Good morning, and welcome to today’s Conference Call for Omeros Corporation. At this time, all participants are in a 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 would now like to turn the call over to Jennifer Williams, Investor Relations from Omeros.

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 special note regarding forward-looking statements in the company’s quarterly report on Form 10-Q, which was filed today with the SEC, and the risk factor section of the company’s 2018 annual report on Form 10-K 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 the our first quarter financial results. We have some time reserved for questions after the financial overview. Now, I would like to turn the call over to Dr. Demopulos.

Thank you, Jennifer and good afternoon everyone. Now, we appreciate you taking the time to join us on the call. We have a lot to cover today. We’ll begin with OMIDRIA, our FDA-approved ophthalmic product. Total revenues from OMIDRIA net sales reported in the first quarter were $21.8 million, an increase of $20.2 million over the first quarter of last year. Our net loss for the first quarter of 2019 was $24.3 million or $0.50 per share, which includes non-cash charges of $6 million or $0.12 per share. The overall decrease in cash, cash equivalents, and short-term investments for the quarter was $13.3 million. As of March 31, we had $47.2 million available for general operations. We’re also finalizing an accounts receivable-based line of credit for up to $50 million should we choose to implement it. Compared to the fourth quarter of 2018, OMIDRIA net sales for the first quarter were essentially flat. The first quarter is historically the weakest of the year for OMIDRIA sales due to the large number of ophthalmology conferences held during the period, and the resetting of insurance deductibles at January 1. Despite this headwind sell-through or vial shipped from our wholesalers to customers set a new record 14% higher than the previous high watermark in the fourth quarter of 2018. This wasn’t reflected in the first quarter’s net sales, because the quarter ended on a weekend and normal wholesaler restocking shifted to the first two days of April. Net sales of OMIDRIA from wholesaler purchases on those two days were approximately $2.4 million. The record sell-through in Q1 was driven by increasing demand, which has continued to grow throughout the current quarter. Utilization continues to increase across ASCs, hospital outpatient departments, and the VA system. We’re also seeing increased buying from ASC chains and…

Thanks, Greg. As Greg noted, revenues for the first quarter were $21.8 million all from OMIDRIA product sales. Our net loss is $24.3 million or $0.50 per share, which includes non-cash expenses of $6 million or $0.12 per share. Here are some details regarding the current quarter versus the fourth quarter of last year. Total revenues from the sale of OMIDRIA for the first quarter were $21.8 million compared to $22 million in the fourth quarter of 2018. Our sell-through or OMIDRIA vial shipped by our wholesalers to hospitals and ambulatory surgery centers on the other hand, increased 14% from the fourth quarter. The difference in reported revenue and sell-through is primarily attributable to the timing of some wholesaler purchases at the end of March. on April 1 and 2, wholesalers purchased in net sales approximately $2.4 million of OMIDRIA. during Q4 2018 and Q1 2019, our overall gross-to-net deductions remained relatively consistent, decreasing slightly from 28.4% of gross revenues in the fourth quarter to 27% in the first quarter. costs and operating expenses for the first quarter were $41 million effectively flat from the $40.5 million in the fourth quarter of last year. Interest expense for the first quarter was in line with our expectations at $5.6 million and included $2.2 million of non-cash interest. Overall decrease in cash, cash equivalents and short-term investments for the quarter was $13.3 million. As of March 31, 2019, we had $47.2 million of cash, cash equivalents and short-term investments available for general operations. As Greg mentioned earlier, we’re also finalizing the accounts receivable base line of credit for up to $50 million, should we choose to implement it. Any amounts borrowed under the line would bear interest at the prime rate, which is currently 5.5%. With that now, let’s take a look…

Thanks, Mike. operator, can we open the call to questions.

[Operator Instructions] Our question comes from Steve Brozak from WBB. Your line is open.

Yes. Hi. Thank you for taking the questions. The first question is actually more of an administrative one in monitoring the different earnings and revenue services, they seem to be all over the place and candidly, it’s a bit confusing. one of the questions, so – and I know that you don’t really want to go into guidance given how the relaunch is just taking place. But can you tell us how you feel in terms of revenue progression and what your thoughts are on that line. And then I’d like to go into further detail on a supplement and back to OMIDRIA please?

