases for certain laboratory and office equipment, as follows:~~

March 31,

December 31,

2020

2019

(In thousands)
Assets

Operating lease assets
$
27,081

$
27,082
Finance lease assets, net

2,638

2,973
Total lease assets
$
29,719

$
30,055

Liabilities

Current:

Operating leases
$
2,391

$
2,282
Finance leases

1,206

1,222
Non-current:

Operating leases

30,125

30,772
Finance leases

1,271

1,546
Total lease liabilities
$
34,993

$
35,822

~~The components of total lease cost are as follows:~~

Three Months Ended

March 31,

2020

2019

(In thousands)
Lease cost





Operating lease cost
$
1,509

$
1,031
Finance lease cost:




Amortization

357

290
Interest

89

82
Short-term lease cost

—

138
Variable lease cost

542

486
Sublease income

(293)

(224)
Total lease cost
$
2,204

$
1,803

~~The supplemental cash flow information related to leases is as follows:~~

Three Months Ended

March 31,

2020

2019

(In thousands)
Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows used for operating leases
$
2,136

$
1,647
Operating cash flows used for finance leases
$
89

$
82
Financing cash flows used for finance leases
$
313

$
254

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~~Note 8—Commitments and Contingencies~~

~~Contracts~~

~~We have various agreements with third parties that would collectively require payment of termination fees totaling $17.6 million if we had cancelled the work as of March 31, 2020.~~

~~Development Milestones and Product Royalties~~

We have licensed a variety of intellectual property from third parties that we are currently developing or may develop in the future. These licenses may require milestone payments during clinical development processes as well as low single to low double-digit royalties on the net income or net sales of the product. For the three months ended March 31, 2020 and 2019, development milestones were insignificant. We do not owe any royalties on OMIDRIA.

~~Note 9—~~10—Shareholders’ Deficit

Common Stock and Warrants

~~For~~On March 1, 2021, we entered into a sales agreement to sell shares of our common stock having an aggregate offering price of up to $150.0 million, from time to time, through an “at the market” equity offering program. As of March 31, 2021, we have not sold any shares under this program.

During the three months ended March 31, ~~2020, we received proceeds of $2.7 million upon the~~2021, a cashless exercise ~~of stock options which resulted~~was executed for 43,115 warrants, resulting in the issuance of ~~306,857~~24,901 shares of our common stock. ~~For the three months ended March 31, 2019, we received proceeds of $0.1 million upon the exercise of stock options which resulted in the issuance of 10,744 shares of common stock.~~

As of March 31, ~~2020 and December 31, 2019, we had 243,115~~2021, 200,000 warrants remained outstanding with ~~a weighted average~~an exercise price of ~~$20.68~~$23.00 per share. The warrants expire on April 12, 2023.

Interim Condensed Consolidated Statements of Shareholders’ Deficit

The changes in interim balances of the components of our shareholders’ deficit are as follows:

Additional

Common

Paid-In

Accumulated


Stock

Capital

Deficit

Total

(In thousands)
Balance January 1, 2020

$
542

$
625,048

$
(734,611)

$
(109,021)
Exercise of stock options

3

2,709

—

2,712
Stock-based compensation expense

—

3,476

—

3,476
Net loss

—

—

(29,031)

(29,031)
Balance March 31, 2020

$
545

$
631,233

$
(763,642)

$
(131,864)


			Additional								Additional
	Common		Paid-In		Accumulated				Common		Paid-In		Accumulated
	Stock		Capital		Deficit		Total		Stock		Capital		Deficit		Total

		(In thousands)								(In thousands)
Balance January 1, 2019	$	490	$	549,479	$	(650,125)	$	(100,156)
Balance January 1, 2021									$	616	$	751,304	$	(872,672)	$	(120,752)
Exercise of stock options		—		108		—		108		6		6,327		—		6,333
At the market offering costs										—		(241)		—		(241)
Cumulative effect of adopting ASU 2020-06										—		(70,779)		(4,697)		(75,476)
Stock-based compensation expense		—		3,374		—		3,374		—		3,271		—		3,271
Net loss		—		—		(24,345)		(24,345)		—		—		(35,090)		(35,090)
Balance March 31, 2019	$	490	$	552,961	$	(674,470)	$	(121,019)
Balance March 31, 2021									$	622	$	689,882	$	(912,459)	$	(221,955)


			Additional
	Common		Paid-In		Accumulated
	Stock		Capital		Deficit		Total

		(In thousands)
Balance January 1, 2020	$	542	$	625,048	$	(734,611)	$	(109,021)
Exercise of stock options		3		2,709		—		2,712
Stock-based compensation expense		—		3,476		—		3,476
Net loss		—		—		(29,031)		(29,031)
Balance March 31, 2020	$	545	$	631,233	$	(763,642)	$	(131,864)

Note 11—Stock-Based Compensation

Stock-based compensation expense is as follows:


	Three Months Ended
	March 31,
	2021		2020

	(In thousands)
Research and development	$	1,480	$	1,447
Selling, general and administrative		1,791		2,029
Total	$	3,271	$	3,476

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~~Note 10—Stock-Based Compensation~~

~~Stock-based compensation expense is as follows:~~

Three Months Ended

March 31,


2020

2019

(In thousands)
Research and development

$
1,447

$
1,494
Selling, general and administrative

2,029

1,880
Total

$
3,476

$
3,374

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following assumptions were applied to all stock option grants:


	Three Months Ended
	March 31,			Three Months Ended
	2020			March 31, 2021
Estimated weighted-average fair value	$	7.89		$	13.15
Weighted-average assumptions:
Expected volatility		76	%		81	%
Expected term, in years		6.0
Expected life, in years					6.1
Risk-free interest rate		1.18	%		0.71	%
Expected dividend yield		—	%		0	%

Stock option activity for all stock plans and related information is as follows:


		Weighted-						Weighted-
		Average			Aggregate			Average			Aggregate
		Exercise		Remaining	Intrinsic			Exercise		Remaining	Intrinsic
	Options	Price per		Contractual Life	Value		Options	Price per		Contractual Life	Value
	Outstanding	Share		(In years)	(In thousands)		Outstanding	Share		(In years)	(In thousands)
Balance at December 31, 2019	11,207,931	$	11.72
Balance at December 31, 2020							11,938,528	$	11.92
Granted	1,744,585		11.95				244,500		19.09
Exercised	(306,857)		8.84				(555,880)		11.39
Forfeited	(54,318)		15.04
Balance at March 31, 2020	12,591,341	$	11.81	6.4	$	26,173
Vested and expected to vest at March 31, 2020	12,116,956	$	11.75	6.3	$	25,838
Exercisable at March 31, 2020	8,261,407	$	11.03	5.0	$	23,067
Canceled							(69,603)		15.26
Balance at March 31, 2021							11,557,545	$	12.08	5.9	$	67,933
Vested and expected to vest at March 31, 2021							11,223,195	$	12.03	5.8	$	66,493
Exercisable at March 31, 2021							8,591,292	$	11.55	4.9	$	54,999

AtAs of March 31, ~~2020,~~2021, there were ~~4.3~~3.0 million unvested options outstanding that will vest over a weighted-average period of ~~2.9~~2.5 years and ~~3.7~~3.9 million shares were available to grant. The total estimated compensation expense yet to be recognized on outstanding options is ~~$32.9~~$22.7 million.

In March 2020, annual stock option grants totaling approximately 1.6 million shares with an exercise price of $11.91 per share were granted to all eligible employees. The options vest monthly on a straight-line basis over four years.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Overview

Our drug product OMIDRIA^® is marketed in the United States for use during cataract surgery or intraocular lens replacement for adult and pediatric patients. Our drug candidate narsoplimab is the subject of a biologics license application (“BLA”) under priority review by the U.S. Food and Drug Administration (“FDA”) for the treatment of hematopoietic stem cell transplant-associated thrombotic microangiopathy (“HSCT-TMA”). We also have multiple ~~Phase 3 and Phase 2 clinical-stage~~late-stage clinical development programs in our pipeline, which are focused ~~on:~~on complement-mediated disorders, including ~~hematopoietic stem cell transplant-associated thrombotic microangiopathy (“HSCT-TMA”), Immunoglobulin~~immunoglobulin A (“IgA”) nephropathy, ~~and~~ atypical hemolytic uremic syndrome (“aHUS”)~~, as well as~~ and COVID-19. We have also initiated a Phase 1 clinical program for our MASP-3 inhibitor OMS906 targeting the alternative pathway of complement and have successfully completed a Phase 1 study in our phosphodiesterase 7 (“PDE7”) program focused on addiction. In addition, we have a diverse group of preclinical programs including GPR174, a novel target in immuno-oncology that modulates a new cancer immunity axis that we ~~recently~~ discovered. Small-molecule and antibody inhibitors of GPR174 are part of our proprietary G protein-coupled receptor (“GPCR”) platform through which we control 54 ~~new~~ GPCR drug targets and their corresponding compounds. We also ~~exclusively possess~~have a ~~novel~~proprietary-asset-enabled antibody-generating ~~platform.~~technology. We have retained control of all commercial rights for OMIDRIA and each of our product candidates and programs.

