Welcome to today's conference call for Omeros Corporation. At this time, all participants are in listen-only mode. After the company's remarks, we will conduct a question-and-answer session. Please be advised that this call is being recorded at the company's request and a replay will be available on the company's website for one week from today. I'll turn over the call to Mark Metcalf from Omeros. Sir, you may begin.

Good afternoon and thank you for joining the call today. I'd like to remind you that some of the statements that will be made on the call today will be forward-looking. These statements are based on management's beliefs and expectations as of today only and are subject to change. All forward-looking statements involve risks and uncertainties that could cause the company's actual results to differ materially. Please refer to the Risk Factor section of the company's annual report on Form 10-K which was filed today with the SEC for a discussion of these risks and uncertainties. Dr. Greg Demopulos, Chairman and CEO of Omeros will take you through a corporate update and then Mike Jacobsen, our Chief Accounting Officer will provide an overview of our fourth quarter and year-end financial results. We have some time reserved for questions after the financial overview. Now, I would like to turn the call over to Dr. Greg Demopulos.

Thank you Mark and good afternoon everyone. We appreciate all of you joining us today. 2017 is shaping up to become a breakout year for Omeros. In 2016 we laid the foundation that will make that possible. Much of that groundwork was solidified in the achievements and successes of the fourth quarter of 2016. Since the broad market launch of a Omidria our commercial product for use during cataract and lens replacement surgery and net revenues have consistently delivered double digit quarter over quarter growth and the fourth quarter of 2016 was no exception. Net revenues of Omidria for the quarter were $12.9 million. This represents a 14% increase over the third quarter of 2016 and on a year over year basis a 212% increase over 2015. This revenue growth was the result of broad based successes including one, an increase in the number of what we call standard of use accounts or those using Omidria in more than 50% of their procedures Two, an increase in the number of new accounts ordering Omidria, three, an increase in the total number of unique accounts purchasing Omidria during the quarter and four, an increase in the number of daily orders. Total vials sold in the fourth quarter increased at an even greater rate, 22% over the third quarter and 223% year over year. The difference between the gross and net revenue and the greater growth in vials sold as a reflection of increased gross to net the deductions in the fourth quarter. This increase in gross to net was anticipated and primarily driven by the increased utilization of the Omidria share reimbursement assistance services and our volume discount purchase program which we introduced in November. The volume discount program provides ambulatory surgery centers or ASCs with rebates based on certain minimum…

Thanks, Greg. As Greg noted revenue for the fourth quarter was $12.9 million, all of which was from Omidria products sales. This is an increase of $1.6 million over the third quarter. Our net loss for the fourth quarter was $19.6 million or $0.45 per share, this includes a loss on early extinguishment of debt of $5.6 million or $0.13 per share related to the prepayment of our previous loan agreement. During the fourth quarter, noncash expenses were $5.2 million or $0.12 per share. Now I will address some details regarding the third versus the fourth quarter. Our reported revenue for the quarter increased 14% from the third quarter while vials of a Omidria sold to our distributors increased by 22% over the third quarter. The difference between these two values is primarily the result of increased gross net deductions in the fourth quarter as the overall price that we receive per unit sold was reduced as we had expected due primarily to the November introduction of our volume purchase discount program. This program has had a net positive impact on our unit sales because we gained new customers and saw the volume of purchases increase in existing accounts that participated in the program. In addition for those existing accounts our incremental revenues were greater than the rebates earned. Costs and operating expenses for the fourth quarter were $24.8 million, an increase of $1.4 million from the third quarter. The increase was primarily related to noncash employee stock options grants made during the fourth quarter for 2015 performance. As I mentioned earlier during the fourth quarter we incurred a $5.6 million loss on early extinguishment debt related to the prepayment of our previous loan agreement. Turning to the balance sheet in October 2016 we entered into a six year $125…

Thanks Mike. Let's open the call to questions.

[Operator Instructions]. Our first question comes from Tyler Van Buren from Cowen & Company. Your line is now open.

Congratulations on the disclosure of beginning the enrolment of the Phase 2 trial and aHUS for 721, clearly a very positive update. So just you know and for what is a disease a very severe patients have to imagine that the agency has a lot of confidence in the efficacy of 721 to allow you guys to go ahead and go into a Phase 3 trial so curious maybe to just hear a little bit more about your end of Phase 2 meeting discussions with the FDA and how that went?