Sure. Hi, Steve. Yes, happy – happy to do that. Look – we don’t, I’m sorry, I’m not sure where that noise is not coming from our end. So, it must be on the operator side. But we don’t – we don’t really follow the earnings estimates. I mean there as you’re right there, they are sort of all over the place and some include some analysts, some include others. With respect to our revenues, look, I said pretty clearly that we expect, again, double-digit growth in sell-through in the second quarter of this year. We’re into that quarter, growth continues and we expect that growth to continue for the reasons I mentioned. I mean one is the increasing demand, the recognition of the clinical trials and the clinical data that we have amassed. The second, which certainly helps us is the improvement in reimbursement, bringing additional payers on board. All of that is helpful and streamlines the process for us also reduces concerns among the providers about being reimbursed. So, I think all of those things are positive. We see the growth of OMIDRIA just – it just keeps – it just keeps growing. So, we’re comfortable with that. And I think, with that, I’ll say – I’ll stop I think right there.

Okay. Well, obviously, I appreciate the color on your perspective. I’m going over to narsoplimab, on the – you’ve mentioned everything on the regulatory side. but I’d like to get more color on the clinical side in terms of what you’re seeing, because it’s one of those situations where – what are the clinicians giving you back in terms of information on what they expect on current standard of care and on your thoughts. And again, as much color as you can give. I know it’s a smaller population, but I’d just like to know about what the clinicians are giving you as far as feedback goes, please?

Well, I think the response from the clinicians has been quite strong around narsoplimab and its role in the treatment of stem cell TMA. You mentioned sort of standard care now. There really is no standard of care now. And there is no approved treatment for stem cell TMA. We expect that narsoplimab will be the first approved drug for the treatment of TMA. And I think that further what the physicians understand that in fact are helping to teach us is that this is not just a TMA issue. This is a broader issue, which expands to something called endothelial injury syndrome, which is a function of endothelial damage. And interestingly and quite fortunate for us is that the endothelial damage is a key activator of the alternative pathway, its cellular damage and as you know, that’s what activates one of the things that activates the lectin pathway. So, the ability we expect of MASP-2 inhibitors and specifically narsoplimab is certainly there to treat not only stem cell TMA, but the other components of endothelial injury syndrome, which include graft-versus-host disease or GvHD, veno-occlusive disease or VOD, and a diffuse alveolar hemorrhage as well as other components of endothelial injury syndrome. So, the response from the docs has been really quite positive. but interestingly, not just limited to stem cell TMA, but much broader to sort of the endothelial injury syndrome and its multiple components in general.

Okay. Let me ask one last question and I’ll hop back in the queue please. you had mentioned earlier in terms of permanent pass-through on OMIDRIA that there was one part they’re dealing with, specifically on the pain side. and frankly, the question relates to what are you looking at in terms of these older patients that are having cataracts or lens replacement surgery and how their profile fits in this management of non-opioid alternatives. How does that – as these are not people that are completely absent in terms of having to use in the past. And I just like as much detail as you can give us on that why this might be different or important and I’ll hop back in the queue. Thank you.

Yes. thanks, Steve. We think it is important, and then we think you’re on point. look, elderly patients, multiple studies show that elderly patients have increased risk with respect to opioids and also these patients, who are undergoing cataract surgery, often that’s not the only procedure that they’ve undergone in the recent months, right. Many of these patients have multiple conditions, which require surgical treatment, whether those are total joint replacements or other surgical procedures. And again, those involve administration of opioids. And it’s this repeated exposure that does the studies indicate increase the risk, with respect to opioids in these patients when patients receive opioids during surgery, while under anesthesia, several studies have demonstrated increased opioid requirements after surgery and really worse, not better pain scores. So, this phenomenon is referred to as really opioid-induced hyperalgesia and that can also play into this for these cataract surgery patients. So yes, we think it is a big deal. And I think that the studies that are demonstrating the reduced need for opioids, the reduced need for postoperative pain medications and concurrently reduced pain in these patients is important. So, I think you’re on point.

Great. Again, thanks for taking the questions. So, I’ll hop back in the queue. Thanks again.

Our next question comes from Brandon Folkes from Cantor. your line is open.