Impact of Global Pandemic

The COVID-19 ~~outbreak~~pandemic and the ~~response of~~responses to it by various governmental authorities, the medical community and others continue to ~~try to limit its spread are having~~have a significant impact on our business. OnIn March ~~18,~~ 2020, The American Academy of Ophthalmology issued a letter recommending that all ophthalmologists immediately cease providing any treatment other than urgent or emergent care. Upon this recommendation the ASCsambulatory surgery centers (“ASCs”) and hospitals using OMIDRIA postponed nearly all cataract ~~surgery. Consequently, our~~surgery in response to recommendations from government and medical organizations. As a result, we did not record any sales of OMIDRIA to our wholesalers ~~have been minimal following~~from March 25 to May 19, 2020. However, by the ~~announcement, including throughout April. In early May, a large number~~end of ~~states began re-opening ASCs and hospitals~~June 2020, the run rate of weekly OMIDRIA sales had recovered to ~~cataract surgery, and we have had facilities in at least 36 states initiate re-ordering~~levels approximating those seen prior to the pandemic. It is not possible to estimate precisely the future impact of ~~OMIDRIA from our wholesalers. The~~ COVID-19 ~~pandemic could have a continuing adverse impact~~ on our business, operations ~~and~~or financial results including through sustained limitation on cataract surgery and corresponding reduction in demand for OMIDRIA, disruptions in commercial sales activities, higher than normal volume of OMIDRIA product returns, delays or disruptions with respect to manufacturing of clinical or commercial supply, delays in our clinical trials or in the submission or review of regulatory applications, as well as deterioration of general economic conditions. Duedue to the unknown magnitude, duration and outcome of the ~~COVID-19~~ pandemic, ~~it is not~~especially in light of the severity and transmissibility of virus variants and possible ~~to estimate precisely its impact on our business, operations or financial results; however,~~local governmental responses across the ~~impact could be material.~~U.S.

Commercial Product - OMIDRIA^®(phenylephrine and ketorolac intraocular solution) 1%/0.3%

OMIDRIA is approved by ~~the~~ FDA for use during cataract surgery or intraocular lens replacement to maintain pupil size by preventing intraoperative miosis (pupil constriction) and to reduce postoperative ocular pain. Outside the U.S., we have received approval from the European Commission (“EC”) to market OMIDRIA in the European Economic Area (“EEA”) for use during cataract surgery and other IOL replacement procedures for maintenance of intraoperative mydriasis (pupil dilation), prevention of intraoperative miosis and reduction of acute postoperative ocular pain.

OMIDRIA is a proprietary drug product containing two active pharmaceutical ingredients: ketorolac, an anti-inflammatory agent, and phenylephrine, a mydriatic, or pupil dilating, agent. Cataract and other lens replacement surgery involves replacement of the original lens of the eye with an artificial intraocular lens. OMIDRIA is added to standard irrigation solution used during cataract and lens replacement surgery and is delivered intracamerally, or within the

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anterior chamber of the eye, to the site of the surgical trauma throughout the procedure. Preventing pupil constriction is essential for these procedures and, if miosis occurs, the risk of damaging structures within the eye and other complications increases, as does the operating time required to perform the procedure.

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We ~~launched OMIDRIA in the U.S. in the second quarter of 2015 and~~ sell OMIDRIA primarily through wholesalers which, in turn, sell to ~~ambulatory surgery centers (“ASCs”)~~ASCs and hospitals. The Centers for Medicare & Medicaid Services (“CMS”), the federal agency responsible for administering the Medicare program, granted transitional pass-through reimbursement status for OMIDRIA ~~in 2014, effective~~ from January 1, 2015 through December 31, 2017. Pass-through status allows for separate payment (i.e., outside the packaged payment rate for the surgical procedure) under Medicare Part B. In March 2018, Congress extended pass-through reimbursement status for ~~a small number of drugs, including~~ OMIDRIA through September 30, 2020 when used during procedures performed on Medicare Part B fee-for-service ~~patients for an additional two years, running from October 1, 2018 through September 30, 2020.~~

~~We continue to pursue permanent separate~~patients. Pass-through reimbursement for OMIDRIA ~~beyond the currently scheduled expiration of pass-through reimbursement. CMS is required~~ under ~~the Substance Use–Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act to review payments under~~Medicare Part B expired on October 1, 2020. In December 2020, in its ~~CMS’ outpatient prospective payment system~~annual rule on Outpatient Prospective Payments System (“OPPS”) and ASC payments, CMS confirmed that OMIDRIA qualifies for ~~opioids and evidence-based~~separate payment when used on Medicare Part B patients in ASCs under CMS’ policy for non-opioid ~~alternatives for~~ pain management ~~with a goal to ensure~~surgical drugs. We believe that ~~there are~~CMS will not ~~financial incentives to use opioids instead of non-opioid alternatives. In~~change its ~~2020 OPPS proposed rule, CMS noted that non-opioid drugs that are indicated for reduction of post-operative pain may warrant~~ separate payment ~~if there is evidence to show packaged payment presents a demonstrated barrier to access~~policy for ~~such~~non-opioid pain management surgical drugs, ~~and that such drugs help to deter or avoid prescription opioid use and addiction. Although Omeros provided CMS with evidence that it believes shows that OMIDRIA meets these criteria, CMS declined~~which has been in its 2020 OPPS final rule to confirm separate payment to OMIDRIA beyond the expiration of its current pass-through status on September 30, 2020. CMS also noted in the 2020 OPPS final rule that it will continue to analyze evidence and monitor utilization of OMIDRIA. We continue to generate evidence and intend to continue pursuing administrative and legislative avenues to secure permanent separate payment or similar reimbursement for OMIDRIA beyond September 30, 2020; however, we cannot provide assurance that these efforts will be successful. For more information regarding OMIDRIA reimbursement, see “Financial Summary” below.

In July 2018, we placed OMIDRIA on the market in the European Union (“EU”), on a limited basis, which maintained the ongoing validity of the European marketing authorization for OMIDRIA. At this time, we do not expect to see significant sales of OMIDRIA in any countries within the EEA or other international territories.effect since 2019.

Clinical Development Programs

Our clinical stage development programs include:

●

MASP-2 - narsoplimab (OMS721) - Lectin Pathway Disorders. Narsoplimab, also referred to as OMS721, is our lead fully human monoclonal antibody targeting mannan-binding lectin-associated serine protease-2 ~~(MASP-2)~~(“MASP-2”), a novel pro-inflammatory protein target involved in activation of the ~~complement system.~~lectin pathway of complement. The ~~complement system~~lectin pathway plays aan important role in the body’s inflammatory response and becomes activated as a result of tissue damage or ~~trauma or~~ microbial pathogen invasion. Inappropriate or uncontrolled activation of the ~~complement system~~lectin pathway can cause serious diseases ~~characterized by serious tissue injury.~~and disorders. MASP-2 is the effector enzyme of the lectin pathway, ~~of the complement system,~~ and the current development focus for narsoplimab is diseases ~~in which~~that are strongly associated with activation of the lectin pathway has been shown to contribute to significant tissue injury and pathology. When not treated, these diseases are typically characterized by significant end organ injuries, such as kidney or central nervous system injury.pathway.

~~We have completed~~FDA is currently reviewing our ~~pivotal clinical trial~~BLA for narsoplimab in HSCT-TMA, and Phase 3 clinical programs are in process for narsoplimab in IgA nephropathy and aHUS.

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~~Table~~ Narsoplimab is also being evaluated for treatment of ~~Contents~~COVID-19 in a late-stage adaptive platform trial and has been administered under compassionate use to treat COVID-19 patients in Italy and in the U.S.

Narsoplimab has received multiple designations from ~~the~~ FDA and from the EMA across ~~the~~ three current indications. These include:

●

HSCT-TMA: In the U.S., the FDA has granted narsoplimab (1) breakthrough therapy designation in patients who have persistent TMA despite modification of immunosuppressive therapy ~~(2) orphan drug designation for the prevention (inhibition) of complement-mediated TMAs,~~ and ~~(3)~~(2) orphan drug designation for the treatment of HSCT-TMA. The EC also granted narsoplimab a designation as an orphan medicinal product for treatment in hematopoietic stem cell transplantation.

●

IgA nephropathy: In the U.S., narsoplimab has received from the FDA (1) breakthrough therapy designation for the treatment of IgA nephropathy and (2) orphan drug designation in IgA nephropathy. In Europe, narsoplimab has ~~received from the EC~~been granted designation as an orphan medicinal product for the treatment of primary IgA nephropathy.

●

aHUS: In the U.S., narsoplimab has received from the FDA (1) fast-track designation for the treatment of patients with aHUS and (2) orphan drug designation for the prevention (inhibition) of complement-mediated thrombotic microangiopathies.

In October 2019, we initiated the rolling submission to FDA of our BLA for narsoplimab for the treatment of HSCT-TMA, a frequently lethal complication of HSCT. A rolling submission enables us to submit sections of the BLA as they are completed, which can accelerate the time to approval by allowing FDA to review completed sections of the application as they are submitted rather than waiting for the entire BLA to be submitted before beginning its review. The initial submission to FDA included all of the nonclinical (i.e., pharmacology, pharmacokinetics and toxicology) data, study reports, overview and summaries for the nonclinical sections of the BLA. We have also successfully completed the manufacturing of the required process validation lots of narsoplimab and submitted the second part of the BLA containing information related to the chemistry, manufacturing and controls (“CMC”) for narsoplimab. The clinical sections and additional CMC information for the BLA are being prepared for submission and, once all CMC and clinical data collection and analyses are complete and compiled, these remaining parts of the BLA will be submitted.