We don't discuss specifics about those meetings Tyler and first thank you for your comments, appreciate it. What we have disclosed from that meeting was our discussion around the design and specifically that the design for the Phase 3 trial will be a single study, single arms so open label, no control arm and the design will be very similar to that which was required for Solaris approval for their BLA. So we again remain confident as you pointed out in our drug and we look forward to completing that clinical trial. Really the interesting part of this is as we've been moving forward with aHUS we have had two other programs sort of rapidly accelerating through development and those as you are the IgA nephropathy study as well as the other nephropathies meaning membranous, lupus nephritis and also our stem cell transplant related TMA studies. So we really have a full plate here with OMS721. To-date we have not found a maximally tolerated dose with 721, we're feeling very good about the safety profile of the drug and clearly we're feeling good about the efficacy that we see at least the apparent efficacy that we see with the drug.

Okay. Can you tell us what the plan dosing regimen is for Phase 3 and also in terms of timelines when we might see the top-line data from the study?

Phase 3 will be, we expect primarily subcutaneous administration. With respect to the timelines on data we've not made those public yet. We'll keep you informed Tyler as we have more information about timelines and additional data from that study.

Okay, great. And just one final one 721, as you think about the broader Phase 2 patient population and the efficacy data and try to compare that to what we've seen historically with Solaris. What do you think are the most relevant end points to compare and perhaps can you give us any insight into maybe the percent of patients with the complete TMA response or event free status? Curious to maybe hear a little bit more about that and maybe also potential timing on a publication or plans to submit one?

We haven't released the data that you're requesting there from the Phase 2 program I mean certainly we think that our drug will compare well to Solaris, we also are pleased with the potential safety differences between them. As I mentioned in our initial comments that we will have additional data from the aHUS study in late April at the International Meeting that I mentioned.

Okay, great. And on Omidria with respect to the C-code transition that you referred to at the end of the year and going into 2018 maybe just a little more granularity on the mechanics there and how should we expect the price to potentially change for the product, any insight there would be helpful.

Yes I think with respect to granularity of our efforts you know we don't want to get too specific about what we're doing other than that we are pursuing a dual pronged approach, one is legislatively and the second is administratively. So we're obviously working through congressional avenues, the second working with CMS directly. I think that there is a good amount of support for the concept that drugs use during surgical procedure should not be packaged. So stated conversely again that drugs used during surgical procedures should be separately paid, really just like almost all other drugs. And we expect again that we will be successful in this effort. With respect to pricing following January 1, 2018 I think that it's a bit premature to discuss that. We're doing well with the product now, let's see how we've progress throughout the year and I think that's a discussion that we can have once hopefully we are successful in securing a long term reimbursement for Omidria.

Our next question comes from Thomas Yip from FBR and Company. Your line is now open.

Very happy to see progress in Omidria and also 721 there earlier, [indiscernible] as well. So first a question regarding the Phase 3 trial of 721 and aHUS. So the finalization of the trial designs and specifically in clinicatrials.gov is that contingent on the FDAs decision on the accelerated approval application that you will file?

No, as you know there is no specific accelerated approval application. Accelerated approval is a process and that is pursued through ongoing discussions with FDA and is based upon in good part data that we present to the FDA from the Phase 3 program.

Right. So what factors do you think the FDA will look at most importantly in making that decision in a Phase 3 data? Are there other factors that could persuade them to approve accelerated approval?

I think it will depend on the data that we generate, it will depend on classes of patients, groups of patients that we can treat that perhaps Solaris cannot, it may also tie into potential safety differences between the two drugs remember that 721 does not inhibit the [indiscernible] of the classical pathway which is required for antigen anti-body complexing that is your -- remember the classical pathway is your acquired immune response. So I think there are multiple areas, Thomas, I hope that answered your question.

Yes I guess the most important thing to see is some preliminary data from Phase 3 and also we expect to hear more about the ongoing Phase 3 trial as well. So I'm going to switch gears and talk about Omidria a little bit, at which revenue level do you expect to begin providing revenue guidance for Omidria?

I'm not sure, it's a good question. We have made the decision at present that we're not going to add and we have not guided. I think at some point as the market stabilizes, as we are able to appropriately and relatively accurately project those revenues we will consider it I think that now though that that is premature.