Hi, thanks for taking my question. Apologies if I missed this earlier. Just been hopping you between a few calls. So, on the J-code, can you help us think about the process between receiving this provisional approval and getting permanent reimbursement. And then secondly, on OMS721, how should we think about stem cell TMA opening up additional indications for this product and how does that affect your thinking when you go and sit down at the FDA and agree on endpoints? Thank you.

Yes, sure. Thanks, Brandon and welcome. the first question was about the j-code, until the j-code is assigned and again, we need to wait to see what that CMS will assign it. We continue to use our C-code and our C-code, obviously, the providers are well versed in the use of our C-code, because they’ve been doing it since our first round of pass-through was received. So, they’re used to it. A number of the payers have it. Interestingly though, some payers just won’t reimburse against a C-code. So, having a j-code certainly helps, the connection between the j-code and permanent separate payment, I don’t want to address any connection there. I mean, technically those things are separate and what we’re going to have to see is how our continued efforts with CMS play out. Look, we believe that certainly given all of the clinical data provided, the reduction in complications, but better outcomes, the reduced opioid use, the preclusion of needs – the need for steroids. All of these things speak very clearly to the need to make OMIDRIA accessible to patients. The only way that that drug can be accessible to patients as freely as it should be as far as to be separately paid, as our most drugs used during surgery. It’s only a small number that are not – it’s a relatively recent occurrence. So, we’re – we continue to believe that certainly, OMIDRIA as the only drug of its kind that’s FDA approved, warrant separate payment. We continue to expect and I would say, remain optimistic that CMS will recognize and appropriately respond to the patient need. And I think that’s really the key here. Remember, we’re talking about separate payment as it applies to CMS, really only for Medicare part B patients, right? I…

Great. Thank you very much.

Thanks, Brandon.

Our next question comes from Ram Selvaraju from H.C. Wainwright. Your line is open.

Hi. thanks very much for taking my questions. So firstly, with respect to a OMIDRIA, could you maybe comment a little bit in more detail on how the CME indication data plays into the value proposition argument in favor of the drug, and whether you think this might potentially lead to any difference in marketing strategy overall going forward, especially within the context of the prospects for extending the reimbursement?

Sure. Hi, Ram. how are you? Yes. Certainly, we’re very focused on all of the clinical data we’re generating. CME or cystoid macular edema is probably the most dreaded complication of cataract surgery, can result in blindness of a patient after the patient undergoes a procedure, which is supposed to be one of the safest procedures and is in almost all cases, results in great vision. So, yes, it’s a big problem. Our ability to inhibit, that problem reduced the incidence of that problem significantly without the need for steroids, associated with cataract surgery. We think it’s a big deal, so do a good number of our key opinion leader advisors. So with respect to do we think it plays into our approach to permanent separate payment? Certainly, it does. I mean every piece of data that we generate, whether it’d be around CME, whether it be around other complications like rebound iritis or pain or photophobia or whether it is tied to the opioid addiction problem. I mean all of those pieces of data that we are generating and remember these are being generated independently by other investigators. So, these are being initiated by investigators and run by investigators outside of the company and the data that are being generated are consistent across all of them. And the data show very clearly that there’s no drug that does what OMIDRIA does. The reduction in complications, all of them including CME, and I would underscore CME certainly, play into our efforts for permanent, separate payment. Not only with – not only with CMS, but with med advantage and commercial payers as well. I mean I think was kind of my point earlier as we talk a lot about CMS, but CMS represents in this case, med part B. We’re also talking about the med advantage and the commercial payers many who are largely one in the same that we are in the throes of convincing why the use of OMIDRIA and the reimbursement of OMIDRIA is important. So, that’s a – that’s the focus. And I think that it does play into that a permanent separate payment approach. With respect to marketing, we will – we will continue to expand our marketing efforts within the four corners of what’s acceptable to FDA. But certainly, if we have these kinds of data, we find appropriate ways to make sure that physicians understand, what the drug is capable of doing? What the drug has been shown to do? And what the drug can do for them and their patients?

Thanks very much. And then with respect to the potential commercialization of OMIDRIA ex-U.S. in particular and European markets. Could you just give us an update on where that stands and how this might evolve throughout the remainder of this year, and particularly, with respect to any interest being shown by potential European distributors of the product?