~~On March 2,~~ 2020, we reported final clinical data from our pivotal trial of narsoplimab in ~~HSCT-TMA.~~HSCT-TMA, a frequently lethal complication of HSCT. The single-arm, open-label trial included safety and efficacy endpoints that ~~were previously agreed to with FDA. These endpoints~~ were assessed for (1) all 28 patients who received at least one dose of narsoplimab and (2) patients who received the protocol-specified dosing of at least four weeks of narsoplimab.

The primary efficacy endpoint in the trial was the proportion of patients who achieved designated “responder” status based on improvement in HSCT-TMA laboratory markers and clinical status. This is referred to as the ~~“complete~~

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“complete response rate.” The primary laboratory markers that were evaluated were platelet count and lactate dehydrogenase (“LDH”), levels, while improvement in clinical status was evaluated based on organ function and transfusions. ~~Patients who did not fully meet these criteria~~Each patient was required to show improvement in both laboratory markers and clinical status to be considered a responder. All others were considered ~~“non-responders.”~~non-responders.

~~The FDA-agreed efficacy threshold for the primary endpoint is a complete response rate of 15%.~~ Among patients who received at least one dose of narsoplimab, the complete response rate was ~~54% (p~~61% (95% confidence interval [CI] 40.6 to 78.5; p<0.0001), while the complete response rate among patients who received the protocol-specified narsoplimab treatment of at least four weeks of dosing was ~~65% (p~~74% (95% CI 51.6 to 89.8; p<0.0001). The response rates and their respective lower levels of the 95% confidence intervals are a multiple of the pre-specified efficacy threshold of 15%.

Secondary endpoints in the trial were survival rates and change from baseline in HSCT-TMA laboratory markers. Among ~~the responder population, 93% of~~all treated patients, 68% survived for at least 100 days following HSCT-TMA diagnosis, while 83% of patients who received treatment for at least four weeks and ~~68%~~94% of the ~~total treated population~~responders achieved this endpoint. Median overall survival was 274 days among all patients and 361 days among patients who received the protocol-specified treatment of at least four weeks. Median survival could not be estimated for responders because more than half of the responders were alive at last follow-up. Results also included statistically significant improvements in platelet count, LDH and haptoglobin. The treated population had multiple high-risk features that portend a poor outcome, including the persistence of HSCT-TMA despite modification of immunosuppression (which was a criterion for entry into the trial), graft-versus-host disease, significant infections, non-infectious pulmonary complications and neurological findings. ~~Patients in the trial had a high expected mortality rate, with 93% of~~

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~~them having multiple risk factors.~~ The most common adverse events observed in the trial were nausea, vomiting, diarrhea, hypokalemia, neutropenia and fever, which are all common in stem-cell transplant patients. Six deaths occurred during the trial. These were due to sepsis, progression of the underlying disease, and graft-versus-host ~~disease.~~disease with TMA. All of these are common causes of death in this patient population.

In November 2020, we completed the rolling submission to FDA of our BLA for narsoplimab for the treatment of HSCT-TMA. The BLA was accepted for filing by FDA and granted priority review, and we have responded to all information requests received to date. The FDA action date under the Prescription Drug User Fee Act (“PDUFA”) is July 17, 2021.

In Europe, the EMA has confirmed narsoplimab’s eligibility for EMA’s centralized review of a single ~~MAA~~marketing authorization application (“MAA”) that, if approved, authorizes the product to be marketed in all EU member states and EEA countries. We ~~plan~~are targeting to complete ~~the~~our MAA submission ~~of an MAA after our BLA submission has been filed with FDA. In October 2019 we received a positive opinion from EMA on our pediatric investigation plan (“PIP”) for narsoplimab~~ in the treatment of HSCT-TMA. A PIP outlining a development program for the investigational product in the pediatric population must be agreed with EMA as a prerequisite to EMA’s acceptance of an MAA. The narsoplimab PIP provides a study plan to evaluate the safety and effectiveness of the drug for HSCT-TMA in patients from one month through 17 years of age. We received a deferral for completion of our PIP until after approval of the narsoplimab MAA.2021.

In our IgA nephropathy program, patient enrollment continues in the narsoplimab Phase 3 clinical trial, ARTEMIS-IGAN. The single Phase 3 trial design is a randomized, double-blind, placebo-controlled multicenter trial in patients at least 18 years of age with biopsy-confirmed IgA nephropathy and with 24-hour urine protein excretion greater than one gram per day at baseline on optimized renin-angiotensin system blockade. This trial includes a run-in period. Initially, patients are expected to receive an IV dose of study drug each week for 12 weeks; additional weekly dosing can be administered to achieve optimal response. The primary endpoint, which we believe could suffice for full or accelerated approval depending on the effect size, is reduction in proteinuria at 36 weeks after the start of dosing. The trial is designed to allow intra-trial adjustment in sample size. For the purposes of safety and efficacy assessments, the initial sample size for the proteinuria endpoint is estimated at 140 patients in each of the treatment and placebo groups. This will include a subset of patients (78 per arm) with high levels of proteinuria (i.e., equal to or greater than 2 g/day) at baseline, and a substantial improvement at 36 weeks in this subset of patients alone could potentially form the basis for approval. We believe that the trial design will allow assessment for either full or accelerated approval at 36 weeks based on proteinuria results either (1) across the general population of study patients or (2) in the high-proteinuria subset of patients.

The Phase 3 clinical program in patients with aHUS, in which patient enrollment is ongoing, consists of one Phase 3 clinical trial – a single-arm (i.e., no control arm), open-label trial in patients with newly diagnosed or ongoing aHUS. This trial is targeting approximately 40 patients for full approval in Europe and accelerated approval in the U.S. with approximately 80 total patients required by FDA for full approval in the U.S. The trial

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includes multiple sites in the U.S., Asia and Europe, though enrollment has been slow in part due to prioritizing the use of resources within our narsoplimab programs on HSCT-TMA, COVID-19 and IgA nephropathy.

●

~~PDE7~~MASP-2 - ~~OMS527~~narsoplimab (OMS721) - COVID-19. In ~~our phosphodiesterase 7 (PDE7)~~March 2020, in response to a request from physicians at the Papa Giovanni XXIII Hospital in Bergamo, Italy, we initiated a compassionate use program ~~we are developing proprietary compounds~~for narsoplimab to treat addiction and compulsive disorders as well as movement disorders. In September 2019 we reported positive results from our Phase 1 single-ascending- and multiple-ascending-dose clinical trial designed to assess safety, tolerability and pharmacokinetics of our lead compound in healthy subjects.patients with severe COVID-19 requiring mechanical ventilation.

The initial cohort treated under this compassionate use program included a total of six COVID-19 patients treated with narsoplimab, all with acute respiratory distress syndrome (“ARDS”) and requiring continuous positive airway pressure (“CPAP”) or intubation. At baseline, circulating endothelial cell (“CEC”) counts and serum levels of interleukin-6 (IL-6), IL-8, C-reactive protein (CRP), LDH, D-dimer and aspartate aminotransferase (AST) were markedly elevated. During the course of the compassionate use program, institutional guidelines at the treating hospital were updated to require that all COVID-19 patients in the hospital receive steroids. One patient treated with narsoplimab did not receive steroids. Of the five narsoplimab-treated patients who received steroids, two initiated them after already improving such that CPAP was no longer required or was discontinued the following day. The study evaluated CEC counts in a separate group of four patients receiving only steroids for a short duration, and the counts were found to be unaffected by steroid administration. This suggests that any beneficial effect of steroids on COVID-19-associated endothelial damage may be delayed and had little effect on the recovery course of the narsoplimab-treated patients who initiated steroid treatment after improving.

Narsoplimab treatment was associated with rapid and sustained reduction across all of the above-named markers of endothelial damage and inflammation. In addition, massive bilateral pulmonary thromboses, seen in two of the ~~double blind, randomized Phase 1 study, the study~~patients, resolved while on narsoplimab. All six narsoplimab-treated patients recovered, survived and were discharged. Narsoplimab was well tolerated and no adverse drug ~~referred to as OMS182399, met the primary endpoints of safety and tolerability~~reactions were reported. Two control groups with similar baseline characteristics were used for retrospective comparison and showed ~~a favorable~~substantial mortality rates of 32% and ~~dose-proportional pharmacokinetic profile supporting once-daily dosing. There~~53%. A manuscript detailing the results of the initial cohort of Bergamo patients treated with narsoplimab was ~~no apparent food effect on plasma exposure~~published in the peer-reviewed journal Immunobiology.

All six patients were evaluated five to ~~OMS182399. Our focus is nicotine addiction,~~six months after cessation of narsoplimab treatment. None of them showed any clinical or laboratory evidence of long-term effects of COVID-19, such as cognitive impairment or cardiac, pulmonary or other organ disorder, commonly seen following resolution of initial COVID-19 symptoms.