Our next question comes from Liana Moussatos from Wedbush Securities. Your line is now open.

For OMS721 you're going to have data presentations in April at the World Congress and in June at Renal Diseases, how are those data sets different from what we've already seen that you probably disclosed, will there be more patients, will all the patient data be presented -- what's going to be different at those two meetings? There will be data at those meetings and in those presentations that will be from ongoing clinical work.

Okay. So there will be interim preliminary data that we haven’t seen yet or full data from?

Yes.

Our next question comes from Steve Brozak from WBB Securities. Your line is now open.

Let me dive into a couple of quick questions, since lots has asked and answered. On the OMS721 you're going to be conceivably running multiple trials 721 where you could in theory see data that actually comes back that is better in some areas than in others, can you give us any feedback in terms of what you're seeing as far as what the clinicians are giving you on that kind of guidance because obviously you know one of the things that is really important are the specific clinicians that are treating the patients, what do they expect and what's what your feedback on that so far?

Well obviously from the incidence of compassionate use request, I would think that they are seeing the data as positive and helpful to their patients. I think you've raised a good point. We have multiple trials running at one time, Steve and really the question is how do we get OMS721 across the finish line meaning how do we get it commercialized as quickly as possible and that's really our focus here and I think the beauty of what we are seeing now is that we really do have multiple shots on goal within 721.

About those multiple goals with IgA and stem cell, can you go into more detail about that because that's something that I think you mentioned but it is critically important.

Yes I can to whatever extent I am allowed to do here but I will tell you that look we're very pleased. Let me take a step back, we're in a Phase 3 program on aHUS, we've met with FDA and EMA, we're feeling comfortable with what we need to do to get that indication approved for OMS721. So let's put right now aHUS aside and talk about what I think you're asking which is the IgA and stem cell transplant programs for 721. I will tell you that we are very excited about the data that we are seeing in both of those indications. I believe that also you had mentioned how are the physicians viewing those data. I think it is fair to say that those physicians who treat these patients are equally excited about the potential for OMS721 in these indications. We have had dialogue with FDA around these programs. We will continue to do so. We will put out additionally more data from these programs. I think and I think I see where you're going with this, I want to make sure I'm answering your question Steve but these programs each of them or both of them could accelerate quite quickly and we are really looking at all three of these programs and we're controlling the dials across all three and again the objective is to get OMS721 into the market as quickly as possible with really any of the three indications and that will continue to build upon itself, that's the objective, that's our focus from what we're seeing today with all of the appropriate caveat we do expect that we will be successful.

Right, I will quickly switch and last question. On Omidria, you obviously you iterated all the significant teaching centers that you're in right now. Given the fact that you transition from teaching centers obviously to other hospital forms regionals and as such, can you give us some feedback even if it's anecdotal on what you've seen on how the teaching centers have started to adopt Omidria and what you would expect to happen as far as how it will start to translate and obviously penetrate the healthcare system.

Sure. Let's just take an example of one of those institutions I mentioned New York Eye and Ear, New York Eye and Ear performs more cataract surgery procedures annually than any other hospital in the United States. These types of institutions are usually slower to adopt just because of their size, just because of the layers of bureaucracy, but their physicians and frankly the pharmacist as well when looking at all of our data pushed hard for the ability to bring Omidria into the facility. Utilization within that facility has continued to expand, the number of physicians using it within the facility has continued to increase and the procedures have increased and then you get the satellite effect from other institutions located other facilities located around New York Eye and Ear that look to New York Eye and Ear to see what is New York Eye and Ear doing in-patient care and when they see that Omidria is an important component of that patient care you know that has an effect and I think that we're seeing that not just in New York Eye and Ear but really at all of those institutions that I mentioned. Duke, Wake Forest, Mass Eye and Ear, UCSF, all of those that I mentioned have that satellite effect or that ripple effect that that really does translate to increased utilization regionally not just locally but I think regionally and the importance of that is also the residency programs right, I mean these are young surgeons in training who are likely going to have more difficulty performing surgery than those who are well versed with years of experience in cataract surgery. Certainly these are young doctors who can benefit from Omidria. And also once they use that product in their training program they tend and very frequently tend to adopt those same routines, those same products, those same practices when they move into private practice or when they move into an academic position at some other institution. So it's an effect seeding future use of Omidria and I think we've seen that pretty clearly.