Sure. I’ll start at the back-end of those and work to the front of your question, which is, we don’t discuss our partnering efforts, that may be ongoing. But what I will tell you is, look, our focus remains the expansion of the utilization of OMIDRIA in the U.S. first and foremost. When we have achieved what we want to there and when we have gotten ourselves to the point where we have that permanent separate payment, then it does make sense to start to move to the European markets as well. And the clinical data that we’re generating also help smooth the transition for us to the European market, but we want to make sure that we developed the data that we are developing. We want to make sure that we establish the demand for the product in the U.S. and then use that to expand into Europe. So for right now, I’ll tell you, our focus is U.S. and what we’re doing with the clinical data and permanent separate payment in the U.S., those are our areas of focus for OMIDRIA.

Okay. And then just three quick things on OMS721 or narsoplimab. Firstly, with regard to the TMA, rolling BLA filing, can you give us a sense of how many components you expect there to be and what might be in each component if there’s three or four or five pieces to the BLA, the rolling BLA submission. Secondly, would be very helpful if you could elaborate a little bit on potential commercial grade preparations for manufacturing of narsoplimab and give us a sense of how easy it should be to scale up manufacturing to a hypothetical commercial scale level. And thirdly, if you could give us an idea of whether you have a better line of sight at this juncture on the timeline to completion of enrollment in the ARTEMIS study? Thank you.

Sure. With – there I’m going to have to rely at some point on regulatory to answer those specific number or I can get back to you on the specific number, but they’re – they’re going to be, it’s going to be a common technical document modules and there are five of those and how all those breakouts will see. The advantage again of the rolling BLA is that FDA – I’m sorry, FDA can review those as we are submitting them. So, it saves time on the back-end and we do expect to avail ourselves of the opportunity that FDA has extended to us on that front. With respect to our commercial manufacturer, we’re well set there. We’ve not named our commercial manufacturer, but you would expect that if we’re doing this and we’re very serious about doing this, we’re using one of the premier or the premier contract manufacturer in the world take to get this done. So, the manufacturing of narsoplimab is well in hand. It is reproducible scale-up. We’re effectively already there on scale. and so we’re quite confident that not only are we kind of going to meet what we need to on the clinical side with narsoplimab for our BLA, but that certainly will be able to satisfy the CMC requirements or the BLA as well with narsoplimab.

And the ARTEMIS study, do you – at this juncture have more visibility on how long it might take to get the full enrollment?

We’re looking at that and we haven’t put anything out publicly. We will at some point, I mean, we have presentations coming up at meetings around our data. We have publications coming out around our data, and frankly around the trial. So, a lot of that information will be laid out. Again, I would underscore that with the ability to gain approval on proteinuria alone, does considerably shorten or expedite the timeline to approval, because in the setting of a full approval, it takes off the table the GFR question with respect to duration, right? I mean if they’re going to rely on GFR for an approval, that’s a two to three year – that’s a two to three-year commitment. If you’re looking at GFR as really more of a safety endpoint, which we hope to be able to do based on the strength of the proteinuria data, then obviously, you’re shaving that time off. If it’s an accelerated approval, you’re still going to have to generate the GFR data, but you’re able to make the drug commercially available to patient based on the proteinuria data and then providing later the EGFR data. So, all of these timelines for us are a bit influx. You know what we’re focused on, which is making sure that the proteinuria data that we generate support, hopefully, a full approval and if not a full approval, then an accelerated approval, and we’ll meet whatever subsequent commitments if necessary as they come. But the idea is to get the drug on the market as quickly as possible for IgA patients, because again, there is no treatment, there’s no approved treatment for IgA. These patients are managed, they’re managed with RAS blockade there, occasionally managed with steroids, but no treatments. And so we hope again to be the first to that market with our drug.

Great. Thanks very much for taking the questions.

Thanks, Ram.

I’m showing no further questions at this time. I would like to turn the call back to Dr. Demopulos for closing remarks.

Thank you, operator. That wraps up our call for today. Thanks again everyone for taking the time to listen in. While it’s still early, 2019 is already shaping up to be what we expect will be a genuinely transformative year for Omeros. With the goal of becoming a multi-product commercial company, we see clearly within our reach. As always, we’ll keep you updated periodically and we appreciate your support. Have a good evening everyone. Thank you.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may disconnect and have a wonderful day.