Endothelial damage and resultant thromboses are significant to the pathophysiology of COVID-19, and we believe these data illustrate the importance of inhibiting the lectin pathway to treat critically ill COVID-19 patients. Endothelial damage activates the lectin pathway of complement. We believe the results observed following narsoplimab treatment in critically ill COVID-19 patients at Papa Giovanni were consistent with those seen in HSCT-TMA and underscore the pathophysiologic similarities between these two disorders. Narsoplimab has been shown to inhibit lectin pathway activation and to block the MASP-2-mediated conversion of prothrombin to thrombin, microvascular injury-associated thrombus formation and the activation of factor XII as well as the MASP-2-mediated activation of kallikrein. We believe that the anticoagulant effects of narsoplimab may provide therapeutic benefits in both HSCT-TMA and COVID-19.

Following treatment of the initial six patients under the compassionate use program in Italy, we continued compassionate-use treatment in the U.S. and Italy. Prior to receiving narsoplimab, all of the patients in this second cohort were severely ill, mechanically ventilated, had multiple comorbidities, and had failed other therapies, including anti-virals, targeted anti-inflammatory therapeutics, convalescent plasma and steroids. Following treatment with narsoplimab, the laboratory improvements and clinical outcomes of these patients are ~~planning our Phase 2 development program.~~similar to those seen in the initial cohort of Bergamo patients.

~~Preclinical Development Programs~~

Narsoplimab is also the only complement inhibitor included in the I-SPY COVID-19 platform trial sponsored by Quantum Leap Healthcare Collaborative, which is evaluating investigational therapies for the treatment of critically ill COVID-19 patients. The trial utilizes Quantum Leap Healthcare Collaborative's adaptive platform

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trial design, which is intended to increase trial efficiency by minimizing the number of participants and ~~Platforms~~time required to evaluate potential treatments.

~~Our preclinical programs~~

Discussions regarding the use of narsoplimab in COVID-19 with leaders across various government agencies, both in the U.S. and ~~platforms include:~~internationally, continue to progress.

●

MASP-3 - OMS906 - Alternative Pathway Disorders. As part of our MASP program, we have identified mannan-binding lectin-associated serine protease-3 (“MASP-3”), which has been shown to be the key activator of the complement system’s alternative pathway (“APC”), and we believe that we are the first to make this and related discoveries associated with the APC. The complement system is part of the immune system’s innate response, and the APC is considered the amplification loop within the complement system. MASP-3 is

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responsible for the conversion of pro-factor D to factor D; converted factor D is necessary for the activation of the APC. Based on our alternative pathway-related discoveries, we have expanded our intellectual property position to protect our inventions stemming from these discoveries beyond MASP-2-associated inhibition of the lectin pathway to include inhibition of the alternative pathway. Our current primary focus in this program is developing MASP-3 inhibitors for the treatment of disorders related to the APC. We believe that MASP-3 inhibitors have the potential to treat patients suffering from a wide range of diseases and conditions, including: paroxysmal nocturnal hemoglobinuria (“PNH”); ~~C3 glomerulopathy;~~ multiple sclerosis; ~~arthritis; traumatic brain injury;~~ neuromyelitis optica; ~~pauci-immune necrotizing crescentic glomerulonephritis; disseminated intravascular coagulation;~~ age-related macular degeneration; ~~asthma; dense deposit disease; Bechet’s disease; aspiration pneumonia; TMA; ischemia-reperfusion injury; Guillain Barre syndrome;~~ Alzheimer’s disease; ~~amylotrophic lateral sclerosis;~~ systemic lupus erythematosus; diabetic retinopathy; ~~uveitis;~~ chronic obstructive pulmonary disease; ~~transplant rejection; acute respiratory distress syndrome;~~ antineutrophil cytoplasmic antibody-associated vasculitis; anti-phospholipid syndrome; atherosclerosis; myasthenia gravis and others. Our OMS906 monoclonal antibody program has generated positive data in a well-established animal ~~model associated with~~models of PNH and rheumatoid arthritis as well as strong pharmacodynamic activity in non-human primates. ~~The~~

In September 2020 we began enrollment and dosing in a placebo-controlled, double-blind, single-ascending-dose and multiple-ascending-dose Phase 1 clinical trial to evaluate the safety, tolerability, pharmacodynamics and pharmacokinetics of OMS906. We have completed dosing all of the intravenous dosing cohorts and the first subcutaneous dosing cohort in the single-ascending dose study. Initial data from the Phase 1 trial are expected in the second quarter of 2021.

●

PDE7 - OMS527. In our PDE7 program, ~~has also generated~~we are developing proprietary compounds to treat addiction and compulsive disorders as well as movement disorders. In September 2019 we reported positive ~~data in a well-established animal model of arthritis. In preparation for clinical trials, we have completed the first-in-human-enabling toxicology studies,~~results from our Phase 1 single-ascending- and ~~the manufacturing scale-up process is underway to support the remainder of the development program. We are currently targeting PNH as the first clinical indication for OMS906 and plan to submit a~~multiple-ascending-dose clinical trial ~~application~~designed to assess safety, tolerability and pharmacokinetics of our lead compound in ~~the first half of 2020.~~healthy subjects.

In the double blind, randomized Phase 1 study, the study drug, referred to as OMS182399, met the primary endpoints of safety and tolerability and showed a favorable and dose-proportional pharmacokinetic profile supporting once-daily dosing. There was no apparent food effect on plasma exposure to OMS182399. Continued clinical development in our PDE7 program is subject to allocation of financial and other resources, which are currently prioritized for other programs. A manuscript detailing the mechanism of action of PDE7 inhibition in nicotine addiction has been accepted for publication in the peer-reviewed Journal of Neuroscience.

Preclinical Development Programs and Platforms

Our preclinical programs and platforms include:

●

Other MASP Inhibitor Preclinical Programs. We have generated positive preclinical data from MASP-2 inhibition in in vivo models of age-related macular degeneration, myocardial infarction, diabetic neuropathy, stroke, traumatic brain injury, ischemia-reperfusion injury, and other diseases and disorders. We are also developing a longer-acting second generation antibody targeting MASP-2 for which we ~~are targeting for initiation of~~expect to initiate clinical trials in 2022. This program is designated as “OMS1029.” Development efforts are also directed to a small-molecule inhibitor of MASP-2 designed for oral administration as well as to small-molecule inhibitors of MASP-3 and ~~biospecific~~bispecific small- and large-molecule inhibitors of MASP-2/-3.

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●

GPR174 and GPCR Platform. We have developed a proprietary cellular redistribution assay which we use in a high-throughput manner to identify synthetic ligands, including antagonists, agonists and inverse agonists, that bind to and affect the function of orphan GPCRs. We have screened Class A orphan GPCRs against our small-molecule chemical libraries using the cellular redistribution assay and have identified and confirmed compounds that interact with 54 of the 81 Class A orphan GPCRs linked to a wide range of indications including cancer as well as metabolic, cardiovascular, immunologic, inflammatory and central nervous system disorders. One of our priorities in this program is GPR174, which is involved in the modulation of the immune system. In ex vivo human studies, our small-molecule inhibitors targeting GPR174 upregulate the production of cytokines, block multiple checkpoints and tumor promoters, and suppress regulatory T-cells. Based on our data, we believe that GPR174 controls a major, previously unrecognized pathway in cancer and modulation of the receptor could provide a seminal advance in immuno-oncologic treatments for a wide range of tumors. Our studies in mouse models of melanoma and colon carcinoma found that GPR174-deficiency resulted in significantly reduced tumor growth and improved survival of the animals versus normal mice. Our ~~recent~~ discoveries suggest a new approach to cancer immunotherapy that targets inhibition of GPR174 and can be combined with and significantly improve the tumor-killing effects of other oncologic agents, including radiation, adenosine pathway inhibitors and checkpoint inhibitors. These discoveries include (1) identification of cancer-immunity pathways controlled by GPR174, (2) the identification of phosphatidylserine as a natural ligand for GPR174, (3) a collection of novel small-molecule inhibitors of GPR174 and (4) a synergistic enhancement of “tumor-fighting” cytokine production by T cells following the combined inhibition of both GPR174 and the adenosine pathway, ~~(e.g., A2A and/or A2B),~~ another key metabolic pathway that regulates tumor immunity. We ~~continue to focus on~~are developing both small-molecule and antibody inhibitors of GPR174 ~~and several other of our GPCR targets~~ with the objective of moving compounds ~~targeting them~~ into human ~~trials.~~trials and exploring several of our other GPCR targets as well.

Financial Summary

We recognized net losses of ~~$29.0~~$35.1 million and ~~$24.3~~$29.0 million for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively, and our OMIDRIA net revenues were ~~$23.5~~$21.1 million and ~~$21.8~~$23.5 million for the same periods. As of March 31,

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~~2020,~~ 2021, we had ~~$54.0~~$100.5 million in cash and cash equivalents and short-term investments available for general corporate use and ~~$24.1~~$24.8 million in accounts receivable, net.

Fiscal quarters with significantly reduced cataract procedures due to COVID-19

Pass-through reimbursement expired on October 1, 2020. In December 2020, separate payment was confirmed for OMIDRIA, effective retroactively as of October 1, 2020.

Pass-through reimbursement for OMIDRIA under Medicare Part B expired on October 1, 2020, which negatively affected our net revenues for September, the fourth quarter of 2020 and the first quarter of 2021. In December 2020, CMS confirmed that OMIDRIA qualifies for separate payment when used on Medicare Part B patients in ASCs. CMS’ current non-opioid separate payment policy can be changed by CMS through its OPPS/ASC annual rulemaking and

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comment process. We believe CMS will continue its separate payment policy for non-opioid pain management surgical drugs, which has been in effect since 2019, and that OMIDRIA will continue to be separately reimbursed when used in the ASC setting.