Our next question comes from Serge Balenger from Needham & Company. Your line is now open.

A couple questions first on Omidria, Greg in lieu of the 2017 guidance can you talk maybe about -- if you're seeing some of the same seasonality we saw last year in the early part of '17 and where do you expect growth to come from in Omidria and -- do you expect any impact on pricing given that we should see additional use of the volume discount program.

In response to your first question, yes we see some of the seasonality not to the same extent that we have previously but certainly. I don't think it's any secret that cataract surgery and other surgical procedures are slower in the early part of the year simply because of how insurance rolls over and those deductible period start anew at the beginning of the year which tends to have patients putting off surgery until a good part of that deductible is already eaten through and they don't have to absorb all of that cost in the early part of January but as I said we're seeing not -- the extent of that is less than what we had previously seen. With respect to where we think the growth is coming from and will come from in the future I think it's going to come from hospitals and ASC's I think it's coming from expanding utilization within our existing accounts and from a wholly new accounts who are starting to use Omidria. Certainly I think that the very early resistance that we had around Omidria that certainly seems to have waned substantially particularly as I mentioned earlier just the clinical pushback that, gee is this really a product necessary? Does it really do what we need it to do? I think that it is very difficult for someone to take an opposing position to the fact that Omidria does do all of that. I think it's very difficult to take that opposing position credibly when you look at the data. The third question that you asked is what about pricing with respect to the discount program. We still have been able to almost wholly maintain our ASP even with these discount programs. We continue to expect to do these programs in a very smart way and we're monitoring it closely you know remember that our price initially was set as a requirement to qualify for pass through, there's a threshold above which the price needs to be to qualify for pass through. But at some point here we're not going to be limited to that threshold but we're still comfortable with how our pricing is progressing .

Back to the -- you're to make further entry into the hospital segment, can you talk about the evaluation process that these P&T committees go through usually pretty focused on costs just how they look at Omidria?

Certainly we've been successful. I mean our distribution across hospitals and ASCs now as we've said reflects exactly what the distribution across the U.S. is. Approximately 35% in hospitals, 65% in ASCs, so we've clearly been successful there. You are correct that they do focus on cost. They also do though focus on clinical benefit and I think that we clearly make a very strong case with respect to clinical benefit. Remember too that a number of these hospitals, these large institutions are 340B facilities. So these are facilities that qualifies 340Bs by treating a sufficient percentage or number of indigent patients and by virtue of their being 340B or having 340B status they are then afforded government mandated discounts. So the 340B program also helps in sort of the entrée search to these hospitals and those initial discussions with the P&T committees and then I think it's really the clinical data that ends up carrying the day and closing that arrangement.

Okay. And then just regarding potential European partnerships on Omidria, is that still the plan to enter partnership into '17, if I remember correctly that EU marketing authorization have a shelf-life and how will that affect your partnership discussion?

Once again you're spot on and yes we do plan to partner in 2017, but that’s all I will say about that at this point.

Our next question comes from Elemer Piros from Cantor. Your line is now open.

What I would like to ask is when I look at the historical numbers, quarter and quarter there is a very steady, predictable linear growth in Omidria sales. So my question is that do you see at some point in 2017 perhaps and what would precipitate a divergence from this trend and we're hoping for an upgrade for this to become more of an exponential sort of growth.

Yes I understand, yes we would much prefer that to be a kink up than a kink down. And answer to your question about the kink in that curve yes that's clearly one of our major objectives is to put an upward kink in that curve. We do believe that we can do that. We believe that the programs were initiating help to do that. We also believe that at some point there's a threshold of critical mass with respect to users and once we exceed that we also think that that will help bend that curve upward more steeply than that linear growth that you referenced. Surgeons in general and it appears that a mix surgeons perhaps even more so than many others are conservative but they're slow to adopt new products but once they reach that initial threshold then that growth really picks up. I'll use as an example Viscoelastics, if you look at the adoption rate of this Viscoelastics in their early years of availability to a [indiscernible] surgeon, the percentage penetration was really minimal, low single digits and yet now when you look at Viscoelastic devices what you see is that they are mainstay. They're used in effectively in all procedures and I think that this is somewhat reflective of surgery in general but certainly I think of [indiscernible] surgery in particular.