We expect our net losses will continue until such time as we derive sufficient revenues from sales of OMIDRIA and/or other sources, such as licensing, product sales and other revenues from our product candidates, that are sufficient to cover our operating expenses and debt service obligations.

*~~Fiscal quarters without pass-through reimbursement.~~

During the period from January 1, 2018 to September 30, 2018, OMIDRIA was not reimbursed separately when used for procedures involving patients covered by Medicare Part B and our revenues decreased significantly. After reinstatement of separate reimbursement for OMIDRIA in 4Q 2018, our revenues quickly returned to levels when separate reimbursement was available and quarter-over-quarter revenue growth approximated historical rates. In Q1 2020, OMIDRIA revenues declined due to the impact of COVID-19 on the volume of cataract surgery being performed.

Pass-through status for OMIDRIA is scheduled to expire on September 30, 2020. If we are unable to obtain permanent separate or similar reimbursement for OMIDRIA, the net revenues we receive for OMIDRIA would be reduced, potentially by a significant amount. Although we expect to pursue an alternative sales strategy if we are unable to obtain permanent separate or similar reimbursement for OMIDRIA, we may face difficulties or delays in implementing such a strategy and, even if successfully implemented, we cannot predict whether or to what extent our customers would increase their utilization of OMIDRIA. ~~See “Commercial Product - OMIDRIA” earlier in this section~~ ~~for additional details regarding the pass-through reimbursement status for OMIDRIA.~~

~~Due to the ongoing impact of COVID-19 on OMIDRIA sales and the scheduled expiration of pass-through status on September 30, 2020, we are unable to predict future OMIDRIA product sales, net.~~

Results of Operations

Revenue

Our revenue consists of OMIDRIA product sales to ASCs and hospitals in the U.S. Our product sales, net ~~during the three months ended March 31, 2020 and 2019~~ are as follows:

Three Months Ended

March 31,

2020

2019

(In thousands)
Product sales, net

$
23,537

$
21,779

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	Three Months Ended
	2021		2020

	(In thousands)
Product sales, net	$	21,061	$	23,537

During the three months ended March 31, ~~2020,~~2021, OMIDRIA net revenue was ~~$23.5~~$21.1 million as compared to ~~$21.8~~$23.5 million for the three months ended March 31, ~~2019.~~2020. The ~~increase~~decrease in revenue during the three months ended March 31, ~~2020~~2021 compared to the same period in the prior year was due to ~~increased demand~~the timing of ASCs’ ability to verify reimbursement status following the December confirmation by CMS of separate payment for OMIDRIA ~~by ASCs and hospitals following~~before resuming their OMIDRIA usage. The lack of Medicare Part B reimbursement in the ~~reinstatement~~hospital setting during the quarter ended March 31, 2021 also contributed to the decrease in revenues. The ongoing COVID-19 pandemic negatively affected the number of ~~pass-through reimbursement status for OMIDRIA on October 1, 2018. However, revenue for~~cataract procedures performed in the ~~three months~~quarter ended March 31, 2020 ~~was negatively affected as~~and, to a ~~result of inventory utilization by ASCs and hospitals in early March in anticipation of~~lesser extent, the ~~COVID-19-related shutdown of elective surgical procedures. Sales of OMIDRIA were minimal following the postponement of most cataract procedures in mid-March. Revenue for the three months~~quarter ended March 31, ~~2020 includes a $2.5 million provision~~2021. With separate payment for OMIDRIA established, we expect OMIDRIA revenues to increase during the potential return of OMIDRIA product. In early May, a large number of states began re-opening ASCs and hospitals to cataract surgery, and we have had facilities in at least 36 states initiate re-ordering of OMIDRIA from our wholesalers. In the event that ongoing customers return product and subsequently repurchase, those sales will be recorded as revenue when the wholesaler acquires the replacement product from us.second quarter.

Gross-to-Net Deductions

We record OMIDRIA product sales net of estimated chargebacks, rebates, distribution fees and product returns. These deductions are generally referred to as gross-to-net deductions. Our total gross-to-net provision for the three months ended March 31, ~~2020~~2021 was ~~32.3%~~31.5% of gross OMIDRIA product ~~sales. This compares~~sales compared to ~~27.0%~~32.3% for the three months ended March 31, ~~2019.~~2020. The ~~increase~~decrease in gross-to-net deductions as a percentage of sales in 2021 compared to 2020 is due to ~~product return allowances as described below.~~a reduction in sales returns during the first quarter of 2021 partially offset by an increase in our OMIDRIAssure^®patient assistance and reimbursement program.

A summary of our gross-to-net related accruals for the three months ended March 31, ~~2020~~2021 is as follows:

Distribution


Fees and

Product

Chargebacks

Return

and Rebates

Allowances

Total

(In thousands)
Balance as of December 31, 2019

$
10,240

$
2,237

$
12,477
Provisions

7,563

3,675

11,238
Payments

(9,556)

(1,266)

(10,822)
Balance as of March 31, 2020

$
8,247

$
4,646

$
12,893


			Distribution
			Fees and
			Product
	Chargebacks		Return
	and Rebates		Allowances		Total

	(In thousands)
Balance as of December 31, 2020		3,740		948		4,688
Provisions		8,539		1,109		9,648
Payments		(5,399)		(582)		(5,981)
Balance as of March 31, 2021	$	6,880	$	1,475	$	8,355

Chargebacks and Rebates

We record a provision for estimated chargebacks and rebates at the time we recognize OMIDRIA product sales revenue and reduce the accrual when payments are made or credits are granted. Our chargebacks are related to a

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pharmaceutical pricing agreement, a federal supply schedule agreement, a 340B prime vendor agreement, a Medicaid drug rebate agreement and an off-invoice discount to our ASC and hospital customers. We also record a provision for our OMIDRIAssure^® patient assistance and reimbursement ~~services~~ program and ~~our~~for rebates under our purchase volume-discount programs.

Distribution Fees and Product Return Allowances

We pay our wholesalers a distribution fee for services they perform for us based on the dollar value of their purchases of OMIDRIA. We record a provision for these charges as a reduction to revenue at the time of sale to the wholesaler and make payments to our wholesalers based on contractual terms.

We allow for the return of product up to 12 months past its expiration date or for product that is damaged or not used by our customers. We record a provision for returns upon sale of OMIDRIA to our wholesaler. When a return or claim is received, we issue a credit memo to the wholesaler against its outstanding receivable to us or we reimburse the customer. For the three months ended March 31, 2020, as noted above, we recorded a $2.5 million return allowance for return of OMIDRIA product from wholesalers and ASCs related to the postponement of cataract surgeries due to the COVID-19 pandemic. Additionally, should pass-through reimbursement expire on September 30, 2020, it is possible

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that wholesalers, ASCs and hospitals may return a portion of their OMIDRIA on hand for a full refund of the purchase price. If a reserve is required, we would record the reserve during our third quarter of 2020.

Research and Development Expenses

Our research and development expenses can be divided into three categories: direct external expenses, which include clinical research and development, preclinical research and development activities; internal, overhead and other expenses; and stock-based compensation expense. Direct external expenses consist primarily of expenses incurred pursuant to agreements with third-party manufacturing organizations prior to receiving regulatory approval for a product candidate, contract research organizations, clinical trial sites, collaborators, consultants, and licensors consultants. Costs are reported in preclinical research and development until the program enters the clinic. Internal, overhead and other expenses consist of personnel costs, overhead costs such as rent, utilities and depreciation and other miscellaneous costs. We do not generally allocate our internal resources, employees and infrastructure to any individual research project because we deploy them across multiple clinical and preclinical projects that we are advancing in parallel.

The following table illustrates our expenses associated with these activities:

Three Months Ended

March 31,


2020

2019

(In thousands)
Direct external expenses:

Clinical research and development:




MASP-2 Program - OMS721 (narsoplimab)

$
13,215

$
14,437
OMIDRIA - Ophthalmology

626

708
PDE7 - OMS527

1,337

576
Total clinical research and development

15,178

15,721
Preclinical research and development

3,515

1,516
Total direct external expenses

18,693

17,237
Internal, overhead and other expenses

8,771

7,524
Stock-based compensation expense

1,447

1,494
Total research and development expenses

$
28,911

$
26,255


	March 31,
	2021		2020

	(In thousands)
Direct external expenses:
Clinical research and development:
MASP-2 program - OMS721 (narsoplimab)	$	17,031	$	13,215
MASP-3 program - OMS906		1,771		—
OMIDRIA - Ophthalmology		565		626
PDE7 - OMS527		142		1,337
Total clinical research and development		19,509		15,178
Preclinical research and development		2,711		3,515
Total direct external expenses		22,220		18,693
Internal, overhead and other expenses		9,657		8,771
Stock-based compensation expense		1,480		1,447
Total research and development expenses	$	33,357	$	28,911

~~Direct external~~Total clinical research and development expenses increased ~~$1.5~~$4.3 million for the three months ended March 31, ~~2020~~2021 compared to the same period in ~~2019. This increase is~~the prior year due ~~primarily~~ to ~~higher IgA nephropathy clinical trial costs offset by lower~~timing of narsoplimab drug manufacturing ~~cost. In~~and medical affairs-related activities surrounding the commercial launch of narsoplimab. During the first quarter of ~~2019 we acquired raw materials used in~~2021, OMS906 clinical research and development expenses were $1.8 million, which also contributed to the ~~manufacturing of our drug substance validation batches that concluded later in the year 2019. The $2.0 million~~ increase in ~~our~~total clinical research and development expenses. In the prior year quarter, OMS906 expenses of $2.3 million were included as preclinical research and development.

The decrease in preclinical research and development ~~expense~~expenses for the three months ended March 31, ~~2020 as~~2021 compared to the same period in ~~2019 reflects addition third-party manufacturing scale up costs related~~the prior year is primarily due to ~~our~~the migration of OMS906 ~~program as well as~~from preclinical research and development to clinical research and ~~analytical activities related our MASP-2 long-acting second-generation antibody program.~~development beginning in the third quarter of 2020 when OMS906 entered Phase 1 clinical trials.

The increases in internal, overhead and other expenses ~~for the three months ended March 31, 2020 compared to the prior year period~~ are primarily due to additional employee-related costs and additional leased laboratory facilities to support our ~~increased~~ research and development activities.

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We expect ~~the majority of our research and development expenses for the remainder of 2020 will be related to our narsoplimab program. We expect~~overall research and development costs ~~to increase in 2020 as we incur incremental manufacturing costs in preparation for the anticipated commercial launch of narsoplimab in HSCT-TMA~~ in the ~~U.S.~~second quarter of 2021 to be comparable to the quarter ended March 31, 2021.

At this time, we are unable to estimate with certainty the longer-term costs we will incur in the continued development of our product candidates due to the inherently unpredictable nature of our preclinical and clinical development activities as well as to the potential impacts of the COVID-19 pandemic. Clinical development timelines, the probability of success and development costs can differ materially as new data become available and as expectations change. Our future research and development expenses will depend, in part, on the preclinical or clinical success of each

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product candidate as well as on ongoing assessments of each program’s commercial potential. In addition, we cannot forecast with precision which product candidates, if any, may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

We are required to expend substantial resources in the development of our product candidates due to the lengthy process of completing clinical trials and seeking regulatory approval. Any failure or delay in completing clinical trials, or in obtaining regulatory approvals, could delay our generation of product revenue and increase our research and development expenses.

Selling, General and Administrative Expenses

Three Months Ended

March 31,

2020

2019

(In thousands)
Selling, general and administrative expenses, excluding stock-based compensation expense

$
16,007

$
12,752
Stock-based compensation expense

2,029

1,880
Total selling, general and administrative expenses

$
18,036

$
14,632


	Three Months Ended
	2021		2020

	(In thousands)
Selling, general and administrative expenses, excluding stock-based compensation expense	$	16,261	$	16,007
Stock-based compensation expense		1,791		2,029
Total selling, general and administrative expenses	$	18,052	$	18,036

~~The increase in~~Total selling, general and administrative expenses ~~during the three months ended March 31, 2020~~did not increase significantly compared to the same period in ~~2019 was primarily due to increased pre-commercialization marketing activities for narsoplimab, including employee-related costs and professional service fees.~~the prior year.

We expect that our selling, general and administrative expenses will increase induring the ~~remaining quarters~~second quarter of ~~2020 compared to current levels, primarily~~2021 due to increased pre-commercialization activities for narsoplimab.

Interest Expense

Three Months Ended

March 31,

2020

2019

(In thousands)
Interest expense

$
5,903

$
5,600


	Three Months Ended
	March 31,
	2021		2020

	(In thousands)
Interest expense	$	4,897	$	5,903

Interest expense is comprised of contractual interest and amortization of debt issuance and debt discount related to our ~~$210.0~~2023 and 2026 Notes as well as to interest on our finance leases. Interest expense decreased $1.0 million ~~of 6.25% Convertible Senior Notes due 2023 (the “Convertible Notes”). Non-cash interest expense~~ for the three months ended March 31, 2021 compared to the same period in the prior year due to the early adoption of ASU 2020-06, which eliminated the amortization of the non-cash debt discount on the 2023 and 2026 Notes. This decrease was partially offset by the increase in interest related to our 2026 Notes, which were issued in August and September 2020 ~~and 2019 was $2.5 million and $2.2 million, respectively. For~~(for more information, ~~regarding our Convertible Notes,~~ see ~~Part II, Item 8,~~ “Note 8--7—Unsecured Convertible Senior Notes” in ~~our Annual Report on Form 10-K for the year ended December 31, 2019.~~).

Financial Condition - Liquidity and Capital Resources

As of March 31, ~~2020,~~2021, we had ~~$54.0~~$100.5 million in cash, cash equivalents and short-term investments available for general corporate use held primarily in money-market accounts as compared to ~~$60.8~~$135.0 million at December 31, ~~2019.~~2020. In addition, as of March 31, ~~2020,~~2021, we had ~~$24.1~~$24.8 million in accounts receivable, net. We have historically generated net losses and incurred negative cash flows from operations and debt service. For the three months ended March 31, ~~2020, we incurred net losses of $29.0 million and incurred negative cash flows from operations of $9.1 million.~~2021,

In the first quarter of 2020, our business operations and liquidity were negatively affected by the reduction in demand for OMIDRIA caused by restrictions on cataract surgeries implemented in response to the COVID-19 pandemic. The ongoing restrictions are expected to continue to negatively impact working capital in the second quarter and possibly in future periods, with the magnitude of the impact being dependent on the duration and extent of applicable limitations on the operations of our ASC and hospital customers.

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~~In early May,~~we incurred a ~~large~~net loss of $35.1 million and incurred negative cash flows from operations of $40.3 million. The net loss and the negative cash flows from operations in the quarter ended March 31, 2021 were significantly affected by (1) reduced OMIDRIA revenues following expiration of the drug’s pass-through status and the delayed posting by Medicare Administrative Contractors of CMS’ December 2020 determination that OMIDRIA be paid separately under Medicare Part B in the ASC setting, and (2) the COVID-19-related decrease in the number of ~~states began re-opening ASCs~~cataract procedures performed nationally.

FDA accepted our BLA for narsoplimab in HSCT-TMA for priority review with a PDUFA action date of July 17, 2021. We anticipate, but cannot guarantee, that narsoplimab will receive FDA approval and ~~hospitals to cataract surgery, and we have had facilities~~launch in ~~at least 36 states initiate re-ordering of OMIDRIA from our wholesalers. However,~~the U.S. in 2021. If approved, we cannot ~~yet~~fully predict ~~with certainty~~ the ~~levels~~timing or the magnitude of ~~OMIDRIA product~~ narsoplimab revenues, but we believe they will be significant. Our sales and marketing strategies for the launch of narsoplimab for HSCT-TMA include various milestones at which we ~~will achieve. In addition, pass-through reimbursement~~commit to incremental spending, such as for OMIDRIA is currently scheduled to expire on September 30, 2020. We are pursuing legislative and administrative means to extend permanent reimbursement but have not yet received such an extension. Consequently, we are unable to includefield sales hiring, providing for flexibility in the ~~determination regarding our prospects as a going concern OMIDRIA revenues and amounts available under~~timing of costs incurred should the ~~Line~~approval of Credit Agreement, as borrowing availability is determined based on eligible OMIDRIA accounts receivable. We have also not included any proceeds from debt transactions or other financing instruments, despite our successful track record in accessing capital through each of these avenues nor any potential partnerships related to our products or product candidates. The conditions described above when evaluated within the constraints of the accounting literature raise substantial doubt with respect to our ability to meet our obligations through May 11, 2021 and, therefore, to continue as a going concern.narsoplimab be delayed.

We plan ~~to continue~~ to fund our operations ~~through proceeds~~for the next twelve months with our cash and investments on hand from sales of OMIDRIA ~~after the postponement~~and, if FDA approval is granted, from sales of ~~non-urgent ophthalmic surgical procedures, including cataract surgery, ends and,~~ innarsoplimab for HSCT-TMA. In addition, we may utilize funds available under our ~~receivable-based~~ line of credit, which allows us to borrow up to 85% of our available accounts receivable borrowing base, less certain reserves, or $50.0 million, whichever is less. We also entered into a sales agreement to sell shares of our common stock, from time to time, up to an aggregate offering amount of $150.0 million through an “at the ~~extent it is available to us.~~market” equity offering program. Should it be necessary or d~~etermined~~determined to be strategically advantageous, we ~~also~~ could pursue debt financings as well as public and private offerings of our equity securities, similar to those we have previously completed, ~~previously, and/~~or other strategic transactions, which may include licensing a portion of our existing technology. ~~If these capital sources, for any reason, are needed but inaccessible, it would have a significantly negative effect on our financial condition.~~ Should it be necessary to manage our operating expenses, we would reduce our projected cash requirements through reduction of our expenses by delaying clinical trials, reducing selected research and development efforts, ~~and/~~or implementing other restructuring activities.