And in the 721 trial would you please confirm that in previous patients, previously treated aHUS patients you also used subcutaneous dosing.

I will neither confirm nor deny that at this point.

But in the Phase 3 we're doing that subcu?

Yes.

And often would they be dosed?

We've not discussed dosing regimen publicly.

Okay. And one last question on the nephrology conference that you highlighted, if you could tell us just qualitative maybe somewhat quantitatively how many patients worth of data would we see, would we see a follow up data from the very earliest patients that you treated?

I will answer that question in this way Elemer, we have to-date put out only two patients from the IgA study. I am confident in telling you that at the conference presentation you will see more patients than what we have already put out publicly and you will see additional data on those patients for whom we have already released data. So you will see more data on the existing patients for those who are already out in the public domain and you will see -- I expect new patients and their data as well.

And would we have some aHUS patients data as well?

At the renal program?

Yes.

That well I need to check with our clinical group, I know that aHUS data is coming up later in April at the World Congress.

Our next question comes from Jason Kolbert from Maxim Group. Your line is now open.

I'd like to talk a little bit about OMS721 particularly as it relates to TMA's and stem cell transplantation. Can you do me a favor and just help me understand kind of the origins of the TMA and kind of what the treatment paradigm would look like for when 721 is going to be used in those patients so I can get a handle on what the market size might be. Thanks.

Right. There's a lot in that question so I'll try to take it in a stepwise progression, Jason. First of all the mechanism, endothelial damage, we believe is the inciting event and endothelial damage activating the lectin pathway specifically. We do know that endothelial damage activates the lectin pathway, we know that MASP-2 is the effector enzyme of the lectin pathway and therefore inhibiting MASP-2 as does OMS721 should have a positive effect in disorders associated or temporarily downstream related to endothelial damage. The endothelial damage in stem cell transplant patients well you know that very well with the conditioning required and the drugs used, both pre and post stem cell transplants, so clearly endothelial damage is there. With respect to what patients specifically the patients who we have treated with OMS721 are those patients who really have severe thrombotic microangiopathy. So these are patients who are sick very, very sick and these are patients whose mortality rate I think as I mentioned would be expected to be 90% or greater, those are the patients that we are initially treating. With respect to what patient population would be served potentially by OMS721 were clearly those patients. So those patients who have already undergone -- who have TMA's and have undergone revision or modification in calcine urine inhibitors or other immunotherapies and TMA continues certainly those patients are the ones we're treating now. So I would expect that would be a population amenable to treatment but then I would start to look upstream meaning again temporarily upstream to those patients potentially and again you're asking me and I'm giving you my thoughts I want to be very clear about that but this is a PMA following a stem cell transplant as you know very well is an extremely severe disorder. So could want to imagine moving temporally upstream to those demonstrating changes in any markers of TMA, sure, potentially I could imagine that I think you could too. So with respect to ultimately the population of patients with TMA following stem cell transplant we would treat I think it's likely broader than those patients who we are currently treating now.

So it's sounds like the market initially becomes not quite ultra-orphan but ultra-orphan and I'm assuming ultra-orphan like pricing but eventually it could broaden out that kind of much significantly larger segment of the market.

Yes especially when you think of what other disorders are associated with TMA's. There probably there are over 20,000 stem cell transplants U.S. alone, but then you start to think about the other disorders associated with stem cell transplant and there I'm talking about graft versus host disease or GVHD or of veno-occlusive disease as well and you start to think about, gee, what are their opportunities as well and I can tell you that certainly we are considering those as potential opportunities.

Thank you. And that completes the Q&A part of the call. I would like to turn the call back over to Dr. Demopulos for closing comments.

Well thank you very much, that ends our call for today and I would like to thank everyone for taking the time to listen in today as I said earlier 2017 promises to hold a series of important milestones throughout the year and we do expect to provide additional information on a number of the programs that we discussed today and perhaps others as the year progresses. As always to each of you we appreciate your continued interest and support. Have a good day and we look forward to talking with you again soon.

Ladies and gentleman thank you for your participation in today's call. This does conclude the program. You may all disconnect. Everyone have a great day.