Cash Flow Data

Three Months Ended March 31,

2020

2019

(In thousands)
Selected cash flow data

Cash provided by (used in):

Operating activities

$
(9,141)

$
(12,948)
Investing activities

$
10,776

$
11,287
Financing activities

$
2,399

$
(146)


	Three Months Ended March 31,
	2021		2020

	(In thousands)
Selected cash flow data
Cash provided by (used in):
Operating activities	$	(40,254)	$	(9,141)
Investing activities	$	32,985	$	10,776
Financing activities	$	5,796	$	2,399

Operating Activities. Net cash used in operating activities for the three months ended March 31, ~~2020 decreased~~2021 increased by ~~$3.8~~$31.1 million as compared to the same period in ~~2019.~~2020. The net ~~decrease~~increase is primarily due to a ~~$13.0~~$32.1 million ~~increase~~reduction in ~~cash provided from collections of~~ accounts receivable ~~offset by an~~cash collections, a $6.1 million increase in our net loss ofand a $2.3 million decrease in non-cash charges offset by $4.4 million decrease in prepaids and a $4.7 million an increase ~~of $4.0 million in cash used~~ in accounts payable and accrued ~~expense, and an increase of $1.5 million in funds used for advance payments.~~expenses.

Investing Activities. Cash flows from investing activities primarily reflect cash used to purchase short-term investments and proceeds from the sale of short-term investments, thus causing a shift between our cash and cash equivalents and short-term investment balances. Because we manage our cash usage with respect to our total cash, cash equivalents and short-term investments, we do not consider fluctuations in cash flows from investing activities to be important to the understanding of our liquidity and capital resources.

Net cash provided by investing activities during the three months ended March 31, ~~2020~~2021 was ~~$10.8~~$33.0 million, ~~a decrease~~an increase of ~~$0.5~~$22.2 million for the same period in ~~2019 primarily~~2020 due to ~~investments purchased~~net proceeds from investment maturities exceeding ~~investments sold by $0.6 million.~~investment purchases.

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Financing Activities. Net cash provided by financing activities during the three months ended March 31, ~~2020~~2021 was ~~$2.4~~$5.8 million, an increase of ~~$2.5~~$3.4 million compared to the same period in ~~2019.~~2020. The increase ~~for~~was due to incremental cash proceeds from the ~~three months ended~~exercise of our common stock.

At the Market Sales Agreement. On March 1, 2021, we entered into a sales agreement to sell shares of our common stock, from time to time and having an aggregate offering price of up to $150.0 million, through an “at the market” equity offering program. As of March 31, ~~2020 compared to the prior year was primarily due to $2.7 million in net proceeds from exercises~~2021, we have not sold any shares under this agreement.

Line of ~~stock options.~~

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~~Loan and Security~~Credit Agreement. Our ~~Loan and Security~~Line of Credit Agreement with Silicon Valley Bank ~~(the “Loan Agreement”),~~ provides for a $50.0 million revolving line of credit facility. Under the ~~Loan~~Line of Credit Agreement we may draw, on a revolving basis, up to the lesser of $50.0 million ~~and~~or 85.0% of our eligible accounts receivable, less certain reserves. The ~~Loan~~Line of Credit Agreement is secured by all of our assets, excluding intellectual property and development program inventories, and matures on August 2, 2022. As of March 31, ~~2020,~~2021, we had no outstanding borrowings under the ~~Loan~~Line of Credit Agreement, and we were in compliance with all covenants in all material respects. See earlier discussion under “Liquidity and Capital Resources” for further detail regarding the availability of the line of credit.

Contractual Obligations and Commitments

Our future minimum contractual commitments and obligations were reported in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. Other than the following, our future minimum contractual obligations and commitments have not changed materially from the amounts previously reported.

Lease Agreements

Our lease for our office and laboratory space ends in November 2027. We have two five-year options to extend the lease term. As of March 31, 2021, the remaining aggregate non-cancelable rent payable under the initial term of the lease, excluding common area maintenance and related operating expenses, is $53.8 million.

Goods and Services

We have certain other non-cancelable obligations under various ~~other~~ agreements ~~for the acquisition of~~that relate to goods and ~~services associated with the manufacturing of our product candidates that contain firm commitments.~~services. As of March 31, ~~2020,~~2021, our aggregate firm commitments ~~are $17.6~~were $30.9 million.

We may be required, in connection with in-licensing or asset acquisition agreements, to make certain royalty and milestone payments and we cannot, at this time, determine when or if the related milestones will be achieved or whether the events triggering the commencement of payment obligations will occur. Therefore, such payments are not included in the ~~amount~~amounts described above.

~~Lease Agreements~~

We lease our office and laboratory space in The Omeros Building under a lease agreement with BMR - 201 Elliott Avenue LLC. The initial term of the lease ends in November 2027, and we have two options to extend the lease term, each by five years. As of March 31, 2020, the remaining aggregate non-cancelable rent payable under the initial term of the lease, excluding common area maintenance and related operating expenses, is $51.4 million.

Critical Accounting Policies and Significant Judgments and Estimates

~~There~~On January 1, 2021, we adopted ASU 2020-06, Debt—Debt with Conversion Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) on a modified retrospective basis (for more information, see “Note 2—Significant Accounting Policies, Recently Adopted Pronouncements”).

Other than the adoption of ASU 2020-06, there have not been any material changes in our critical accounting policies and significant judgments and estimates as disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Off-Balance Sheet Arrangements

We have not engaged in any off-balance sheet arrangements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk is primarily confined to our investment securities. The primary objective of our investment activities is to preserve our capital to fund operations. We also seek to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of investments in high-credit-quality securities. As of March 31, ~~2020,~~2021, we had cash, cash equivalents and short-term investments of ~~$54.0~~$100.5 million. In accordance with our investment policy, we invest funds in highly liquid, investment-grade securities. These securities in our investment portfolio are not leveraged and are classified as available-for-sale. We currently do not hedge interest rate exposure. Because of the short-term maturities of our investments, we do not believe that an increase in market rates would have a ~~material~~materially negative impact on the realized value of our investment portfolio. We actively monitor changes in interest rates and, with our current portfolio of short-term investments, we are not exposed to potential loss due to changes in interest rates.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, ~~2020.~~2021. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, ~~2020,~~2021, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, in the ordinary course of business, we may be involved in various claims, lawsuits and other proceedings. As of the date of filing of this Quarterly Report on Form 10-Q, we were not involved in any material legal proceedings.
ITEM 1A. RISK FACTORS
We operate in an environment that involves a number of risks and uncertainties. Before making an investment decision you should carefully consider the risks described in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, as filed with the SEC on March ~~2, 2020.~~1, 2021. In assessing the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, you should also refer to the other information included therein and in this Quarterly Report on Form 10-Q. In addition, we may be adversely affected by risks that we currently deem immaterial or by other risks that are not currently known to us. The trading price of our common stock could decline due to any of these risks and you may lose all or part of your investment.
~~The risk factors set forth below update, and should be read together with, the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2019.~~
Our ability to achieve profitability is highly dependent on the commercial success of OMIDRIA, and to the extent OMIDRIA is not successful, our business, financial condition and results of operations may be materially adversely affected and the price of our common stock may decline.
OMIDRIA is our only product that has been approved by the FDA, for commercial sale in the U.S. For the three months ended March 31, 2020, we recorded net sales of OMIDRIA of $23.5 million. Revenues from sales of OMIDRIA have not been sufficient to fund our operations fully in prior periods and we cannot provide assurance that revenues from OMIDRIA sales will be sufficient to fund our operations fully in the future. We will need to generate substantially more product revenue from OMIDRIA to achieve and sustain profitability. We may be unable to sustain or increase revenues generated from OMIDRIA product sales for a number of reasons, including:
● ~~the significant reduction in the volume of ophthalmic surgical procedures and corresponding reduction in demand for OMIDRIA as a result of the COVID-19 pandemic;~~
● the scheduled expiration of pass-through reimbursement on September 30, 2020 and uncertainty regarding the extent of coverage and reimbursement for OMIDRIA when used in Medicare patients after September 30, 2020;
● pricing, coverage and reimbursement policies of government and private payers such as Medicare, Medicaid, the U.S. Department of Veterans Affairs, group purchasing organizations, insurance companies, health maintenance organizations and other plan administrators;
● ~~a lack of acceptance by physicians, patients and other members of the healthcare community;~~
● ~~the availability, relative price and efficacy of the product as compared to alternative treatment options or branded, compounded or generic competing products;~~
● ~~an unknown safety risk;~~
● ~~the failure to enter into and maintain acceptable partnering arrangements for marketing and distribution of OMIDRIA outside of the U.S.; and~~
● ~~changed or increased regulatory restrictions in the U.S., EU and/or other foreign territories.~~

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~~Table of Contents~~

~~Any decline in sales from OMIDRIA also would impact our ability to borrow under the Loan Agreement since the amount we can borrow is dependent on our eligible receivables.~~

~~The spread of COVID-19 and efforts to reduce its transmission may negatively impact our business, operations and financial results.~~

The spread of COVID-19 and efforts to reduce its transmission have significantly affected the global economy and have adversely affected our sales of OMIDRIA due to a reduction in the overall volume of cataract surgery and intraocular lens replacement procedures. On March 18, 2020, The American Academy of Ophthalmology issued a letter recommending that all ophthalmologists immediately cease providing any treatment other than urgent or emergent care. Upon this recommendation the ASCs and hospitals using OMIDRIA temporarily postponed nearly all cataract surgery. Consequently, our sales of OMIDRIA have been minimal to our wholesalers following the announcement. In early May, a large number of states began re-opening ASCs and hospitals to cataract surgery, and we have had facilities in at least 36 states initiate re-ordering of OMIDRIA from our wholesalers. The COVID-19 pandemic could have a continuing adverse impact on our business and financial results, including through sustained limitation on cataract surgery and corresponding reduction in demand for OMIDRIA, disruptions in commercial sales activities, higher than normal volume of OMIDRIA product returns, as well as a deterioration of general economic conditions.

We may also experience disruptions to our operations due to COVID-19, such as delays or disruptions with respect to manufacturing of clinical or commercial drug substance or drug product and delays in our clinical trials or in the submission or review of regulatory applications. Such delays or disruptions could negatively affect our commercial operations, clinical programs, and research and development. The health of our employees, contractors and other persons on whom we rely may be adversely affected by COVID-19. Although we are taking precautionary measures intended to help minimize the risk of the virus to our employees, these measures may be ineffective or may otherwise adversely affect our productivity. In addition, the conditions created by the pandemic may intensify other risks inherent in our business. Due to the unknown magnitude, duration and outcome of the COVID-19 pandemic, it is not possible to estimate precisely its impact on our business, operations or financial results; however, the impact could be material.
To the extent COVID-19 adversely affects our business, financial condition, and results of operations and global economic conditions more generally, it may also have the effect of heightening many of the other risk factors described in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019.
If our clinical trials or clinical protocols are delayed, suspended or terminated, we may be unable to develop our product candidates on a timely basis, which would adversely affect our ability to obtain regulatory approvals, increase our development costs and delay or prevent commercialization of approved products.
We cannot predict whether we will encounter problems with any of our completed, ongoing or planned clinical trials or clinical data collection protocols that will cause regulatory agencies, institutional review boards or ethics committees, or us to delay our clinical trials or suspend or delay the analysis of the data from those trials. Clinical trials and clinical data protocols can be delayed for a variety of reasons, including:

● ~~discussions with the FDA, the EMA or other foreign authorities regarding the scope or design of our clinical trials or clinical data collection protocols;~~
● delays or the inability to obtain required approvals from institutional review boards, ethics committees or other responsible entities at clinical sites selected for participation in our clinical trials;
● delays in enrolling patients into clinical trials, collecting data from enrolled patients, adequately monitoring patients before or after treatment, or collecting historical control data for any reason including disease severity, trial or data collection protocol design, study eligibility criteria, patient population size (e.g., for orphan diseases or for some pediatric indications), proximity and/or availability of clinical trial sites for prospective patients, availability of competing therapies and clinical trials, regional differences in diagnosis and treatment, perceived risks and benefits of the product or product candidate, physician patient referral practices, disruptions due to external events, including an outbreak of pandemic or contagious disease such as the COVID-19 coronavirus, which has slowed enrollment in our clinical trials of narsoplimab in patients with IgA nephropathy;

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~~Table of Contents~~

●

~~lower than anticipated retention rates of patients in clinical trials;~~

●

the need to repeat or conduct additional clinical trials as a result of inconclusive or negative results, failure to replicate positive early clinical data in subsequent clinical trials, failure to deliver an efficacious dose of a product candidate, poorly executed testing, a failure of a clinical site to adhere to the clinical protocol, an unacceptable study design or other problems;

●

~~adverse findings in clinical or nonclinical studies related to the safety of our product candidates in humans;~~

●

~~an insufficient supply of product candidate materials or other materials necessary to conduct our clinical trials;~~

●

~~the need to qualify new suppliers of product candidate materials for FDA and foreign regulatory approval;~~

●

~~an unfavorable inspection or review by the FDA or other regulatory authority of a clinical trial site or records of any clinical investigation;~~

●

~~the occurrence of unacceptable drug-related side effects or adverse events experienced by participants in our clinical trials;~~

●

~~the suspension by a regulatory agency of a trial by imposing a clinical hold; or~~

●

the amendment of clinical trial or data collection protocols to reflect changes in regulatory requirements and guidance or other reasons as well as subsequent re-examination of amendments to clinical trial or data collection protocols by institutional review boards or ethics committees.

●

In addition, our clinical trial or development programs have been, and in the future may be, suspended or terminated by us, the FDA or other regulatory authorities, or institutional review boards or ethics committees due to a number of factors, including:

●

~~failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;~~

●

~~inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;~~

●

~~the failure to remove a clinical hold in a timely manner, if at all;~~

●

~~unforeseen safety issues or any determination that a trial presents unacceptable health risks;~~

●

~~inability to deliver an efficacious dose of a product candidate; or~~

●

lack of adequate funding to continue the clinical trial or development program, including as a result of unforeseen costs due to enrollment delays, requirements to conduct additional trials and studies and/or increased expenses associated with the services of our contract research organizations (“CROs”), or other third-parties.

If the results of our clinical trials are not available when we expect or if we encounter any delay in the analysis of data from our clinical trials, we may be unable to file for regulatory approval or conduct additional clinical trials on the schedule we currently anticipate. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate. Any delays in completing our clinical trials could increase our development costs, could slow down our product development and regulatory submission process, could delay our receipt of product revenue and could make it difficult to raise additional capital. In addition, significant clinical trial delays also could allow our competitors to bring products to market before we do and impair our ability to commercialize our future products, potentially harming our business.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
~~None.~~We issued 24,901 shares of our common stock upon the cashless net exercise of a warrant to purchase 43,115 shares of our common stock during the three months ended March 31, 2021. The warrant was issued on May 18, 2016 in connection with the amendment of a previous loan agreement. We deemed the issuance of common stock upon the exercise of the warrant to be exempt from registration under the Securities Act pursuant to Section 3(a)(9) of the Securities Act. No underwriters were involved in the issuance of our common stock upon the exercise of the warrant and no commissions were paid in connection with such issuance.
ITEM 6. EXHIBITS

Exhibit
Number

Description
~~10.1~~

10.1†

~~Ninth Amendment to Lease dated January 15, 2020~~Platform Development Funding Agreement between Omeros Corporation and ~~BMR-201 Elliott Avenue LLC~~Vulcan Inc. and its affiliate dated October 21, 2010 (previously filed as Exhibit 10.44 from the Company’s Annual Report on Form 10-K filed on March 15, 2011)
10.2*10.2†

~~Consulting~~Grant Award Agreement ~~effective February 10, 2020~~ between Omeros Corporation and ~~Kurt Zumwalt~~the Life Sciences Discovery Fund Authority dated October 21, 2010 (previously filed as Exhibit 10.45 from the Company’s Annual Report on Form 10-K filed on March 15, 2011)
31.1

Certification of Principal Executive Officer Pursuant to Rule 13-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2

Certification of Principal Financial Officer Pursuant to Rule 13-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS

Inline XBRL Instance Document
101.SCH

Inline XBRL Taxonomy Extension Schema Document
101.CAL

Inline XBRL Taxonomy Extension Calculation ~~Linkbase~~Link base Document
101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

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Table of Contents

104.1

Cover Page Interactive Data File, formatted in Inline XBRL (included in Exhibit 101)

*Indicates management contract† Confidential portions of this Exhibit were redacted pursuant to Item 601(b)(10) of Regulation S-K and the Company agrees to furnish supplementary to the Securities and Exchange Commission a copy of any redacted information or ~~compensatory plan~~ omitted schedule and/or ~~arrangement.~~exhibit upon request.

The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the SEC and are not to be incorporated by reference into any filing of Omeros Corporation under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

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Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

OMEROS CORPORATION

Dated: May ~~11, 2020~~10, 2021
/s/ Gregory A. Demopulos

Gregory A. Demopulos, M.D.

President, Chief Executive Officer and Chairman of the Board of Directors

Dated: May ~~11, 2020~~10, 2021
/s/ Michael A. Jacobsen

Michael A. Jacobsen

Vice President, Finance, Chief Accounting Officer and Treasurer

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		Page
Part I — Financial Information		5
Item 1.	Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1719
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2830
Item 4.	Controls and Procedures	2830
Part II — Other Information		2931
Item 1.	Legal Proceedings	2931
Item 1A.	Risk Factors	2931
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3231
Item 6.	Exhibits	3231
Signatures		33


Exhibit Number		Description
~~10.1~~
10.1†		~~Ninth Amendment to Lease dated January 15, 2020~~Platform Development Funding Agreement between Omeros Corporation and ~~BMR-201 Elliott Avenue LLC~~Vulcan Inc. and its affiliate dated October 21, 2010 (previously filed as Exhibit 10.44 from the Company’s Annual Report on Form 10-K filed on March 15, 2011)
10.2*10.2†		~~Consulting~~Grant Award Agreement ~~effective February 10, 2020~~ between Omeros Corporation and ~~Kurt Zumwalt~~the Life Sciences Discovery Fund Authority dated October 21, 2010 (previously filed as Exhibit 10.45 from the Company’s Annual Report on Form 10-K filed on March 15, 2011)
31.1		Certification of Principal Executive Officer Pursuant to Rule 13-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer Pursuant to Rule 13-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation ~~Linkbase~~Link base Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document


	OMEROS CORPORATION

Dated: May ~~11, 2020~~10, 2021	/s/ Gregory A. Demopulos
	Gregory A. Demopulos, M.D.
	President, Chief Executive Officer and Chairman of the Board of Directors

Dated: May ~~11, 2020~~10, 2021	/s/ Michael A. Jacobsen
	Michael A. Jacobsen
	Vice President, Finance, Chief Accounting Officer and Treasurer